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Non-standard measures related to the COVID-19 pandemic

In order to address the effects of the COVID-19 pandemic on the economy, the Governing Council of the ECB adopted several monetary policy measures to preserve favourable borrowing conditions for firms and households. Against this background, the Eurosystem extended the operations providing liquidity to the financial system, relaxed the criteria for accepting the assets that banks are required to provide as collateral, helping to strengthen the Eurosystem’s liquidity-providing operations for banks, and launched a new public and private sector purchase programme.

For further details on the monetary policy measures adopted, see the decoder released on 27 April 2020 on the webpage dedicated to the COVID-19 pandemic (see Related pages).


Additional longer-term refinancing operations (LTROs)

On 12 March 2020, the Governing Council of the ECB decided to temporarily conduct additional longer-term refinancing operations (LTROs). These operations provided liquidity to the euro area financial system at favourable terms in case of need until the fourth TLTRO III operation in June 2020:

  • They were carried out on a weekly basis with an interest rate that was equal to the average rate on the deposit facility;
  • All operations matured on 24 June 2020, the settlement date of the fourth TLTRO-III;
  • The first operation was settled on 18 March 2020.


Pandemic emergency longer-term refinancing operations (PELTROs)

On 30 April 2020, the Governing Council of the ECB announced a new series of seven additional longer-term refinancing operations, called pandemic emergency longer-term refinancing operations (PELTROs). The aim of these operations is to strengthen the liquidity support to the euro area banking system and contribute to preserving the smooth functioning of money markets by providing an effective backstop after the longer-term refinancing operations (LTROs) that have been conducted since March 2020 mature in June 2020.

The PELTROs will be provided under the following conditions:

  • The interest rate will be 25 basis points below the average rate applied in the main refinancing operations (MROs) over the life of the respective PELTRO;
  • They will be conducted on a monthly basis 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 will benefit from the collateral easing measures in place until the end of September 2021 that were announced by the ECB on 7 and 23 April 2020.

On 10 December 2020, the Governing Council announced four additional quarterly operations during 2021, with tenors of approximately one year. The first operation in these conditions will be settled on 25 March 2021 and the last one on 16 December 2021. The interest rate on these operations is the same as in the first series.


Collateral easing measures

So that credit institutions maintain sufficient eligible collateral to be able to participate in all liquidity-providing operations, the Eurosystem decided to ease the eligible criteria and risk control measures applied to collateral. 

The Eurosystem increased its risk tolerance by lowering collateral valuation haircuts applied to marketable and non-marketable assets. It also introduced other changes in the monetary policy framework: the uncovered bank bonds concentration limit increased, the minimum threshold for mobilising individual credit claims was reduced, there was a simplification of the reporting requirements for credit claims and the criteria for accepting of credit claims with public guarantees were eased. In turn, it decided to accept a larger number of credit assessment sources to evaluate additional credit claims, namely IRB systems only approved by the relevant supervisors and statistical ICAS of the national central banks. At the same time, National Central Banks were given the opportunity to extend their additional credit claims frameworks.

It also decided to temporarily continue to accept as collateral marketable assets and the issuers or guarantors of these assets that fulfilled the eligibility criteria on 7 April 2020 notwithstanding a potential deterioration in their credit ratings, as long as the ratings remain 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. 


Pandemic emergency purchase programme (PEPP)

On 18 March 2020, the Governing Council of the ECB decided to create a new purchase programme of private and public sector securities, the pandemic emergency purchase programme (PEPP), to counter the risks to the functioning of the monetary policy transmission mechanism and the euro area economy posed by the COVID-19 pandemic. All asset categories eligible under the APP are eligible under the PEPP. Public sector securities with a minimum maturity of 70 days and Greek government securities are also eligible. In addition, commercial paper is eligible for purchases under the PEPP and now also under the CSPP. Purchases of public sector securities will be carried out on the basis of the ECB capital key of each national central banks. However, purchases may be conducted in a flexible manner, which will allow for fluctuations in the distribution of purchase flows over time, across asset classes and among jurisdictions.