The European Central Bank (ECB) has announced a €750 billion Pandemic Emergency Purchase Programme (PEPP) in response to the continued spread of Covid-19 – and the subsequent economic impact of it.
The governing council of the ECB decided on three key measures in its announcement this morning, Thursday, March 19.
Firstly, the bank decided to launch a new temporary asset purchase programme of private and public sector securities.
This new PEPP will have an overall envelope of €750 billion.
Purchases will be conducted until the end of 2020 and will include all the asset categories eligible under the existing asset purchase programme (APP), the bank added.
For the purchases of public sector securities, the benchmark allocation across jurisdictions will continue to be the capital key of the national central banks.
At the same time, purchases under the new PEPP will be conducted in a flexible manner, the bank said.
Secondly, the ECB said it aims to expand the range of eligible assets under the corporate sector purchase programme (CSPP) to non-financial commercial paper, making all commercial papers of sufficient credit quality eligible for purchase under CSPP.
Finally, the bank has decided to ease the collateral standards by adjusting the main risk parameters of the collateral framework.
“In particular, we will expand the scope of Additional Credit Claims (ACC) to include claims related to the financing of the corporate sector,” the bank said in a statement.
In its release today, the governing council of the ECB stressed that it is committed to playing its role in supporting all citizens of the euro area.
To that end, the ECB will ensure that all sectors of the economy can benefit from supportive financing conditions that enable them to absorb this shock. This applies equally to families, firms, banks and governments.
Outlining that it will “do everything necessary within its mandate”, the governing council said it is “fully prepared to increase the size of its asset purchase programmes and adjust their composition, by as much as necessary and for as long as needed”.
“It will explore all options and all contingencies to support the economy through this shock.
“To the extent that some self-imposed limits might hamper action that the ECB is required to take in order to fulfil its mandate, the governing council will consider revising them to the extent necessary to make its action proportionate to the risks that we face.
“The ECB will not tolerate any risks to the smooth transmission of its monetary policy in all jurisdictions of the euro area,” the central bank concluded.