European Central Bank keeps rates unchanged; tightens collateral norms

The European Central Bank has left its benchmark interest rate unchanged at a record low of 0.75 per cent, even as it proposed tighter controls by national central banks on collateral from private lenders.

While the tough measures would help stem irregularities like those reported in France and Spain, the current low ECB rates will push down what banks charge businesses and consumers for borrowing

Analysts also say any further rate cut might not necessarily help the 17 euro zone nation in the European Union as the banks and governments are not passing on those lower rates to customers while businesses are reluctant to borrow.

The ECB has now offered to buy bonds in indebted countries, lowering borrowing costs in those countries.

''We take these incidents very, very seriously,'' ECB President Mario Draghi told journalists in Frankfurt. ''We've decided to create a data quality compliance network and an ECB unit that are responsible for, first monitoring the data quality, by performing regular checks and reports and prompting improvements in national-central-bank processes and procedures, internal controls as well.''

According to ECB rules, issue ratings of securities pledged as collateral take priority over issuer ratings. The ECB takes smaller haircuts on securities with an A-rating, according to the central bank's website.