Securities lending of holdings under the asset purchase programme (APP) and pandemic emergency purchase programme (PEPP)
Updated on 20 April 2020
Securities purchased under the public sector purchase programme (PSPP) have been made available for securities lending in a decentralised manner by Eurosystem central banks since 2 April 2015.
In addition, several Eurosystem central banks make their holdings under the three covered bond purchase programmes (CBPP, CBPP2 and CBPP3) available for securities lending.
As of 18 July 2016, holdings under the corporate sector purchase programme (CSPP) have also been made available for securities lending by the purchasing national central banks (Nationale Bank van België/Banque nationale de Belgique, Deutsche Bundesbank, Banco de España, Banque de France, Banca d’Italia and Suomen Pankki-Finlands Bank).
As of 8 December 2016, Eurosystem central banks have the possibility to also accept cash as collateral in their PSPP securities lending facilities without having to reinvest it in a cash-neutral manner.
The Eurosystem started conducting purchases under the PEPP on 26 March 2020 and the holdings are also available for lending. The same conditions apply for securities lending transactions under the PEPP as under the APP. This means that, for example, public sector PEPP holdings can also be borrowed against cash as collateral.
The ECB and the Eurosystem national central banks make available further details on their securities lending arrangements on their respective websites.
Data on the securities lending activity of the Eurosystem
PSPP and public sector PEPP securities lending
The ECB publishes the aggregate monthly average on-loan balance for the Eurosystem and the daily on-loan balances, together with breakdowns by collateral type (securities or cash). The data is published every third Monday of the month for the previous month.
|On-loan balance of securities
lent by the Eurosystem¹, € bn.
|Of that, lent against securities collateral, € bn.||32.7|
|Of that, lent against cash collateral, € bn.||1.5|
|* average balance during the month.
¹ Includes securities lending of holdings under the
Securities Markets Programme (SMP), market value,
Figures are preliminary and may be subject to revision.
History of PSPP and public sector PEPP securities lending aggregate monthly average balances (in € bn.) last update: 15 June 2020
History of PSPP and public sector PEPP securities lending aggregate daily balances (in € bn.) last update: 15 June 2020
More information on the Eurosystem’s securities lending can be found in: Taking stock of the Eurosystem’s asset purchase programme after the end of net asset purchases, 3. Implementation issues, Economic Bulletin Issue 2, 2019.
General APP securities lending framework
The aim of securities lending is to support bond and repo market liquidity without unduly curtailing normal repo market activity. The Eurosystem is primarily targeting market participants with market-making obligations and is monitoring the securities lending activities closely so as to ensure the ongoing effectiveness of the arrangements.
Lending of securities purchased under the expanded asset purchase programme (APP) is conducted by the Eurosystem in a decentralised manner.
Eurosystem central banks use various lending channels for that purpose. These channels include bilateral securities lending, lending via specialised securities lending agents and via the lending infrastructure of international central securities depositories (ICSDs). The Eurosystem endeavours to offer effective and accessible securities lending arrangements.
Eurosystem central banks also either make their APP holdings available for the so-called fails mitigation lending programmes of international or domestic central securities depositories, or alternatively ensure that comparable arrangements are in place in their jurisdiction.
Lending of APP securities holdings takes place against securities or cash collateral. Lending against securities as collateral means that repo transactions are accompanied by fully offsetting reverse repo transactions for the same value date, and typically with the same counterparty. For securities lending against cash collateral such offsetting transactions are not needed, but this variant is subject to an overall limit which is currently set at €75 billion for the Eurosystem.
The individual Eurosystem central banks determine the securities lending modalities of their respective APP holdings, including collateral eligibility, pricing, haircut, term and counterparty eligibility, so as to support market liquidity. This allows Eurosystem central banks to reflect domestic infrastructures and market practices.
Why is securities lending of CBPP3 and ABSPP holdings not mandatory for the Eurosystem?
For cost efficiency and operational reasons, securities lending of holdings under CBPP3 is not mandatory for Eurosystem central banks. The establishment and maintenance of securities lending arrangements has a certain cost for the Eurosystem central banks. The total cost depends on a number of factors, such as the lending channel, the lending infrastructure, the number of securities available for lending, the type of collateral accepted and other technical and operational parameters. The overall Eurosystem cost increases if several central banks make the same security available for lending.
Covered bonds purchased under the CBPP3 are often held by several (i.e. more than two) Eurosystem central banks, which is due to the programme-specific allocation of the eligible universe to individual Eurosystem central banks. This is in contrast to the PSPP and CSPP allocation, where each security is held by one or at most two Eurosystem central banks. Moreover, the CBPP3 allocation often results in individual central banks having relatively small holdings, so that the benefit of setting up and maintaining securities lending facilities would not justify the cost. However, even though lending the CBPP3 holdings is not mandatory, the ECB and several other national central banks make their CBPP3 (as well as CBPP and CBPP2) bonds available for lending. Those Eurosystem central banks that do not make their holdings available for lending very rarely receive requests to borrow them. For them, the expected demand would not justify the cost of establishing securities lending facilities. Most importantly, holdings from each covered bond jurisdiction are made available for lending by at least one Eurosystem central bank.
Securities lending of holdings under the ABSPP is in principle possible for the ECB, which holds all the asset backed securities (ABS) purchased under the ABSPP. However, no requests for securities lending have been received since the start of the ABSPP in October 2014. This is reportedly at least partly due to the lower secondary market liquidity of this asset class and the higher share of hold-to-maturity portfolios compared to other markets. In the event of a broader increase in demand for borrowing the ABS held under the ABSPP, the ECB could consider making its holdings available for lending taking due consideration of the cost-benefit implications, including the technical complexity of ABS amortising cash flows.
Why does the Eurosystem not publish the ISIN lists of its ABSPP and CBPP3 holdings for securities lending purposes?
The Eurosystem publishes the ISIN lists only for those programmes (PSPP and CSPP) for which the Governing Council has decided to make securities lending mandatory. Thus the Eurosystem does not publish the ISIN lists for its ABSPP and CBPP3 holdings as securities lending is not mandatory for those two programmes. Counterparties that wish to borrow CBPP3 holdings can contact the ECB or any NCB that makes those bonds available for lending to enquire about the potentially availability of their holdings of particular ISINs.
|European Central Bank||(EN)|
|Nationale Bank van België/Banque Nationale de Belgique||(EN)||(same link)|
|Deutsche Bundesbank||(EN)||(same link)|
|Central Bank of Ireland||(EN)|
|Bank of Greece||(EN), (EL)|
|Banco de España||(EN), (ES)||(same links)|
|Banque de France||(EN), (FR)||(same links)|
|Banca d'Italia||(EN), (IT)||(same links)|
|Central Bank of Cyprus||(EN), (EL)|
|Lietuvos bankas||(EN), (LT)|
|Bank centrale du Luxembourg||(EN), (FR)|
|Central Bank of Malta||(EN)|
|De Nederlandsche Bank||(EN)|
|Oesterreichische Nationalbank||(EN), (DE)|
|Banco de Portugal||(EN), (PT)|
|Národná banka Slovenska||(EN)|
|Suomen Pankki||(EN)||(same link)|