Monetary policy purchase programmes
The monetary policy toolbox also includes asset purchase programmes, which, since the financial crisis, have complemented interest rate policy particularly at times when policy rates have been at zero or negative. The purchase programmes have also promoted the effective transmission of monetary policy. In its various purchase programmes, the Eurosystem has purchased public sector debt securities, covered bonds issued by banks, asset-backed securities and corporate sector debt securities.
Asset purchase programme (APP)
On 22 January 2015, the Governing Council of the ECB announced an expanded asset purchase programme (APP), and actual purchases under the programme commenced in March 2015. The programme was aimed at fulfilling the ECB’s price stability mandate and addressing the risks of a too prolonged period of low inflation.
The size of purchases under the programme were adjusted on several occasions, and the purchases are published on the ECB’s website. Net purchases under the APP were discontinued in July 2022 and, in accordance with the Governing Council’s decision of 15 June 2023, the reinvestments under the APP were discontinued as of July 2023. The APP portfolio will decline as securities mature.
The APP consisted of the
- public sector debt securities programme (PSPP);
- asset-backed securities purchase programme (ABSPP);
- third covered bond purchase programme (CBPP3);
- corporate sector purchase programme (CSPP).
Pandemic emergency purchase programme (PEPP)
On 18 March 2020, the ECB Governing Council announced the launch of a pandemic emergency purchase programme (PEPP) with an envelope of EUR 750 billion to counter the serious risks to the monetary policy transmission mechanism and the outlook for the euro area economy and prices posed by the outbreak of COVID-19. At its monetary policy meeting on 4 June 2020, the Governing Council decided to increase the envelope for PEPP to a total of EUR 1,350 billion, and on 10 December 2020 to a total of EUR 1,850 billion.
Purchases under the PEPP include all the asset categories eligible under the APP. In addition, the eligibility criteria were expanded to include bonds issued by the Greek government and a broader range of commercial paper.
Net asset purchases under the PEPP were discontinued at the end of March 2022. The Governing Council has decided that it intends to continue to reinvest, in full, the principal payments from maturing securities purchased under the PEPP during the first half of 2024.
Over the second half of the year, it intends to reduce the PEPP portfolio by EUR 7.5 billion per month on average. PEPP reinvestments are intended to be discontinued completely at the end of 2024. The Governing Council will continue applying flexibility in reinvesting redemptions coming due in the PEPP portfolio, with a view to countering risks to the monetary policy transmission mechanism.
Other purchase programmes
The other securities purchase programmes are, for example, the transmission protection instrument (TPI) and outright monetary transactions (OMTs) that have been announced but under which no securities purchases have been made. The already terminated programmes are the securities markets programme (SMP) and the first and second covered bond purchase programmes (CBPP1 and CBPP2).
Securities lending of the Bank of Finland's holdings under the securities purchase programmes
Securities lending via Euroclear
The Bank of Finland’s holdings of covered bonds and corporate and public sector bonds are available for securities lending under Euroclear’s Securities Lending and Borrowing Programme and the GC Access programme.
The terms and conditions of the automatic Securities Lending and Borrowing Programme are the standard conditions set forth by Euroclear. In the GC Access programme, market participants may borrow securities subject to their availability (open repo). The programme is operated according to terms and conditions set out by the Bank of Finland. Transactions under the programme are to take place on a cash neutral basis.
Bilateral lending against cash collateral
For securities bought under the public sector purchase programmes, the Bank of Finland’s securities trading counterparties are also eligible for bilateral securities lending against cash collateral via repurchase agreements, provided that they fulfil all legal requirements, in particular the relevant contractual documentation.
The repo transactions against cash collateral are conducted bilaterally at a rate equal to the lower of the rate of the ECB deposit facility minus 20 basis points and the prevailing market repo rate. Cash collateral transactions have one-week maturity and may be rolled over. For more information on the bilateral repo terms, please contact the Bank of Finland’s EAPP team.
A list of holdings under the corporate sector and public sector purchase programmes made available for lending is published on a weekly basis on this site.
For further information on the lending programmes, please contact Euroclear or the Bank of Finland’s EAPP team: +358 9 183 7021, or email: eapp(at)bof.fi.