The role of loans and the ICAS BE in the Eurosystem’s collateral framework in 2024

Abstract

Rationale This article analyses the developments over the last 12 months in the share of non-marketable assets (essentially bank loans) pledged as collateral in the Eurosystem’s monetary policy credit operations, focusing in particular on the actual and potential contribution of the Banco de España’s in-house credit assessment system (ICAS BE). Takeaways •Over the last 12 months the share of non-marketable assets in the collateral pledged by Spanish counterparties in Eurosystem financing operations has increased once again, marking a continuation of the upward trend that began after the onset of the COVID-19 crisis. The proportion of non-marketable assets that are loans to firms rated using the ICAS BE has also risen. •Counterparties have ample scope to increase the volume of ICAS BE-rated pledged loans, especially in the case of loans to small and medium-sized enterprises. •After improving for two years, Spanish firms’ credit ratings assigned by the ICAS BE have deteriorated slightly compared with 2023, above all due to the increased interest burden firms are currently shouldering.