# Decision (EU) 2015/774 of the European Central Bank (repealed)Show full title

Decision (EU) 2015/774 of the European Central Bank of 4 March 2015 on a secondary markets public sector asset purchase programme            (ECB/2015/10) (repealed)         

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U.K.

# Decision (EU) 2015/774 of the European Central Bank

# of 4 March 2015

# on a secondary markets public sector asset purchase programme (ECB/2015/10) (repealed)

THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK,

Having regard to the Treaty on the Functioning of the European Union, and in particular to the first indent of Article 127(2)                           thereof,                        

Having regard to the Statute of the European System of Central Banks and of the European Central Bank, and in particular to                           the second subparagraph of Article 12.1 in conjunction with the first indent of Article 3.1, and Article 18.1 thereof,                        

Whereas:

(1)In accordance with Article 18.1 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter                              the ‘Statute of the ESCB’), the European Central Bank (ECB), together with the national central banks of the Member States                              whose currency is the euro (hereinafter the ‘NCBs’) may operate in the financial markets by, among other things, buying and                              selling marketable instruments outright, in order to achieve the objectives of the ESCB.

(2)On 4 September 2014, the Governing Council decided to initiate a third covered bond purchase programme (hereinafter the ‘CBPP3’)                              and an asset-backed securities purchase programme (ABSPP). Alongside the targeted longer-term refinancing operations introduced                              in September 2014, these asset purchase programmes are aimed at further enhancing the transmission of monetary policy, facilitating                              credit provision to the euro area economy, easing borrowing conditions of households and firms and contributing to returning                              inflation rates to levels closer to 2 %, consistent with the primary objective of the ECB to maintain price stability.

(3)On 22 January 2015, the Governing Council decided that asset purchases should be expanded to include a secondary markets public                              sector asset purchase programme (hereinafter the ‘PSPP’). Under the PSPP the NCBs, in proportions reflecting their respective                              shares in the ECB's capital key, and the ECB may purchase outright eligible marketable debt securities from eligible counterparties                              on the secondary markets. This decision was taken as part of the single monetary policy in view of a number of factors that                              have materially increased the downside risk to the medium-term outlook on price developments, thus jeopardising the achievement                              of the ECB's primary objective of maintaining price stability. These factors include lower than expected monetary stimulus                              from adopted monetary policy measures, a downward drift in most indicators of actual and expected euro area inflation — both                              headline measures and measures excluding the impact of volatile components, such as energy and food — towards historical lows,                              and the increased potential of second-round effects on wage and price-setting stemming from a significant decline in oil prices.

(4)The PSPP is a proportionate measure for mitigating the risks to the outlook on price developments, as it will further ease                              monetary and financial conditions, including those relevant to the borrowing conditions of euro area non-financial corporations                              and households, thereby supporting aggregate consumption and investment spending in the euro area and ultimately contributing                              to a return of inflation rates to levels below but close to 2 % over the medium term. In an environment where key ECB interest                              rates are at their lower bound, and purchase programmes focussing on private sector assets are judged to have provided measurable,                              but insufficient, scope to address the prevailing downside risks to price stability, it is necessary to add to the Eurosystem's                              monetary policy measures the PSPP as an instrument that features a high transmission potential to the real economy. Thanks                              to its portfolio re-balancing effect, the sizable purchase volume of the PSPP will contribute to achieving the underlying                              monetary policy objective of inducing financial intermediaries to increase their provision of liquidity to the interbank market                              and credit to the euro area economy.

(5)The PSPP contains a number of safeguards to ensure that the envisaged purchases will be proportionate to its aims, and that                              the related financial risks have been duly taken into account in its design and will be contained through risk management.                              To allow for the smooth operation of markets in eligible marketable debt securities, and to avoid obstructing orderly debt                              restructurings, thresholds will apply to the purchases of those securities by the Eurosystem central banks.

