Deviations from the capital key - Public sector purchase programme
Policy changes: 1 March 2020 vs 2 February 2021
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1 March 2020 |
5 February 2021 |
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Interest rates |
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| Main refinancing operations | 0% | 0% |
| Marginal lending facility | 0.25% | 0.25% |
| Deposit facility | -0.50% | -0.50% |
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Asset purchase programmes |
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| Size & Time frame | APP at €20bn per month for as long as necessary (decided Sep 2019, effective from Nov 2019) | Original APP + additional envelopes €120bn APP until end-2020 + €1.85tn PEPP until at least March 2022 |
| Terms of purchase | ||
| Capital key | Capital key guides purchases in APP | Capital Key remains for APP and PEPP but more flexibility for PEPP |
| Issuer limit | Issuer limit at 33% of any country’s eligible bonds | Issuer limit does not apply to PEPP |
| Eligibility | Eligibility in line with rating requirements | Greek government bonds included in PEPP but not in APP (PSPP). No catch-up purchases of these securities. Non-financial commercial papers (if sufficient credit quality) eligible for CSPP. Easing of collateral standards by adjusting main risk parameters of collateral framework. |
| Maturities | Maturities for PEPP extended, new range is from 70days to 30 years and 364 days. For private securities the maturity range is at 28 days up to 30 years and 364 days. No maturity restrictions of ABSPP and CBPP3-eligible securities | |
| Reinvestments | Apply to APP | Apply to APP until after rates start to rise, apply to PEPP until at least end-2023 |
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Open market operations |
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| Additional LTROs | Conducted as fixed rate tender procedures with full allotment, rate fixed at avg of deposit rate. Operations mature June 2020 | |
| TLTRO III | Favourable conditions apply between June 2020-June 2022 | |
| Terms of purchase | ||
| Interest rate | As low as avg rate on deposit facility | 50bp below avg refi rate and even lower (up to 50bp below avg deposit rate) for those who maintain levels of credit provision |
| Borrowing allowance | 30% of stock of eligible loans | Raised to 55% |
| Lending performance threshold | 2.5% | Reduced to 0% (assessment period set to 1 March 2020)
For banks that do not reach the threshold different TLRO III rates apply (25bp below avg refi rate) and lending threshold reduced to 1.15% |
| Limit on stock of eligible loans that can be borrowed in each operation | 10% | No limit |
| Repayment options | Early repayment option available after two years from settlement | Early repayment option available after one year from settlement starting in September 2021 |
| PELTROs | From May 20202: New series of non-targeted pandemic emergency longer-term refinancing operations, conducted as fixed rate tender procedures with full allotment, rate fixed at 25bp below refi rate. Operations mature in staggered sequence between July-September 2021. Four additional PELTROs in 2021.
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Collateral framework for liquidity facilities (LTROs and TLTROs) |
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| Bank funding against loans to corporates and households | Guided by additional credit claims (ACC) framwork | Expanded ACC framework: accepts collateral and new debtor types covered by Covid-19 government guarantees ; enlarges scope of acceptable credit assessment systems (e.g. supervisor-approved banks’ own assessments); reduces ACC loan level reporting requirements to speed up process. In place until June 2022 |
| Non-uniform minimum size threshold for domestic credit claims | EUR 25,000 | Lowered to EUR 0 |
| Concentration limit for unsecured bank bonds | 2.5% | Raised to 10% |
| Greek Government Bonds | Waiver to accept as collateral | |
| Risk tolerance level in credit operations (haircut parameters) | Reduction of collateral valuation haircuts by fixed factor of 20%. Further haircut reduction of around 20% for on-marketable assets. | |
| Rating measures | Eligibility ‘freeze’, rating floor imposed at CQS5 (BB) | |
| Rating measures (ABS) | Eligibility ‘freeze’, rating floor imposed at CQS4 (BB+) | |
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Other liquidity facilities |
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| Bilateral swap/repo lines | Standing swap arrangements with the UK, Canada, Japan, US, Switzerland and China. Expired swap arrangements with Denmark, Sweden, Latvia, Hungary and Poland. | Additions of temporary swap arrangements until March 2022 with Denmark (reactivated, amount doubled to €24bn), Croatia (€2bn) and Bulgaria (€2bn). New repo lines set up with Romania (€4.5bn), Albania (€400m), Serbia (€1bn), Hungary (€4bn), North Macedonia (€400m) and San Marino (€100m).
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| Repo facilities | New Eurosystem repo facility EUREP as a precautionary backstop to address pandemic-related euro liquidity to non-Eurosystem central banks. Available until June 2021 | |
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Supervision |
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| Â | Level of capital defined by Pillar 2 Guidance and Liquidity Coverage Ratio | Relaxation of conditions: banks allowed to operate temporarily below level of capital defined by P2G and LCR |
| Â | Capital instruments need to qualify as Common Equity Tier 1 capital | This has been lifted; banks now allowed to partially use capital instruments that do not qualify as CET1 eg Additional Tier 1 or Tier 2 instruments. |
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Relevant links:
2 March: Statement by ECB President
12 March: Monetary policy decisions
12 March: Supervisory policy decisions
18 March: ECB launches Pandemic Emergency Purchase Programme
25 March: ECB lifts limits on PEPP
20 March – 22 April : ECB (re) activates swap lines with Denmark, Croatia and Bulgaria
7 April: ECB announces package of temporary collateral easing measures
30 April: ECB eases conditions on TLTRO III, introduces PELTROs
4 June: ECB expands and extends pandemic emergency purchase programme, introduces reinvestments
17 July: ECB sets up repo lines to provide euro liquidity with Bank of Albania and National Bank of Serbia
23 July: ECB sets up repo line with Magyar Nemzeti Bank to provide euro liquidity
18 August: ECB sets up repo lines with National Bank of the Republic of North Macedonia and the Central Bank of the Republic of San Marino to provide euro liquidity
22 September: ECB to accept sustainability-linked bonds as collateral from January 2021
10 December: ECB extends pandemic emergency longer-term refinancing operations
4 February: ECB extends bilateral euro liquidity lines with non-euro area central banks