The second – when the first is exhausted – is given by the appropriation of the collateral posted as backing of the loan. If a counterparty defaults, the underlying collateral assets allow for the recovery of the amount lent. The use of risk control measures such as valuation haircuts and variable margins further mitigate the exposure to credit risk.
The same risk control principle applies in the context of the OMT programme, through limitations on the maturity of eligible securities (one to three years) and through the strict conditionality for a country to be eligible for the programme. Another aspect of our operations is that they are designed precisely with the goal of achieving neutrality in credit allocation.