ECB ANNOUNCED PANDEMIC EMERGENCY PURCHASE PROGRAM TO MITIGATE CORONAVIRUS EFFECTS
While central banks all over the world take some measures to reduce the destructive effects of the coronavirus on the national economies, the European Central Bank (ECB) has announced an emergency private and public bond purchase scheme of 750 billion euro (820 billion dollars) to stabilise euro area economy. In this context, the ECB has planned to purchase the public and private sector debt securities of the euro area countries within the scope of Pandemic Emergency Purchase Program (PEPP). ECB aims to carry out asset purchases by the end of 2020 including all asset categories under the current asset purchase program.
The basic principles of the program were determined as follows:
• 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. This allows for fluctuations in the distribution of purchase flows over time, across asset classes and among jurisdictions.
• Securities issued by the Greek Government in procurement of assets will be exempt from eligibility requirements and be granted for purchases under PEPP.
• Once coronavirus outbreak crisis phase is over, net asset purchases under PEPP will be terminated. However, this is not expected to happen in any case before the end of 2020.
• the range of eligible assets under the corporate sector purchase programme (CSPP) will be expanded to non-financial commercial paper, making all commercial papers of sufficient credit quality eligible for purchase under CSPP.
•Collateral standards will be eased by adjusting the main risk parameters of the collateral framework.
The Governing Council of the ECB adopted a strong stance in the measures to be taken against the coronavirus pandemic: “ECB is committed to playing its role in supporting all citizens of the euro area through this extremely challenging time. 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. The Governing Council will do everything necessary within its mandate. The Governing Council 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.”