(6)The PSPP complies fully with the obligations of the Eurosystem central banks under the Treaties, including the monetary financing                              prohibition, and does not impair the operation of the Eurosystem in accordance with the principle of an open market economy                              with free competition.

(7)In terms of the size of the PSPP, the ABSPP and the CBPP3, the liquidity provided to the market by the combined monthly purchases                              will amount to EUR 60 billion. Purchases are intended to be carried out until the end of September 2016 and will, in any case,                              be conducted until the Governing Council sees a sustained adjustment in the path of inflation which is consistent with its                              aim of achieving inflation rates below, but close to, 2 % over the medium term.

(8)With a view to ensuring the effectiveness of the PSPP, the Eurosystem hereby clarifies that it accepts the same (*pari passu*) treatment as private investors as regards the marketable debt securities that the Eurosystem may purchase under the PSPP,                              in accordance with the terms of such instruments.

(9)The purchases of eligible marketable debt instruments by the Eurosystem under the PSPP should be implemented in a decentralised                              manner, giving due regard to market price formation and market functioning considerations, and coordinated by the ECB, thereby                              safeguarding the singleness of the Eurosystem's monetary policy,

HAS ADOPTED THIS DECISION:

## Article 1U.K.Establishment and scope of PSPP

The Eurosystem hereby establishes the PSPP under which the Eurosystem central banks shall purchase eligible marketable debt                     securities, as defined in Article 3, on the secondary markets, from eligible counterparties, as defined in Article 7, under                     specific conditions.                  

## Article 2U.K.Definitions

For the purposes of this Decision, the following definitions apply:

‘Eurosystem central bank’ means the ECB and the national central banks of the Member States whose currency is the euro (hereinafter                              the 'NCBs');                           

‘recognised agency’ means an entity that the Eurosystem has classified as such for the purpose of the PSPP;

‘international organisation’ means an entity within the meaning of Article 118 of Regulation (EU) No 575/2013 of the European                              Parliament and of the Council(1) and that the Eurosystem has classified as such for the purpose of the PSPP;                           

‘multilateral development bank’ means an entity within the meaning of Article 117(2) of Regulation (EU) No 575/2013 and that                              the Eurosystem has classified as such for the purpose of the PSPP;                           

‘positive outcome of a review’ means the later of the following two decisions: the decision by the Board of Directors of the                              European Stability Mechanism and, in case the International Monetary Fund co-finances the financial assistance programme,                              the Executive Board of the International Monetary Fund to approve the next disbursement under that programme, on the understanding                              that both decisions are necessary for the resumption of purchases under the PSPP.                           

Lists of the entities referred to in points (2) to (4) are published on the ECB's website.

## Article 3U.K.Eligibility criteria for marketable debt securities

1.Subject to requirements laid down in this Article, euro-denominated marketable debt securities issued by central governments                        of a Member State whose currency is the euro, recognised agencies located in the euro area, international organisations located                        in the euro area and multilateral development banks located in the euro area shall be eligible for purchases by the Eurosystem                        central banks under the PSPP. In exceptional circumstances, where the envisaged purchase amount cannot be attained, the Governing                        Council may decide to purchase marketable debt securities issued by other entities located in the euro area, in accordance                        with the conditions laid down in paragraph 4.                  

2.In order to be eligible for purchases under the PSPP, marketable debt securities shall comply with the eligibility criteria                        for marketable assets for Eurosystem credit operations pursuant to Annex I to Guideline ECB/2011/14(2), subject to the following requirements:                  

(a)the issuer or guarantor of the marketable debt securities shall have a credit quality assessment of at least Credit Quality                        Step 3 in the Eurosystem's harmonised rating scale expressed in the form of at least one public credit rating provided by                        an external credit assessment institution (ECAI) accepted within the Eurosystem credit assessment framework;                  

