Measures related to the COVID-19 pandemic
In the context of the COVID-19 pandemic, the Governing Council adopted a number of monetary policy measures to support access to credit for firms and households. The Eurosystem extended its liquidity-providing operations to the financial system, eased eligibility criteria for assets that banks must provide as collateral, thereby facilitating banks’ access to the Eurosystem’s liquidity-providing operations, and established a new asset purchase programme of private and public sector securities.
For further details on the monetary policy measures adopted, see this decoder (in Portuguese only).
Additional longer-term refinancing operations (LTROs)
On 12 March 2020 the Governing Council decided to conduct, temporarily, additional longer-term refinancing operations (LTROs). These operations provided liquidity to the euro area financial system, in case of need and with favourable conditions, until June 2020:
- operations were allotted on a weekly basis with an interest rate that was equal to the average rate on the deposit facility;
- the first operation was settled on 18 March 2020;
- all operations matured on 24 June 2020 when the fourth operation of TLTRO III settled.
Pandemic emergency longer-term refinancing operations (PELTROs)
On 30 April 2020 the Governing Council announced a new series of seven additional longer-term refinancing operations, called pandemic emergency longer-term refinancing operations (PELTROs). These operations aimed to provide liquidity support to the euro area financial system and contribute to preserving the smooth functioning of money markets by providing an effective backstop after the expiry, in June 2020, of the bridge longer-term refinancing operations (LTROs) conducted since March 2020.
PELTROs were made available under the following conditions:
- the interest rate was set at 25 basis points below the average rate applied in the main refinancing operations (MRO) over the life of the respective PELTRO;
- they were conducted monthly with decreasing tenors, starting with a tenor of 16 months in the first operation (21 May 2020) and ending with a tenor of 8 months in the last operation (3 December 2020);
- counterparties participating in PELTROs were able to benefit from the collateral easing measures in place until the end of September 2021 that were announced by the Governing Council on 7 and 23 April 2020.
Four new operations to be conducted in the course of 2021, allotted on a quarterly basis, each with a tenor of one year, were announced on 10 December 2020. The first such operation took place on 25 March 2021 and the last one on 16 December 2021. The interest rate applied was as in the initial series.
Collateral easing measures
For institutions to participate in liquidity-providing operations, the Eurosystem relaxed the eligibility criteria and risk control measures applied to collateral.
The Eurosystem increased its risk tolerance by lowering collateral valuation haircuts for both marketable and non-marketable assets.
It also introduced other changes in the monetary policy framework: it raised the concentration limit for uncovered bank bonds, lowered the threshold for the mobilisation of individual credit claims, simplified the reporting requirements for credit claims and eased the criteria for accepting credit claims with public guarantees.
In turn, it decided to accept a larger number of credit assessment sources to evaluate additional credit claims, namely IRB systems approved by the relevant supervisors only and statistical ICASs (in-house credit assessment systems) of the national central banks. National central banks were also given the opportunity to extend their additional credit claim frameworks.
It also decided to temporarily continue to accept as collateral marketable assets and the issuers or guarantors of such assets that fulfilled the eligibility criteria on 7 April 2020, notwithstanding a potential deterioration in their credit ratings, providing the ratings remained above a certain quality level.
On 10 December 2020, the Governing Council decided to extend, from September 2021 to June 2022, the period during which these measures will remain in force.
On 24 March 2022, the Governing Council announced a timeline to gradually phase out collateral easing measures, starting on 8 July 2022. All measures should in principle be discontinued by March 2024 (see related pages).
Pandemic emergency purchase programme (PEPP)
On 18 March 2020 the Governing Council decided to establish a new public and private sector asset purchase programme, the pandemic emergency purchase programme (PEPP).
The PEPP was launched to counter serious risks to the monetary policy transmission mechanism and to the outlook for the euro area economy posed by the COVID-19 pandemic.
All asset categories eligible under the APP are also eligible under the PEPP. Public sector securities with a remaining maturity of at least 70 days and securities issued by the Greek Government are also eligible. Commercial paper is also eligible for purchases under the PEPP and has become eligible under the CSPP.
The purchases of public sector securities were made on the basis of the ECB capital key of the national central banks. However, purchases were conducted in a flexible manner, leading to fluctuations in the distribution of purchase flows over time, across asset classes and across jurisdictions.
Net asset purchases under the PEPP ended in April 2022. The principal payments from maturing securities under this programme are reinvested in full and in a flexible manner.