Trichet says ECB examining collateral swap rules

By Marc Jones

FRANKFURT (Reuters) - The European Central Bank is carefully reviewing the range of assets banks are allowed to use as security for ECB funding, and may need to tighten its rules, ECB President Jean-Claude Trichet said on Thursday.

In order to control short-term interest rates, the ECB lends euro zone banks funds in euros and dollars for up to six months if assets of a suitable quality are offered up as security in case things go wrong.

But the pressure of the credit crunch has made banks increasingly creative about the assets they are using and non euro zone banks have tried to find ways to access the funding.

Things reached a new level when Australia's Macquarie Group (MQG.AX) confirmed the ECB had accepted 455 million euros (360 million pounds) worth of securities backed by Australian car loans -- not at first sight what the Frankfurt-based central bank had envisioned at the outset.

Trichet said the ECB might have to tighten its rules, echoing concerns expressed earlier by his ECB colleagues Jose Manuel Gonzalez-Paramo and Yves Mersch.

"We are permanently examining and applying our rules (on acceptable collateral) with great care and looking very carefully at all that happens."

"If it is necessary to refine elements of our scheme as we did in the past ... then we will see what we have to do," he told reporters at the ECB's monthly news conference.

The ECB does not offer the borrowing bank funding equal to the full value of the asset being used as security, instead applying a so-called 'haircut', designed to protect the central bank from losing money.