(b)if multiple ECAI issuer or ECAI guarantor ratings are available, the first-best rule shall apply, i.e. the best available                        ECAI issuer or guarantor rating shall apply. If the fulfilment of the credit quality requirements are established based on                        an ECAI guarantor rating, the guarantee shall fulfil the features of an acceptable guarantee as laid down in Section 6.3.2(c)(i)                        to (iv) of Annex I to Guideline ECB/2011/14;                  

(c)if the credit assessment provided by an accepted ECAI for the issuer or guarantor does not comply with at least Credit Quality                        Step 3 in the Eurosystem's harmonised rating scale, marketable debt securities shall be eligible only if they are issued or                        fully guaranteed by the central governments of euro area Member States under a financial assistance programme and in respect                        of which the application of the Eurosystem's credit quality threshold is suspended by the Governing Council pursuant to Article                        8 of Guideline ECB/2014/31(3);                  

(d)In the event of a review of an ongoing financial assistance programme, eligibility for PSPP purchases shall be suspended and                        shall resume only in the event of a positive outcome of the review.                  

3.In order to be eligible for purchases under the PSPP, debt securities, within the meaning of paragraphs 1 to 2, shall have                        a minimum remaining maturity of two years and a maximum remaining maturity of 30 years at the time of their purchase by the                        relevant Eurosystem central bank. In order to facilitate smooth implementation, marketable debt instruments with a remaining                        maturity of 30 years and 364 days shall be eligible under the PSPP. National central banks shall also carry out substitute                        purchases of marketable debt securities issued by international organisations and multilateral development banks if the envisaged                        amounts to be purchased in marketable debt securities issued by central governments and recognised agencies cannot be attained.                  

4.Eurosystem central banks may, in exceptional circumstances, propose to the Governing Council public non-financial corporations                        located in their jurisdiction as issuers of marketable debt instruments to be purchased as substitutes in case the envisaged                        amount to be purchased in marketable debt instruments issued by central governments or recognised agencies located in their                        jurisdiction cannot be attained. The proposed public non-financial corporations shall at least fulfil both of the following                        criteria:                  
          -  be a ‘non-financial corporation’ as defined in Regulation (EU) No 549/2013 of the European Parliament and of the Council(4),                         
          -  be a ‘public sector’ entity, meaning an entity within the meaning of Article 3 of Council Regulation (EC) No 3603/93(5).                         

Following approval by the Governing Council, euro-denominated marketable debt instruments issued by such public non-financial                     corporations located in the euro area which comply with (i) the eligibility criteria for marketable assets as collateral for                     Eurosystem credit operations, as per Section 6.2.1 of Annex I to Guideline ECB/2011/14; and (ii) the requirements in paragraphs                     2 and 3 shall be eligible for purchases as substitutes under the PSPP.                  

5.In principle, purchases of nominal marketable debt instruments at a negative yield to maturity (or yield to worst) above the                        deposit facility rate are permissible.                  

## Article 4U.K.Limitations on the execution of purchases

1.To permit the formation of a market price for eligible securities, no purchases shall be permitted in a newly issued or tapped                        security and the marketable debt instruments with a remaining maturity that are close in time, before and after, to the maturity                        of the marketable debt instruments to be issued, over a period to be determined by the Governing Council (‘blackout period’).                        For syndications, the blackout period in question is to be respected on a best effort basis before the issuance.                  

2.For debt securities issued or fully guaranteed by the central governments of euro area Member States under a financial assistance                        programme, the period of purchases under the PSPP after a positive outcome of each programme review shall, as a rule, be limited                        to two months, unless there are exceptional circumstances justifying a suspension of purchases before or a continuation of                        purchases after such period and until the start of the next review.                  

## Article 5U.K.Purchase limits

1.Subject to Article 3, an issue share limit per international securities identification number shall apply under the PSPP to                        marketable debt securities fulfilling the criteria laid down in Article 3, after consolidating holdings in all of the portfolios                        of the Eurosystem central banks. The limit will initially be set at 25 %, for the first six months of purchases and subsequently                        reviewed by the Governing Council.                  

