Central banks’ collateral frameworks play an important role in defining what is considered as a safe asset. However, the ECB’s framework is unsatisfactory because it is overly reliant on pro-cyclical ratings from credit rating agencies, and because the differences in haircuts between the different ECB credit quality steps are not sufficiently gradual. In this note, the authors propose how the ECB could solve these problems and improve its collateral framework to protect its balance sheet without putting at risk the safe status of sovereign bonds of the euro area.
The Good Friday agreement put to rest age-old conflicts on Ireland. It also offered hope that the reunification of Cyprus might be possible within the European Union. Lately, however, the “Green Line” that divides the easternmost island of the EU, is viewed as a template for a soft border at the westernmost island of the Union after Brexit.