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 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) ) with monthly net purchases between EUR 15 and 80 billion, 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.
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 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 programme to market participants. For more, see the section on securities lending.
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.
- 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.