Additional measures

Alongside the usual open market operations, asset purchase programmes have been in operation since 2009 to support growth in the euro area in line with the objective of price stability.

1. Current asset purchase programmes

1.1 The expanded asset purchase programme of the central banks of the euro area (APP) is designed to help the European Central Bank in its task of keeping inflation at 2% over the medium term. The asset purchase programme became more broadly based in 2015 when purchases of public sector bonds started and several separate earlier programmes were consolidated into one single large programme.

The expanded asset purchase programme contains four separate purchase programmes.

• The third covered bond purchase programme (CBPP3)

The Eurosystem started purchases under the CBPP3 on 20 October 2014. This purchase programme helps make the monetary policy transmission mechanism more effective, supports financing conditions in the euro area, and makes lending to the non-financial economy easier. The Eurosystem buys covered bonds from both the primary and secondary markets.

For further information:
Decision (EU) 2020/187 of the European Central Bank of 3 February 2020 on the implementation of the third covered bond purchase programme (ECB/2020/8)
Asset-backed securities (ABSPP) - Q&A

• The asset-backed securities purchase programme (ABSPP)

The Eurosystem started purchases under the ABSPP on 21 November 2014. This purchase programme helps banks diversify their sources of funding and encourages the issue of new securities. Asset-backed securities help banks fulfil their main function of lending to the non-financial economy. The securitisation and sale of loans can give the banks the funds needed to issue new loans to companies and households. This facilitates funding, eases lending conditions and supports the transmission of monetary policy into the economy of the euro area. The Eurosystem buys asset-backed securities from both the primary and secondary markets.

For further information:
Decision (EU) 2015/5 of the European Central Bank of 19 November 2014 on the implementation of the asset-backed securities purchase programme (ECB/2014/45)
Asset-backed securities purchase programme (ABSPP) - Q&A

• The public sector purchase programme (PSPP)

The Eurosystem started purchases under the PSPP on 9 March 2015. The bonds covered by this purchase programme are those of central governments, regional and local governments, and eligible agencies. Some central banks also purchase bonds issued by international organisations in the euro area and development banks. The Eurosystem only buys public sector bonds from the secondary market because of the prohibition on monetary financing, and up to 33% of a single issue of bonds can be bought and not more than 33% of the total amount from one issuer, or up to 50% for international organisations and development banks.

For further information:
Decision (EU) 2020/188 of the European Central Bank of 3 February 2020 on a secondary markets public sector asset purchase programme (ECB/2020/9)
Public sector purchase programme (PSPP) – Q&A

• The corporate sector purchase programme (CSPP)

The Eurosystem started purchases under the CSPP on 8 June 2016. This programme is designed to purchase corporate bonds, excluding those of banks, to enhance further the positive impact of the Eurosystem's asset purchases on the financing conditions of the non-financial economy, adjust monetary policy in concert with other non-standard monetary policy measures, and help bring inflation to 2% over the medium term. The purchases are made by six euro area central banks from Belgium, Germany, Spain, France, Italy and Finland in coordination, and cover all the countries of the euro area. The Eurosystem buys corporate bonds from both the primary and secondary markets.

For further information:
Decision (EU) 2016/948 of the European Central Bank of 1 June 2016 on the implementation of the corporate sector purchase programme (ECB/2016/16)
Corporate sector purchase programme (CSPP) – Q&A

Reinvestment and net purchases under the expanded asset purchase programme

The Eurosystem made net purchases of 2.6 trillion euros under the expanded asset purchase programme from October 2014 to December 2018. During 2018 the Governing Council became increasingly convinced that inflation was on a sustainable path of growth even without additional asset purchases. Net asset purchases were in consequence stopped from January to October 2019, and only the reinvestment of bonds previously purchased continued. Inflation pressures and economic growth remained weak in the euro area and net asset purchases under the APP were started again in November 2019 and lasted until June 2022. The balance sheet of the Eurosystem held 3.3 trillion euros of bonds when the APP was ended.

From July 2022 until the end of February 2023, the Governing Council reinvested, in full, the principal payments from maturing securities purchased under the APP. In other words the asset purchases did no longer increase the balance sheets of the central bank, but reinvestment meant the balance sheet would not be reduced either and the money sent into the euro area financial system through the asset purchases would continue to boost the economy for as long as necessary.

From March until June 2023, the partial reinvesting of APP portfolio continued with the decline of €15 billion per month on average. Partial reinvestments were conducted broadly in line with net purchases. For the private sector programmes (ABSPP, CBPP3 and CSPP), primary market purchases will be phased out. However, non-bank corporate issuers with a better climate performance and green corporate bonds continued to be purchased in the primary market.

For further information: Asset Purchase Programmes, Modalities for reducing APP holdings

Lending the bonds purchased by Eesti Pank under the public sector asset purchase programme (PSPP)

Since 2 April 2015, market participants have been able to borrow the bonds bought by Eesti Pank under the public sector asset purchase programme (PSPP) and the pandemic emergency purchase programme (PEPP). For more information on this, see here.

