The Eurosystem primarily introduced non-standard measures to reduce risk and to provide support to individual market segments. They were subsequently expanded with the aim to additionally strengthen the effects of these instruments on the financing conditions for the real economy, and in connection with other measures, to strengthen the expansionary monetary policy.
Asset Purchase Programmes
The Eurosystem introduced its first individual asset purchase programmes between 2009 and 2012, but those were later terminated. Since autumn 2014 it has been executing outright purchases of debt securities through the Asset Purchase Programme (APP), which were later on, in the period from 1 January to 31 October, limited to reinvestment of principal payments from maturing securities. As from 1 November 2019, the Eurosystem restarted with net purchases at a monthly peace of EUR 20 billion. The latter will be run for as long as necessary to reinforce the accommodative impact of policy rates, and will be ended shortly before the start of raising the key ECB interest rates.
The APP consists of four purchasing programmes under which the Eurosystem purchases the following asset classes:
- public sector debt securities, the purchase of which has been carried out since March 2015 on the secondary market under the PSPP (Public Sector Purchase Programme),
- debt securities of non-bank corporates, the purchase of which has been carried out since June 2016 under the CSPP (Corporate Sector Purchase Programme),
- covered bonds, the purchase of which has been carried out since October 2014 under the CBPP3 (Covered Bond Purchase Programme), and
- asset-backed securities, the purchase of which has been carried out since November 2014 under the ABSPP (Asset-Backed Securities Purchase Programme).
The legal basis for executing the individual programmes are ECB Decisions. For more information on the individual programmes, see the ECB website.
The monthly net asset purchase targets of the APP were/will be as follows:
March 2015 – March 2016: EUR 60 billion
April 2016 – March 2017: EUR 80 billion
April 2017 – December 2017: EUR 60 billion
January 2018 – September 2018: EUR 30 billion
October 2018 – December 2018: EUR 15 billion
January 2019 – October 2019: reinvestment of principal payments from maturing securities held in the APP portfolios
November 2019 – March 2022: EUR 20 billion
April 2022 – June 2022: EUR 40 billion
July 2022 – September 2022: EUR 30 billion
Since October 2022 on: EUR 20 billion
In 2020, the additional envelope of EUR 120 billion was added to a monthly pace of purchases of EUR 20 billion.
Reinvestments of the principal payments from maturing securities purchased under the APP will continue, in full, for an extended period of time past the date on which the Governing Council begins to raise the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
The Eurosystem lends the securities from the purchase programme to market participants. For more, see the section on securities lending.
Pandemic emergency puchase programme (PEPP)
In order to counter the serious risk to the monetary policy transmission mechanism and the outlook for the euro area posed by the coronavirus outbreak, the ECB initiated the pandemic emergency purchase programme (PEPP) in March 2020. Purchases include all asset classes from the existing APP programme, in addition to certain short-term debt securities and securities issued by the Greek government.
An overall envelope of purchases amounts to a maximum of EUR 1,850 billion. The Governing Council will terminate net asset purchases under the PEPP once it judges that the COVID-19 crisis phase is over, but in any case not before the end of March 2022. The maturing principal payments from securities purchased under the PEPP will be reinvested until at least the end of 2024.
For more, see the Implementation of the PEPP.
The other non-standard measures introduced since the start of the financial market turmoil in 2007 are as follows:
- Open market operations with fixed-rate full allotment tenders: All open market operations have been executed via fixed-rate full allotment tenders since October 2008.
- Longer-term open market operations with new maturities: In addition to the regular 3-month LTROs, banks were also offered several extraordinary LTROs via tenders. From 2014 onwards, the Eurosystem have executed three series of targeted longer-term refinancing operations (TLTROs) with a maturity of up to four years, where the maximum borrowing and interest rate were set separately for each bank and depended on its lending to the non-financial sector. In 2020 and 2021, it offered a series of additional pandemic emergency longer-term refinancing operations (PELTROs) to ensure sufficient liquidity and smooth money market conditions duting the pandemic period.
- Introduction of negative interest rates: A negative interest rate was introduced on the deposit facility in June 2014 and was applied also to bank's excess reserves holdings or from the end of October 2019 onwards to part of bank's excess reserves holdings.
- Two-tier system for remuneration of excess reserves: From the end of October 2019 onward, a part of excess reserves up to six times of institutions' reserve requirements is remunerated at 0%, the rest of excess reserves continues to be remunerated at negative deposit facility rate.
- Liquidity provision in foreign currencies: US dollar liquidity providing operations have been available to banks since December 2007 (as have Swiss franc liquidity providing in the certain period). They are currently executed with a maturity of one week.
- Expansion of eligible collateral for Eurosystem loans: The requirements with regard to the eligibility of financial assets as collateral have been eased slightly since 2008, at the same time risk control measures have been adjusted appropriately.
- Expansion of the list of eligible counterparties for fine-tuning operations: Since 2008 fine-tuning operations have been available to all counterparties that are allowed to participate in open market operations.
In addition to the non-standard measures, in July 2013 the Governing Council of the ECB introduced its forward guidance. The Eurosystem announces its expectations of the future developments of the ECB key interest rates and the time horizon for executing the Asset purchase Programme, depending on the outlook for price stability. It thereby aims to bring greater certainty with regard to interest rates and the intentions of future monetary policy, which acts to stabilise the economic environment.