The European Central Bank (ECB) announced on Wednesday night and by surprise a program to buy public and private bonds of 750,000 million euros to counter the “serious risks” that the crisis entails. of the coronavirus for its monetary policy.
“The Governing Council of the ECB is committed to exercising its role in support of all citizens of the euro zone through these extraordinarily difficult times” and to do “everything necessary within its mandate,” the entity said in a statement.
Specifically, the new Pandemic Emergency Purchase Program (PEPP) will make acquisitions of “all eligible asset categories” under the current Asset Purchase Program (PPA) until the end of the year.
However, the Governing Council of the monetary authority reserves the right to extend the program if it considers that the “crisis phase” of COVID-19 has not yet concluded.
In addition, he noted that acquisitions will be “flexible” and will not be distributed on a regular basis over time and space. “This allows for fluctuations in purchasing flow distributions over time, across asset types, and across jurisdictions.”
Regarding sovereign bonds, the ECB will maintain country fees in the PEPP depending on its percentage of capital in the entity, as it does in other bond purchase programs.
In the purchase of private bonds, it will expand the spectrum of assets that it can acquire with respect to the Corporate Sector Purchase Program (CSPP) to non-financial assets, although it will maintain the credit quality criteria of this program.
It also undertook to lower the standards it sets for collateral so that counterparties can make full use of the Eurosystem’s refinancing operations.
“EVERYTHING NECESSARY” WITHIN YOUR MANDATE
For this reason, the statement continues, the monetary authority “will ensure that all sectors of the economy”, from families to companies, including banks and governments, “can benefit from beneficial financing conditions that allow them to absorb this impact” .
The Governing Council of the ECB added that it will do “everything necessary within its mandate” and that it is “fully prepared to increase the volume of its asset purchase programs and adjust its composition, as necessary and for as long as it is precise”.
The ECB stated that it “will explore all options and all contingencies to support the economy in this shock” and that it is willing to review some of its criteria if they prevent it from acting with the forcefulness necessary to fulfill its mandate.
“The ECB will not tolerate any risk to the effective transmission of its monetary policy in all jurisdictions of the eurozone,” the note concludes.