Asset Purchase Programme (APP)
On 22 January 2015, the Governing Council of the European Central Bank (ECB) announced an expanded asset purchase programme. The programme aims at fulfilling the ECB’s price stability mandate and addressing the risks of a too prolonged period of low inflation.
The asset purchase programme consists of the public sector purchase programme (PSPP), the asset-backed securities purchase programme (ABSPP), the covered bond purchase programme (CBPP3) and the corporate sector purchase programme (CSPP).
The net asset purchase targets of the asset purchase programme over the period 2015–2018 were as follows:
- 03/2015–03/2016: EUR 60 billion
- 04/2016–03/2017: EUR 80 billion
- 04/2017–12/2017: EUR 60 billion
- 01–09/2018: EUR 30 billion
- 10–12/2018: EUR 15 billion
Net asset purchases under the programme came to an end at the end of 2018, and in January 2019 the programme moved to a reinvestment phase. Between January 2019 and October 2019, the Eurosystem fully reinvested the principal payments from maturing securities held in the APP portfolios. On 12 September 2019, the ECB Governing Council decided to restart net purchases under its asset purchase programme at a monthly pace of EUR 20 billion as from 1 November 2019.
On 12 March 2020, after the outbreak of COVID-19, the Governing Council decided to add a temporary envelope of additional net asset purchases of EUR 120 billion until the end of 2020.
The pace of net asset purchases under the APP will be temporarily increased after the net asset purchases under the pandemic purchase programme (PEPP) discontinue at the end of March 2022. On 16 December 2021, the Governing Council decided on a monthly net purchase pace of EUR 40 billion in the second quarter and EUR 30 billion in the third quarter of 2022 under the APP. From October 2022 onwards, the Governing Council will maintain net asset purchases under the APP at a monthly pace of EUR 20 billion.
The Governing Council expects net purchases to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates. 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 when 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 Bank of Finland participates in the implementation of the Eurosystem’s purchase programmes. Purchases conducted by the Bank of Finland are reported in the Bank of Finland’s balance sheet. All purchases made under the purchase programmes by the Eurosystem are published on the ECB website.
THE THIRD COVERED BOND PURCHASE PROGRAMME (CBPP3)
The third covered bond purchase programme (CBPP3) was launched in October 2014. Under this programme, the Eurosystem purchases covered bonds issued by banks on the primary and secondary markets. The securities to be purchased will be subject to the eligibility criteria for collateral used in refinancing operations. The CBPP3 is subject to a full risk-sharing regime. The Eurosystem conducted the first and second covered bond purchase programmes in 2009–2012.
ASSET-BACKED SECURITIES PURCHASE PROGRAMME (ABSPP)
The asset-backed securities purchase programme (ABSPP) was launched in November 2014. Under this programme, the Eurosystem purchases simple and transparent asset-backed securities on the primary and secondary markets and the risks are shared in the Eurosystem. The purchases are conducted by six national central banks acting on behalf of the Eurosystem. The ABSPP is subject to a full risk-sharing regime.
PUBLIC SECTOR PURCHASE PROGRAMME (PSPP)
The public sector purchase programme (PSPP) was launched in March 2015. Under the public sector purchase programme, the Eurosystem purchases bonds issued by regional and local governments, recognised agencies and international and supranational institutions located in the euro area. The Eurosystem national central banks purchase mainly bonds issued by their own governments, on the basis of the ECB’s capital key, i.e. relative to the size of their economy. These types of purchases account for 80% of total purchases, and the risks are carried by the national central banks themselves. The remaining 20% are subject to risk-sharing and comprise bonds issued by EU supranational institutions and purchases by the ECB.
CORPORATE SECTOR PURCHASE PROGRAMME (CSPP)
The corporate sector purchase programme (CSPP) was launched in June 2016. Implementation of the programme is the responsibility of six national central banks, including the Bank of Finland, acting on behalf of the Eurosystem and coordinated by the ECB. The CSPP is subject to a full risk-sharing regime.
Pandemic Emergency Purchase Programme (PEPP)
On 18 March 2020, the ECB Governing Council announced the launch of a new 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 posed by the outbreak of the coronavirus. On 4 June 2020, the Governing Council decided to increase the envelope to a total of EUR 1,350 billion. On 10 December 2020, the Governing Council decided to increase the envelope for PEPP to a total of EUR 1,850 billion.
Purchases under the PEPP will include all the asset categories eligible under the APP. In addition, the PEPP includes a waiver of the eligibility requirements for securities issued by the Greek Government, and the minimum residual maturity of public sector securities eligible for purchase under the PEPP is 70 days. On 18 March 2020, the eligibility of non-financial commercial paper under the corporate sector purchase programme (CSPP) was also expanded to include securities with a remaining maturity of at least 28 days. These securities can be purchased under both the CSPP and the PEPP. Previously, only commercial paper with a remaining maturity of at least six months had been eligible for purchase under the CSPP.
Net asset purchases under the PEPP will be discontinued at 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. The future roll-off of the PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance. In the event of renewed market fragmentation related to the pandemic, PEPP reinvestments can be adjusted flexibly across time, asset classes and jurisdictions at any time. Net purchases under the PEPP could also be resumed, if necessary, to counter negative shocks related to the pandemic.
SECURITIES LENDING OF BANK OF FINLAND’S HOLDINGS UNDER THE APP and PEPP
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 as well as in the GC Access Securities Lending 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 Securities Lending Programme, market participants may borrow securities subject to their availability (open repo). The lending 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 will be 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 available for lending will be 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: tel. +358 9 183 7021 or email to eapp(at)bof.fi.