Those curious to learn why Greece is the only country excluded
form the ECB' QE (for now) as the soon to be former Greek PM
Samaras said moments ago...
GREEK PM SAMARAS SAYS WITHOUT CLOSING THE CURRENT REVIEW,
GREECE WILL BE EXCLUDED FROM ECB BOND-BUY PROGRAMME
... will not find any
additional informationin the ECB's supplement
on its asset purchase program. Neither will they learn why
something that is in effect monetary financing, and is prohibited
by Article 123, is not monetary financing. However, they will learn
that the proceeds from the ECB's money printing can be used "to buy
other assets and extend credit to the real economy." The ECB adds
that "In both cases, this contributes to an easing of financial
conditions." Actually the only thing it will contribute to is
making the world's billionaires into the world's trillionaires.
Finally, anyone wondering if the ECB's purchases are pari passu,
here is the answer:
"Regarding creditor treatment, the Eurosystem accepts the
same (pari passu) treatment as private investors with respect to
securities purchased by the Eurosystem, in accordance with the
terms of such securities."
Full details from the
ECB:
ECB announces expanded asset purchase programme
ECB expands purchases to include bonds issued by euro area
central governments, agencies and European institutions
Combined monthly asset purchases to amount to €60 billion
Purchases intended to be carried out until at least September
2016
Programme designed to fulfil price stability mandate
The Governing Council of the European Central Bank (ECB) today
announced an expanded asset purchase programme. Aimed at fulfilling
the ECB’s price stability mandate, this programme will see the ECB
add the purchase of sovereign bonds to its existing private sector
asset purchase programmes in order to address the risks of a too
prolonged period of low inflation.
The Governing Council took this decision in a situation in which
most indicators of actual and expected inflation in the euro area
had drifted towards their historical lows. As potential
second-round effects on wage and price-setting threatened to
adversely affect medium-term price developments, this situation
required a forceful monetary policy response.
Asset purchases provide monetary stimulus to the economy in a
context where key ECB interest rates are at their lower bound. They
further ease monetary and financial conditions, making access to
finance cheaper for firms and households. This tends to support
investment and consumption, and ultimately contributes to a return
of inflation rates towards 2%.
The programme will encompass the asset-backed securities
purchase programme (ABSPP) and the covered bond purchase programme
(CBPP3), which were both launched late last year. Combined monthly
purchases will amount to €60 billion. They are intended to be
carried out until at least September 2016 and in any case until the
Governing Council sees a sustained adjustment in the path of
inflation that is consistent with its aim of achieving inflation
rates below, but close to, 2% over the medium term.
The ECB will buy bonds issued by euro area central governments,
agencies and European institutions in the secondary market against
central bank money, which the institutions that sold the securities
can use to buy other assets and extend credit to the real economy.
In both cases, this contributes to an easing of financial
conditions.
The programme signals the Governing Council’s resolve to meet
its objective of price stability in an unprecedented economic and
financial environment. The instruments deployed are appropriate in
the current circumstances and in full compliance with the EU
Treaties.
As regards the additional asset purchases, the Governing Council
retains control over all the design features of the programme and
the ECB will coordinate the purchases, thereby safeguarding the
singleness of the Eurosystem’s monetary policy. The Eurosystem will
make use of decentralised implementation to mobilise its
resources.
With regard to the sharing of hypothetical losses, the Governing
Council decided that purchases of securities of European
institutions (which will be 12% of the additional asset purchases,
and which will be purchased by NCBs) will be subject to loss
sharing. The rest of the NCBs’ additional asset purchases will not
be subject to loss sharing. The ECB will hold 8% of the additional
asset purchases. This implies that 20% of the additional asset
purchases will be subject to a regime of risk sharing.
For media queries, please contact Stefan Ruhkamp, tel.: +49
69 1344 5057.
Notes:
A technical annex is published alongside this press release with
further operational details.
TECHNICAL ANNEX ?ECB ANNOUNCES OPERATIONAL MODALITIES OF
THE EXPANDED ASSET PURCHASE PROGRAMME
The expanded asset purchase programme will comprise the
ongoing purchase programmes for asset-backed securities (ABSPP) and
covered bonds (CBPP3), and, as a new element, purchases of
additional euro-denominated securities that meet the following
eligibility criteria:
They fulfil the collateral eligibility criteria for marketable
assets in order to participate in Eurosystem monetary policy
operations, as specified in Guideline ECB/2011/14, as amended,
subject to the fulfilment of the additional criteria listed in
points 2-4 below.
They are issued by an entity established in the euro area
classified in one of the following categories: central government,
certain agencies established in the euro area or certain
international or supranational institutions located in the euro
area.
They have a first-best credit assessment from an external
credit assessment institution of at least CQS3 for the issuer or
the guarantor, provided the guarantee is eligible in accordance
with Guideline ECB/2011/14, as amended.
Securities that do not achieve the CQS3 rating will be
eligible, as long as the Eurosystem’s minimum credit quality
threshold is not applied for the purpose of their collateral
eligibility. Moreover, during reviews in the context of financial
assistance programmes for a euro area Member State, eligibility
would be suspended and would resume only in the event of a positive
outcome of the review.
Inflation-linked and floating rate securities issued by central
governments, certain agencies established in the euro area and
certain international or supranational institutions located in the
euro area are eligible for purchase under the expanded asset
purchase programme.
All eligibility criteria and other modalities of the ABSPP and
CBPP3 remain unaltered under the programme. In addition it was
decided that:
Securities purchased under the expanded asset purchase
programme that are not covered by the ABSPP or CBPP3 must have a
minimum remaining maturity of 2 years and a maximum remaining
maturity of 30 years at the time of purchase.
Securities purchased under the expanded asset purchase
programme that are not covered by the ABSPP or CBPP3 will be
subject to an issue limit, an aggregate holding limit and other
operational modalities specified, in particular, with the aim of
preserving market functioning and allowing the formation of a
market price on a given security. Moreover, the limits ensure that
the application of collective action clauses for a bondholder
decision is not obstructed.
Regarding creditor treatment, the Eurosystem accepts the same
(pari passu) treatment as private investors with respect to
securities purchased by the Eurosystem, in accordance with the
terms of such securities.
Purchases of securities under the expanded asset purchase
programme that are not covered by the ABSPP or CBPP3 will be
allocated across issuers from the various euro area countries on
the basis of the ECB’s capital key.
Holdings of securities issued by central governments, certain
agencies established in the euro area and certain international or
supranational institutions located in the euro area will be valued
at amortised cost, in line with Guideline ECB/2010/20 on the legal
framework for accounting and financial reporting in the ESCB, as
amended.
The eligible counterparties for purchases shall be those
eligible for the Eurosystem’s monetary policy instruments, together
with any other counterparties used by the Eurosystem for the
investment of its euro-denominated portfolios.
Holdings of securities issued by central governments, certain
agencies established in the euro area and certain international or
supranational institutions located in the euro area purchased under
the expanded asset purchase programme will be eligible for
securities lending.
Transactions in securities purchased under the programme will
be published in a weekly report which will list holdings at
amortised cost by asset type. In addition, for securities purchased
under the expanded asset purchase programme that are not covered by
the ABSPP or CBPP3, a report of the amounts held, valued at
amortised cost, and the weighted average remaining maturity by
issuer residence will be released on a monthly basis.
