All Eurosystem liquidity-providing operations are based on eligible underlying assets. Liquidity-providing operations between the Central Bank of Cyprus and its eligible counterparties are executed based on collateral mobilised in favour of the Central Bank of Cyprus. The eligible assets mobilised as collateral may be located either in (“domestic”) or outside (“cross-border”) of the Republic of Cyprus.
Correspondent Central Banking Model (CCBM)
Eligible collateral must be potentially usable in a cross-border context throughout the whole euro area. The cross-border mobilisation of assets is made possible either via:
(i) links between CSDs/SSSs,
(ii) the Correspondent Central Banking Model (CCBM).
The Cypriot SSS, being the Central Depository Central Registry (CDCR) of the Cyprus Stock Exchange (CSE), is not linked with other eligible Eurosystem CSDs/SSS. This makes the CCBM the only viable route for Cypriot counterparties to mobilise eligible assets on a cross-border basis.
Cypriot counterparties are able to deposit eligible assets in the custody account of the central bank of another EU Member State (the Correspondent Central Bank), held with the SSS of that country in favour of the Central Bank of Cyprus (the Home Central Bank), in order to participate in Eurosystem credit operations and/or obtain intraday credit in TARGET2.
Likewise, the Central Bank of Cyprus may also undertake the role of the Correspondent Central Bank for other ESCB Central Banks, for collateral issued and deposited in the CDCR.
Collateralisation Technique
The Central Bank of Cyprus uses the pledge technique under the pool system. A pool of assets is the total value of assets which the counterparty intends to use as collateral so as to participate in ESCB credit operations and/or obtain intraday credit in TARGET2. This means that individual assets are not linked to specific credit operations. The counterparty may include in the pool of assets only those assets which meet the Eurosystem’s eligibility criteria.
Collateral Management
The Central Bank of Cyprus is responsible for the management of the collateral that Cypriot counterparties provide against financing obtained from the Eurosystem, according to Article 18.1 of the ESCB Statute.
The Bank identifies the financial assets that can be used as collateral on the basis of the criteria defined by the Eurosystem. The list of eligible marketable assets is published on the ECB webpage on a daily basis.
Use of Eligible Assets
Further relevant documents and links to ECB's Website: