Banco de España - Monetary Policy Glossary

Monetary Policy Glossary

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Central Securities Depository: A service that registers securities and allows operations to be processed as book entries. Securities can be held in physical form or in a dematerialised form (whereby they only exist as book entries). In addition to its custodial and administration functions (issuance and redemption), it may perform comparison, clearing and settlement functions.
Collateral: Financial instruments which are either hypothecated to guarantee the devolution of a loan or are sold as part of a repurchase agreement. In accordance with article 18.1. of the Statutes of the European System of Central Banks, all Eurosystem credit operations (that is, liquidity providing operations) must be based on adequate collateral.
Collateral: An asset that serves as a guarantee to endorse the granting of credit or a bond issue.
Correspondent agreement: Agreement whereby a credit institution provides payment and other services to another credit institution. Correspondent payments are normally made via reciprocal accounts ("nostro" and "loro"), whereto permanent lines of credit can be assigned. Correspondent services are basically cross-border services but are also provided in certain national contexts, where they are known as agency relations. A "loro" account is the term used by a correspondent entity to describe an account opened in the name of a foreign credit institution. For its part, said entity considers it a "nostro" account.
Correspondent central banking model (CCBM): A mechanism established by the European System of Central Banks with the aim of enabling credit institutions to use assets deposited in another European Union state as collateral in monetary policy operations or intraday credit operations processed through the TARGET payment system. Each central bank, acting as a correspondent, opens and maintains security accounts where it registers the collateral assets of the central bank that extends the financing.
Counterparty: Generally speaking, the opposite party in a financial transaction. Within the sphere of the Eurosystem, this expression refers to the group of euro area credit institutions used to perform certain monetary policy-related operations. In order to be recognised as such, the institutions must fulfil the following general selection criteria: Be governed by the minimum reserve requirement system established by the Eurosystem. Be financially solvent. Fulfil the operating requirements established by national central banks and, where applicable, the ECB. The selected entities may: Participate in Eurosystem open market transactions: main refinancing operations, longer-term refinancing operations, fine-tuning operations and structural operations. Access standing facilities.
Currency swap: Two spot and forward operations carried out simultaneously, exchanging one foreign currency for another.