LUXEMBOURG -(Dow Jones)- The European Central Bank is examining its collateral framework because it suspects its dependency on rating agencies could be misleading, a member of the ECB's governing council said Thursday.
"A more broad overhaul of our collateral framework is an ongoing procedure," said Yves Mersch, who represents the Bank of Luxembourg at the ECB, at the presentation of his institution's annual report.
Reporters had asked Mersch about his view on an announcement by ECB President Jean-Claude Trichet earlier Thursday.
Trichet said in Brussels that the ECB will continue to accept bonds with ratings as low as BBB- as collateral next year, although it won't lend as much against lower-rated paper as against the ultra-safe AAA-rated bonds like Germany's.
The ECB president's announcement gives a massive reassurance to holders of Greek government debt, which could have been rendered unacceptable as collateral at the ECB if the bank had, as planned, raised the minimum acceptable credit rating back to where it had been before the global financial crisis.
Mersch added: "There are other elements of our collateral framework, which will have to be devised in order to avoid certain unwelcome developments which might be inherent in a framework which is exclusively dependent on credit-rating agencies."
Copyright 2009 Dow Jones Newswires
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