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Date: 31-Oct-2024 Category: Not Applicable State: Union Government Country: Europe

Decision (EU) 2024/2819 of the European Central Bank of 24 October 2024 amending Decision (EU) 2020/440 on a temporary pandemic emergency purchase programme (ECB/2020/17) (ECB/2024/29)

Issued by European Central Bank · Not Applicable

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Executive Summary & Key Takeaways

What it means

  • The European Central Bank (ECB) has amended Decision (EU) 2020/440 concerning the temporary pandemic emergency purchase programme (PEPP).
  • The amendment relates to securities lending transactions involving corporate bonds held under the PEPP and the corporate sector purchase programme (CSPP).

Key Changes

  • Article 7 of Decision (EU) 2020/440 (ECB/2020/17) is replaced.
  • The Eurosystem shall make securities purchased under the PEPP available for lending, including repos, with the aim of ensuring the effectiveness of the PEPP.
  • An exception is made for securities that no longer meet the credit quality requirements for securities purchased under the corporate sector purchase programme.

Impact Analysis

Financial Institutions

  • Institutions need to monitor the credit quality of securities held under the PEPP to ensure compliance with the updated lending rules.

European Central Bank (ECB)

  • The ECB needs to monitor the securities lending activities under the PEPP to ensure compliance with the updated rules and manage associated risks.

Corporate Bond Issuers

  • Issuers whose bonds are purchased under the PEPP may see increased demand for their securities due to the lending program.

Risk Management

  • All stakeholders should review and update their risk management frameworks to reflect the changes in securities lending practices under the PEPP.

Key Entities Referenced

European Central Bank (ECB): The central bank of the Eurozone, responsible for monetary policy. Eurosystem: Comprises the European Central Bank and the national central banks of the Eurozone countries. PEPP (Pandemic Emergency Purchase Programme): A temporary asset purchase programme launched by the ECB in response to the COVID-19 pandemic. CSPP (Corporate Sector Purchase Programme): An asset purchase programme under which the ECB purchases corporate bonds. Decision (EU) 2020/440 (ECB/2020/17): The original ECB decision establishing the temporary pandemic emergency purchase programme (PEPP). Decision (EU) 2016/948 (ECB/2016/16): The ECB decision on the implementation of the corporate sector purchase programme (CSPP).
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Official Journal EN of the European Union L series 2024/2819 31.10.2024 DECISION (EU) 2024/2819 OF THE EUROPEAN CENTRAL BANK of 24 October 2024 amending Decision (EU) 2020/440 on a temporary pandemic emergency purchase programme (ECB/2020/17) (ECB/2024/29) 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 the second subparagraph of Article 12.1 in conjunction with the first indent of Article 3.1, and Article 18.1 thereof, Whereas: (1) Taking into account the exceptional economic and financial circumstances associated with the spread of coronavirus disease 2019 (COVID-19), on 18 March 2020, the Governing Council decided to launch a temporary pandemic emergency purchase programme (PEPP) including all the asset categories eligible under the ECB’s asset purchase programme, consisting of the secondary markets public sector asset purchase programme, the third covered bond purchase programme, the asset-backed securities purchase programme, and the corporate sector purchase programme (CSPP). (2) The CSPP was established by Decision (EU) 2016/948 of the European Central Bank (ECB/2016/16)(1). It contains a number of safeguards to ensure that the purchases and holding of corporate bonds will be proportionate to its aims. These safeguards should also ensure that related financial risks are taken into account in the CSPP’s, and therefore also the PEPP’s, design and should reflect risk management perspectives. (3) Accordingly, the Governing Council decided on 6 August 2024 to amend the rule applicable to securities lending transactions of corporate bonds held by the Eurosystem under the CSPP and the PEPP to reflect risk management considerations. (4) Therefore, Decision (EU) 2020/440 of the European Central Bank (ECB/2020/17)(2)should be amended accordingly, HAS ADOPTED THIS DECISION: Article 1 Amendment Article 7 of Decision (EU) 2020/440 (ECB/2020/17) is replaced by the following: ‘Article 7 Securities lending Except for securities that no longer meet the credit quality requirements for securities purchased under the corporate sector purchase programme, the Eurosystem shall make securities purchased under the PEPP available for lending, including repos, with a view to ensuring the effectiveness of the PEPP.’. (1) 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) (OJ L 157, 15.6.2016, p. 28). (2) Decision (EU) 2020/440 of the European Central Bank of 24 March 2020 on a temporary pandemic emergency purchase programme (ECB/2020/17) (OJ L 91, 25.3.2020, p. 1). ELI: http://data.europa.eu/eli/dec/2024/2819/oj 1/2EN OJ L, 31.10.2024 Article 2 Entry into force This Decision shall enter into force on the fifth day following that of its publication in the Official Journal of the European Union. Done at Frankfurt am Main, 24 October 2024. The President of the ECB Christine LAGARDE 2/2 ELI: http://data.europa.eu/eli/dec/2024/2819/oj

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