On April 30, 2025, the European Central Bank (ECB) announced significant changes to its dedicated overnight credit facility for euro area central counterparties (CCPs). The revised facility is designed to offer crisis-related liquidity backstops to eligible CCPs under the TARGET Guideline.
Previously, the activation of the CCP credit facility required a decision by the ECB Governing Council. Under the new framework, this discretionary activation will no longer be necessary, ensuring that the credit facility will be immediately available to euro area CCPs when needed. This change is intended to facilitate quicker operationalisation of the facility during times of financial stress.
CCPs play a critical role as systemically important financial market infrastructures, and under normal conditions, they typically balance their liquidity inflows and outflows by the end of each day. However, in periods of severe financial stress, it may not be feasible for a CCP to manage its liquidity needs through market-based solutions quickly enough. The credit facility provides a pre-arranged and effective liquidity backstop during such times.
The revised credit facility remains subject to the TARGET Guideline and will operate outside the ECB’s monetary policy implementation framework. Euro area CCPs must meet specific requirements outlined in the TARGET Guideline to access the facility. New safeguards have been introduced to ensure that only financially sound CCPs with effective liquidity risk management can use the facility. If a CCP fails to comply with these safeguards, the ECB Governing Council may implement discretionary measures based on prudence.
The applicable interest rate for borrowing under the facility will be the ECB’s marginal lending facility rate. The credit facility will have an overnight maturity, with the option to roll it over across business days. Collateralisation requirements will continue to align with the current provisions of the TARGET Guideline.
These changes follow a review of the CCP credit facility conducted by the Eurosystem central banks over the past several years. The amendments to the CCP credit facility will take effect once the relevant legal acts are adopted in 2025, including updates to the TARGET Guideline. The application of these legal acts is expected by the fourth quarter of 2025, with formal publication to follow.
The ECB’s decision marks a significant step in improving the efficiency and responsiveness of the credit facility, ensuring that euro area CCPs have the necessary liquidity backstops in times of financial stress.
