Decision (EU) 2020/187 of the European Central BankShow full title

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)

(recast)

THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first indent of Article 127(2) thereof,

Having regard to the Statute of the European System of Central Banks and of the European Central Bank and, in particular to the second subparagraph of Article 12.1 in conjunction with the first indent of Article 3.1, and Article 18.1 thereof,

Whereas:

(1) Decision ECB/2014/40(1) has been substantially amended several times(2). Since further amendments are to be made, that Decision should be recast in the interests of legal clarity.

(2) Decision ECB/2014/40 established the third covered bond purchase programme (CBPP3). Alongside the asset-backed securities purchase programme, the secondary markets public sector asset purchase programme and the corporate sector purchase programme, the CBPP3 is part of the expanded asset purchase programme (APP) of the European Central Bank (ECB). The APP aims to enhance the transmission of monetary policy, facilitate the provision of credit to the euro area economy, ease borrowing conditions for households and firms, and support the sustained convergence of inflation rates to levels below, but close to 2 %, over the medium term, consistent with the ECB’s primary objective of maintaining price stability.

(3) Decision (EU) 2017/2199 of the European Central Bank (ECB/2017/37)(3) refined the rules applicable to the eligibility for purchase under the CBPP3 of covered bonds that are commonly referred to as conditional pass-through covered bonds. From 1 January 2019, conditional pass-through covered bonds should no longer be eligible for purchase under the CBPP3, in view of their more complex structure whereby pre-defined events lead to an extension of the bond’s maturity and a switch in the bond’s payment structure.

(4) On 13 December 2018, the Governing Council decided that certain parameters of the APP should be adjusted as from 1 January 2019 in order to achieve the APP’s objectives. More specifically, the Governing Council decided to halt net asset purchases under the APP on 31 December 2018. The Governing Council confirmed its intention that principal payments from maturing securities purchased under the APP should continue to be reinvested in full for an extended period of time past the date when the Governing Council starts raising 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.

(5) On 12 September 2019, the Governing Council decided to restart net purchases under the APP as from 1 November 2019 and expects them to be carried out for as long as necessary to reinforce the accommodative impact of policy rates and to end shortly before the Governing Council starts raising the key ECB interest rates. The Governing Council also decided to continue reinvesting in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when the Governing Council starts raising 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. In light of a protracted slowdown in the euro area economy, persistent downside risks to the growth outlook and an inflation outlook that continued to fall short of its medium-term inflation aim, the Governing Council concluded that a comprehensive policy response was warranted to support the return of inflation to a sustained convergence path towards the Governing Council’s medium-term inflation aim. Resuming net asset purchases is a proportionate measure as it has a greater impact on longer-term rates than interest rate policy and eases the relevant funding costs of firms and households.

(6) The CBPP3, as part of the asset purchase programmes constituting the APP, is a proportionate measure for mitigating the risks to the outlook on price developments, as these programmes further ease monetary and financial conditions, including those relevant to the borrowing conditions of euro area non-financial corporations and households, thereby supporting aggregate consumption and investment spending in the euro area and ultimately contributing to a return of inflation rates to levels below, but close to, 2 % over the medium term. In an environment where key ECB interest rates are close to their lower bound, it is necessary to include in the Eurosystem's monetary policy measures asset purchase programmes as instruments that feature a high transmission potential to the real economy.

(7) The CBPP3 contains a number of safeguards to ensure that the envisaged purchases are proportionate to its aims, and that the related financial risks have been duly taken into account in its design and will be contained through risk management.

(8) The CBPP3 complies fully with the obligations of the Eurosystem central banks under the Treaties, and does not impair the operation of the Eurosystem in accordance with the principle of an open market economy with free competition.

(9) As part of the single monetary policy, the outright purchases of eligible covered bonds by Eurosystem central banks under the CBPP3 should be implemented in a uniform and decentralised manner, in accordance with this Decision,

HAS ADOPTED THIS DECISION:

(1)

Decision ECB/2014/40 of 15 October 2014 on the implementation of the third covered bond purchase programme (OJ L 335, 22.11.2014, p. 22).

(2)

See Annex I.

(3)

Decision (EU) 2017/2199 of the European Central Bank of 20 November 2017 amending Decision ECB/2014/40 on the implementation of the third covered bond purchase programme (ECB/2017/37) (OJ L 312, 28.11.2017, p. 92).