Stricter rules for the eligibility of covered bonds used in the European Central Bank’s (ECB) repo facility are unlikely to significantly depress collateral postings, because the new ABS rule affect few issuers, according to Standard & Poor's and Bank of America Merrill Lynch.

The ECB announced on Nov. 28, that covered bonds with cover pools containing external ABS are no longer repo-eligible, eligible covered bonds must now also be compliant with the capital requirements directive (CRD), UCITS compliant or offer a comparable protection to the one under the CRD compliance criteria. The revised repo eligibility for covered bonds also includes a two-year grandfathering period, starting from Jan. 2013.

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