ECB Says Cyprus Debt Not Eligible As Collateral: Reports

The European Central Bank on Tuesday said that Cyprus government bonds are no longer eligible as collateral after the country's credit rating fell below the minimum credit threshold.

All the three major rating agencies have downgraded Cyprus' rating to 'junk' and at this juncture, the Cypriot government securities does not meet the minimum creditworthiness requirement, reports said citing a statement from the central bank.

"Cypriot government securities cannot be used as collateral in Eurosystem monetary policy operations," the ECB said.

"Counterparties making use of those securities will have to replace them with eligible collateral or, alternatively, get recourse to the liquidity provided by national central banks in line with the relevant Eurosystem arrangements," known as the Emergency Liquidity Assistance.

"The stable funding of Cypriot banks will be ensured within the Euro system procedures," it added.

Earlier this week, Cyprus formally requested financial assistance from its European partners, as its banks are under pressure due to increased exposure to Greece.

Earlier, ECB has suspended creditworthiness requirements for countries like Greece and Ireland after they agreed to the international bailout deal.