FRANKFURT, Feb 21 (Reuters) - The European Central Bank plans to take a more stringent approach in accepting some collateral in its lending operations as the number of accepted credit rating agencies increases, it said on Friday.
The ECB will start to use the second-best credit rating when assessing collateral eligibility on certain assets, instead of its current practice of using the best rating among the accepted rating agencies.
The changes, which will go into effect no sooner than in 18 months' time, will apply to private sector securities such as unsecured bank bonds, covered bank bonds and assets issued by non-financial corporations. They will also apply to non-euro area public sector securities.
The ECB, however, left unchanged its rules on assets issued or guaranteed by the euro area public sector, like central or local governments, and the best rating will continue to apply.
Commercial banks can borrow unlimited funds from the ECB as long as they can post appropriate collateral. These lending operations are little used at the moment, however, as banks hold plenty of excess liquidity.
Reporting by Balazs Koranyi; Editing by Hugh Lawson