2.In case of debt securities referred to in Article 3(2)(c), a different issue share limit will apply.                  

3.Under the PSPP, an aggregate limit of 33 % of an issuer's outstanding securities shall apply to all eligible marketable debt                        securities in respect of the maturities defined in Article 3, after consolidating holdings in all of the portfolios of the                        Eurosystem central banks.                  

## Article 6U.K.Allocation of portfolios

1.Of the total value of purchased marketable debt securities eligible under PSPP, 12 % shall be purchased in securities issued                        by eligible international organisations and multilateral development banks, and 88 % shall be purchased in securities issued                        by eligible central governments and recognised agencies. This allocation is subject to revision by the Governing Council.                        Purchases in debt securities issued by eligible international organisations and multilateral development banks shall be conducted                        by NCBs only.                  

2.The NCBs' share of the total market value of purchases of marketable debt securities eligible under PSPP shall be 92 %, and                        the remaining 8 % shall be purchased by the ECB. The distribution of purchases across jurisdictions shall be according to                        the key for subscription of the ECB's capital as referred to in Article 29 of the Statute of the ESCB.                  

3.Eurosystem central banks shall apply a specialisation scheme for the allocation of marketable debt securities to be purchased                        under the PSPP. The Governing Council shall allow for *ad hoc* deviations from the specialisation scheme should objective considerations obstruct the achievement of the said scheme or                        otherwise render deviations advisable in the interests of attaining the overall monetary policy objectives of the PSPP. In                        particular, each NCB shall purchase eligible securities of issuers of its own jurisdiction. Securities issued by eligible                        international organisations and multilateral development banks may be purchased by all NCBs. The ECB shall purchase securities                        issued by central governments and recognised agencies of all jurisdictions.                  

## Article 7U.K.Eligible counterparties

The following shall be eligible counterparties for the PSPP:

entities that fulfil the eligibility criteria to participate in Eurosystem monetary policy operations pursuant to Section 2.1                              of Annex I to Guideline ECB/2011/14; and                           

any other counterparties that are used by Eurosystem central banks for the investment of their euro-denominated investment                              portfolios.                           

## Article 8U.K.Transparency

1.The Eurosystem shall publish on a weekly basis the aggregate book value of the securities held under the PSPP in the commentary                        of its consolidated weekly financial statement.                  

2.The Eurosystem shall publish on a monthly basis the weighted average residual maturity by issuer residence, separating international                        organisations and multilateral development banks from other issuers, of its PSPP holdings.                  

3.The book value of securities held under the PSPP shall be published on the ECB's website under the open market operations                        section on a weekly basis.                  

## Article 9U.K.Securities lending

The Eurosystem shall make securities purchased under PSPP available for lending, including repos, with a view to ensuring                     the effectiveness of the PSPP.                  

## Article 10U.K.Final provision

This Decision shall enter into force on the day following its publication on the ECB's website. It shall apply from 9 March                     2015.                  

Done at Nicosia, 4 March 2015.

*The President of the ECB*                            

Mario Draghi                            

1

Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit                              institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).                           

2

Guideline ECB/2011/14 of 20 September 2011 on monetary policy instruments and procedures of the Eurosystem (OJ L 331, 14.12.2011, p. 1).                           

3

Guideline ECB/2014/31 of 9 July 2014 on additional temporary measures relating to Eurosystem refinancing operations and eligibility                              of collateral and amending Guideline ECB/2007/9 (OJ L 240, 13.8.2014, p. 28).                           

4

Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European system of national                              and regional accounts in the European Union (OJ L 174, 26.6.2013, p. 1).                           

5

Council Regulation (EC) No 3603/93 of 13 December 1993 specifying definitions for the application of the prohibitions referred                              to in Articles 104 and 104b (1) of the Treaty (OJ L 332, 31.12.1993, p. 1).