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 the effects of this instrument on the financing conditions for the real economy, and in connection with other measures, to strengthen the expansionary monetary policy.
The Eurosysdtem 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).
Asset Purchase Programmes
To reduce the risks of a prolonged period of low inflation and economic growth and to support bank lending to the non-financial sector, the Eurosystem began executing the following programmes:
- the CBPP3 (Covered Bond Purchase Programme), within the framework of which the Eurosystem has been purchasing covered bonds since October 2014,
- the ABSPP (Asset-Backed Securities Purchase Programme), within the framework of which the Eurosystem has been purchasing asset-backed securities since November 2014,
- the PSPP (Public Sector Purchase Programme), within the framework of which the Eurosystem has been purchasing public sector debt securities on the secondary market since March 2015,
- the CSPP (Corporate Sector Purchase Programme), within the framework of which the Eurosystem has been purchasing debt securities of non-bank corporates since June 2016.
The Eurosystem will continue to make asset purchases until the end of December 2018 and then anticipates to end net purchases, subject to incoming data confirming the medium-term inflation outlook. After the end of net purchases, the Eurosystem will reinvest the principal payments from maturing securities purchased under the APP for an extended period, and in any case for as long as neccessary to maintain favourable liqudity conditiopns and an ample degree of monetary accommodation.
The legal basis for executing the individual programmes are ECB Decisions. For more information on the individual programmes, see the ECB website.
The Eurosystem lends the securities from the purchase programmes to market participants. For more, see the section on section on securities lending.
The other non-standard measures introduced since the start of financial market turmoil in 2007 are as follows:
- Open market operations via fixed-rate tull 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. Between 2014 and 2017 the Eurosystem executed two series of targeted longer-term refinancing operations (TLTROs) with a maturity of up to four years, where the maximum borrowing was set separately for each bank and depended on its lending to the non-financial sector.
- 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.
- 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 in ECB interest rates depending on the outlook for price stability. It thereby aims to bring greater certainty with regard to interest rates, which acts to stabilise the economic environment.