Beyond the policy rate: collateral, overdrafts and capital floors all moved
Serguey Asael Shinder2 min readRate decisions get the headlines; the terms on which banks and governments can reach central bank money get the footnotes. Three documents published on 28 and 29 September all changed, or argued about, those terms, and read together they point one way.
Frankfurt: collateral judged on the weaker rating. From 30 November the Eurosystem will assess private sector collateral, from bank bonds to corporate debt, on its second-best external rating rather than the best one, and apply an updated haircut schedule. An asset with one strong and one weaker rating will now be judged on the weaker. The ECB frames the review as keeping risk protection adequate while ensuring enough collateral remains available; for a bank's pool, the direction is towards more discipline.
Mumbai: more room, shorter leash. The RBI's advisory committee on states' ways and means advances proposed raising the aggregate limit by 11.2% to ₹67,839 crore, but also cutting the longest continuous overdraft from 14 working days to 10 and the quarterly maximum from 36 days to 30. Its stated principle is that central bank support covers temporary cash gaps "and not to finance the budget deficit".
Basel: keep both backstops. A BIS Financial Stability Institute paper found that of 13 global systemically important banks disclosing output floor data, none was bound at the end of 2025 because of transition rules, but six would be once the 72.5% floor is fully phased in. The leverage ratio, it argues, cannot do the floor's job.
What connects them
None of these is a rate decision, and none will move a market on the day. Each, though, sets a price or a limit on access to the safety net: what a bank can pledge, how long a state can overdraw, how low a bank's own models can push its capital. In the same days, the Reserve Bank of Australia raised its cash rate to 4.60%, and new UK mortgages cost 4.60% on average in August, up from 4.45%. The tightening is not only in the headline rates; it is in the plumbing too, where it is written in guidelines, committee reports and working papers that few borrowers will read.