Decision (EU) 2025/1240 of the European Central Bank of 11 June 2025 amending Decision (EU) 2020/187 on the implementation of the third covered bond purchase programme (ECB/2020/8) (ECB/2025/20)

## Report on Amendment to the Third Covered Bond Purchase Programme (CBPP3) **1. Executive Summary:** This report analyzes Decision (EU) 2025/1240 of the European Central Bank (ECB), an amendment to Decision (EU) 2020/187 concerning the implementation of the third covered bond purchase programme (CBPP3). The core purpose of this amendment is to broaden the scope of eligible counterparties for the CBPP3, specifically to allow Eurosystem central banks to participate in standard market transactions such as repurchase transactions by issuers of covered bonds (buybacks). The key finding is that this amendment introduces a new category of eligible counterparties, which are issuers of covered bonds held in the CBPP3 Eurosystem portfolios in the case of a repurchase of the relevant covered bond by that issuer pursuant to a buyback. **2. Introduction:** The purpose of this report is to provide an informative overview of Decision (EU) 2025/1240 of the European Central Bank (ECB) based solely on the provided policy text. This decision amends Decision (EU) 2020/187, which implemented the third covered bond purchase programme (CBPP3). The report will focus on the rationale for the amendment, the specific changes introduced, and the likely impact of these changes. **3. Policy Overview:** * This report concerns an amendment to Decision (EU) 2020/187 of the European Central Bank on the implementation of the third covered bond purchase programme (CBPP3). * **Core Objective(s) (inferred from the text):** The CBPP3 aims to purchase and hold covered bonds while ensuring proportionality to its aims and reflecting risk management perspectives. The amendment seeks to allow Eurosystem central banks to participate in standard market transactions such as repurchase transactions by issuers of covered bonds (buybacks). **4. Background and Rationale:** This amendment appears to be driven by the need to facilitate standard market transactions, specifically repurchase transactions (buybacks) involving issuers of covered bonds. The amendment suggests that the original definition of eligible counterparties in Decision (EU) 2020/187 may have been too restrictive, preventing Eurosystem central banks from fully participating in such transactions. By expanding the definition of eligible counterparties, the ECB aims to enable smoother and more efficient market operations within the CBPP3 framework. **5. Key Provisions / Changes:** This amendment specifically modifies Article 4 of Decision (EU) 2020/187, which defines "Eligible counterparties." * **Specific Part Changed:** Article 4 concerning "Eligible counterparties." * **New Rule/Provision:** A new category (c) of eligible counterparties is added: "issuers of covered bonds held in the CBPP3 Eurosystem portfolios to which neither point a nor point b applies, but only in the case of a repurchase of the relevant covered bond by that issuer pursuant to a buyback." * **Difference/Effect of the Change:** Previously, issuers of covered bonds undergoing a buyback who did not meet the criteria of points a (entities eligible for Eurosystem monetary policy operations) or b (counterparties used for euro-denominated investment portfolios) were *not* eligible counterparties. This amendment *now* allows these issuers to be eligible counterparties specifically for repurchase transactions (buybacks) of their own covered bonds held within the CBPP3 Eurosystem portfolios. The effect is to facilitate buybacks by these issuers. **6. Target Audience and Stakeholders:** Based on the text, the primary target audience and stakeholders directly affected by this amendment are: * **Eurosystem central banks:** They are now explicitly permitted to participate in repurchase transactions with issuers of covered bonds in the CBPP3 portfolio. * **Issuers of covered bonds held in the CBPP3 Eurosystem portfolios:** Specifically, those issuers who are undertaking buybacks and do not otherwise qualify as eligible counterparties under the original criteria (points a and b). * **Covered bond market participants:** The amendment can influence the liquidity and efficiency of the covered bond market. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The European Central Bank (ECB) and Eurosystem central banks are responsible for implementing this amendment. * **Timelines/Procedures:** The amendment enters into force on the fifth day following its publication in the Official Journal of the European Union (i.e., 25 June 2025). There are no other specific timelines or procedures detailed in the text beyond this. * **Implementation of the Change:** Eurosystem central banks must update their internal procedures to reflect the inclusion of covered bond issuers (conducting buybacks) as eligible counterparties. **8. Expected Outcomes / Impact of Changes:** The likely intended outcome of this amendment is to: * Facilitate repurchase transactions (buybacks) of covered bonds held within the CBPP3 portfolio. * Potentially improve liquidity and efficiency in the covered bond market by making it easier for issuers to manage their outstanding bonds. * Provide Eurosystem central banks with greater flexibility in managing their CBPP3 portfolios. **9. Conclusion:** Decision (EU) 2025/1240 represents a targeted amendment to the ECB's CBPP3, specifically designed to broaden the scope of eligible counterparties to include issuers of covered bonds undertaking buybacks under certain conditions. This change aims to facilitate repurchase transactions, potentially improving market liquidity and providing greater flexibility to Eurosystem central banks in managing their covered bond portfolios. This targeted adjustment underscores the ECB's commitment to ensuring the efficient and effective operation of the CBPP3 program.

Key Entities Referenced