1.2 The pandemic emergency purchase programme (PEPP)

The Governing Council of the European Central Bank decided from 18 March 2020 to launch a temporary, extraordinary asset purchase programme to handle the economic impact of the pandemic during the crisis phase of Covid-19. This was intended to stabilise markets effectively even with the increased uncertainty that was caused by the uneven impact of the pandemic across the countries of the euro area and the different asset markets. The asset classes purchased are similar to those under the APP. Public sector bonds are only bought from the secondary market, and the principles of the capital keys of countries must be followed. It was also permitted to buy sovereign bonds with remaining maturities of less than one year and corporate commercial paper with at least 28 days remaining to maturity. The PEPP is a more flexible programme than the usual asset purchase programmes, as it allows purchases to be varied over time and over countries according to need.

The monthly net asset purchases made from March 2020 until March 2022 added 1.7 trillion euros to the balance sheet of the Eurosystem.

From April 2022, only the principal repaid on securities purchased under the PEPP that reach maturity will be reinvested, in full amount until the end of June 2024 and thereafter the reinvestment will be reduced on average by 50% every month. The purchases will cease at the end of 2024.

Additionally, until the end of 2024, it remains possible that net asset purchases under the PEPP could be restarted if the pandemic delivers a further negative shock, or that flexibility could be allowed in reinvesting the repayments^[1] with the aim of maintaining the operation of the monetary policy transmission mechanism.

For further information:
Decision (EU) 2020/440 of the European Central Bank of 24 March 2020 on a temporary pandemic emergency purchase programme (ECB/2020/17)
Pandemic emergency purchase programme (PEPP)

2. Measures not activated

The monetary policy toolbox of the Eurosystem contains two measures that have never yet been launched:

• outright monetary transactions (OMT)
• transmission protection instrument (TPI)

3. Terminated asset purchase programmes

The asset purchase programmes that have been terminated are:

• the securities markets programme (SMP), which started on 10 May 2010 and ended on 10 June 2014
• the first covered bond purchase programme (CBPP), which started on 2 July 2009 and ended on 30 June 2010
• the second covered bond purchase programme (CBPP2), which started in November 2011 and ended on 31 October 2012

4. Targeted longer-term refinancing operations (TLTRO)

The targeted longer-term refinancing operations of the Eurosystem provide long-term financing for credit institutions in the euro area on favourable terms. The aim of the Governing Council of the European Central Bank with the targeted longer-term refinancing operations was to diversify the funding options for the banks and stimulate lending to the non-financial economy, especially to small and medium-sized enterprises. The measure was also designed to meet the objective of price stability.

The first series of TLTROs was announced on 5 June 2014, the second series (TLTRO-II) on 10 March 2016, and the third series (TLTRO-III) on 7 March 2019.

In October 2022 the Governing Council decided to change the terms and conditions of the third series of targeted longer-term refinancing operations (TLTRO III). During the acute phase of the pandemic, this instrument played a key role in countering downside risks to price stability. In view of the unexpected and extraordinary rise in inflation, it needs to be recalibrated to ensure that it is consistent with the broader monetary policy normalisation process. It helps to reinforce the transmission of policy rate increases to bank lending conditions, to control the growth of inflation and to contribute to achieving price stability in the medium term.

Nevertheless, the main difference between the operations of the third series and those of the first and second series is the very low interest rate, because if the goal of credit growth was fulfilled, this could be:

• up to 50 basis points below the average interest rate of the European Central Bank deposit facility between 24 June 2020 and 23 June 2022, meaning it could be as low as -1.00%;
• the average interest rate on the deposit facility over the entire loan operation for the remaining term of the operation until 22 November 2022;
• from 23 November 2022 until the repayment the average interest rate on the deposit facility over the entire loan operation.

Loans from the third series could be paid back once a quarter before their maturity until the final maturity of the loans, with the maturity of the last lending operation coming in December 2024. Furthermore, three additional voluntary early repayment dates was introduced to provide TLTRO III participants with additional opportunities to repay their respective TLTRO III borrowings before their maturity.

For further information:
Targeted longer-term refinancing operations (TLTROs)
Guidelines for the reporting of credit institutions

5. The bridge longer-term refinancing operations (LTROs) and pandemic emergency longer-term refinancing operations (PELTRO)

When the Governing Council of the European Central Bank decided in March 2020 to ease the conditions for TLTRO-III loans from the June operation, it also announced an additional bridge operation to help cover the gap from March until the four TLTRO-III operations under the new conditions. Weekly operations were held from March, and they ended in June 2020. For more information see the ECB website.

Additional pandemic emergency longer-term refinancing operations (PELTRO) were provided from May 2020 to December 2021 to soften the economic impact of the pandemic and ensure that money markets operated smoothly. A total of 11 operations were held. For more information see the ECB website and the ECB website.