Decision (EU) 2025/1241 of the European Central Bank of 11 June 2025 amending Decision (EU) 2020/440 on a temporary pandemic emergency purchase programme (ECB/2020/17) (ECB/2025/21)

## Report on Amendment to the Pandemic Emergency Purchase Programme (PEPP) **1. Executive Summary:** This report analyzes Decision (EU) 2025/1241 of the European Central Bank (ECB), an amendment to Decision (EU) 2020/440 concerning the temporary pandemic emergency purchase programme (PEPP). The core purpose of this amendment is to modify the rules regarding securities lending transactions of covered bonds held by the Eurosystem under the CBPP3 and PEPP to reflect risk management considerations. The key change involves replacing Article 7 of the original decision, concerning securities lending, to ensure the effectiveness of the PEPP while acknowledging risk management requirements. **2. Introduction:** This report provides an overview and analysis of Decision (EU) 2025/1241 of the European Central Bank (ECB), which amends Decision (EU) 2020/440 regarding the temporary pandemic emergency purchase programme (PEPP). The analysis is based solely on the text of the amending decision. **3. Policy Overview:** * This report concerns an amendment to an existing policy, Decision (EU) 2020/440 on a temporary pandemic emergency purchase programme (PEPP). * **Core Objective(s) (as inferred from the text):** The primary objective of the amendment is to refine the securities lending practices within the PEPP framework, specifically concerning covered bonds, to enhance risk management while maintaining the programme's effectiveness. It seeks to balance the need for securities lending to support market functioning with the need to mitigate potential risks. **4. Background and Rationale:** This amendment appears to address concerns related to risk management in the context of securities lending transactions within the PEPP. The text indicates that the Governing Council decided to amend the rules applicable to securities lending transactions of covered bonds to reflect risk management considerations. It aims to refine practices established in the CBPP3 that are also applicable to the PEPP. **5. Key Provisions / Changes:** This amendment focuses *specifically* on changing Article 7 of the original Decision (EU) 2020/440. * **Specific Part of Original Policy Being Changed:** Article 7 of Decision (EU) 2020/440, which concerns securities lending. * **New Rule/Provision:** Article 7 is replaced with the following: "Except for securities that no longer meet the credit quality requirements for securities purchased under the corporate sector purchase programme or the third covered bond 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." * **Difference/Effect of Change:** The change seems to clarify that the Eurosystem is *obliged* to make securities purchased under the PEPP available for lending, including repos, to ensure the program's effectiveness. The only exception is for securities that no longer meet credit quality requirements. The amendment likely aims to provide more specific guidance on securities lending within the PEPP, focusing on its role in ensuring the program's overall efficacy, while still acknowledging risk management considerations. It seems to ensure a certain level of securities remains available for lending purposes. **6. Target Audience and Stakeholders:** Based on the text, the target audience and stakeholders are likely: * **The Eurosystem:** As the body responsible for implementing the PEPP and engaging in securities lending. * **Financial institutions participating in the Eurosystem's securities lending operations:** These institutions will be directly affected by the amended rules governing the availability and eligibility of securities for lending. * **The covered bond market:** Participants in this market will be affected by the rules governing securities lending as it can affect liquidity and pricing. **7. Implementation Aspects (Inferred):** * **Responsible agency/bodies:** The Eurosystem is the primary body responsible for implementing these changes. * **Timelines or procedures:** The Decision enters into force on the fifth day following its publication in the Official Journal of the European Union (June 20, 2025), indicating an immediate implementation timeline after that date. The specific procedures for securities lending are not detailed in this text but are likely established within the Eurosystem's operational framework. * The changes need to be applied to all securities lending transactions under the PEPP going forward. **8. Expected Outcomes / Impact of Changes:** The likely intended outcome *of these specific changes* introduced by the amendment text is: * **Increased effectiveness of the PEPP:** By ensuring the availability of securities for lending, the amendment aims to improve market liquidity and the overall functioning of the PEPP. * **Enhanced risk management:** The text explicitly mentions risk management considerations as a driving force behind the amendment. This suggests that the change is intended to refine the risk profile of securities lending transactions within the PEPP framework. * **Greater clarity and operational efficiency:** By providing a clearer rule for securities lending, the amendment likely aims to reduce ambiguity and improve the operational efficiency of the PEPP. **9. Conclusion:** Decision (EU) 2025/1241 represents a targeted amendment to the PEPP, refining the rules on securities lending to strike a balance between ensuring the program's effectiveness and managing related risks. The changes primarily affect the Eurosystem and financial institutions participating in securities lending operations, with the ultimate goal of improving the functioning and resilience of financial markets during the pandemic recovery. This refinement underscores the ECB's commitment to adapt its policies to evolving market conditions and risk assessments.

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