European Central Bank announces Pandemic Emergency Purchase Programme

• The issuer has to be incorporated in the euro area (even if the ultimate parent is not based in the euro area but if this is the case then all the other eligibility criteria will have to be satisfied).
• The issuer cannot:
  • be a credit institution or have any parent undertaking (as defined in Article 4(15) of the Capital Requirements Regulation) which is a credit institution (as defined in Article 2(14) of Guideline ECB/2014/60);
  • have a parent company which is subject to banking supervision outside the euro area;
  • be an investment firm within the meaning of Article 4(1)(1) of Directive 2014/65/EU of the European Parliament and of the Council;
  • be a supervised entity as defined in Article 2(2) of Regulation (EU) No 468/2014 of the European Central Bank (ECB/2014/17) or a member of a supervised group as defined in Article 2(21) of Regulation (EU) No 468/2014 (ECB/2014/17), in each case as contained in the list published by the ECB on its website in accordance with Article 49(1) of Regulation (EU) No 468/2014 (ECB/2014/17), and may not be a subsidiary, as defined in Article 4(1)(16) of Regulation (EU) No 575/2013, of any of those supervised entities or supervised groups;
  • be an entity, whether publicly or privately owned, that: (i) has as its main purpose the gradual divestment of its assets and the cessation of its business; or (ii) is an asset management or divestment entity established to support financial sector restructuring and/or resolution;
  • have issued an asset-backed security, a multi cédula, or a structured covered bond; and
  • be an eligible issuer for the PSPP.

•  Must be euro denominated
• Must have either:
  • an initial maturity of 365/366 days or less and a minimum remaining maturity of 28 days at the time they are bought, or
  • an initial maturity of 367 days or more, a minimum remaining maturity of six months and a maximum remaining maturity of less than 31 years (i.e. purchases of securities with a remaining maturity of 30 years and 364 days are possible) at the time they are bought.
• The debt instruments issued by corporations must also comply with the eligibility criteria for marketable assets for Eurosystem credit operations (including being issued in New Global Note form (if bearer bonds) or being note issued through the new safekeeping structure (if registered bonds)).
• Note: on March 18, 2020, the Governing Council decided to expand the range of eligible assets under the corporate sector purchase programme to non-financial commercial papers, making all commercial papers of sufficient credit quality eligible also for purchases under the PEPP. The ECB will typically require such CP to have the STEP label or be listed.
• Note: There is no minimum issuance volume for corporate bonds eligible for purchase under the CSPP. According to the ECB, this ensures that corporate bonds with small issuance volumes (often ones issued by small firms) can also be purchased. To be eligible for purchase, a commercial paper security must have a minimum outstanding issuance amount of €10 million.

• Eurozone banks.

• Only credit assessment information that is provided by an external credit assessment institution accepted within the Eurosystem credit assessment framework will be taken into account for the assessment of the credit quality requirements of the marketable debt instrument.

• The CSPP purchases are carried out by a National Central Bank (NCB) acting on behalf of the Eurosystem. The ECB coordinates the purchases. The six NCBs conducting the purchases are the Nationale Bank van België/Banque Nationale de Belgique, the Deutsche Bundesbank, the Banco de España, the Banca d’Italia, the Banque de France and Suomen Pankki – Finlands Bank.
• Market segments for purchases under the CSPP are allocated to the purchasing NCBs according to the geographical location of the issuer as follows:
  • Nationale Bank van België/ Banque Nationale de Belgique: Belgium, Cyprus, Greece, Luxembourg, Malta, Portugal, The Netherlands(4), Slovenia and Slovakia
  • Deutsche Bundesbank: Germany and The Netherlands(1)
  • Banco de España: Spain and The Netherlands(2)
  • Suomen Pankki/Finlands Bank: Austria, Estonia, Finland, Ireland, Lithuania and Latvia
  • Banque de France: France
  • Banca d’Italia: Italy and The Netherlands(3)
  1. Includes issuers with The Netherlands as residence country and Germany as country of risk
  2. Includes issuers with The Netherlands as residence country and Spain as country of risk
  3. Includes issuers with The Netherlands as residence country and italy as country of risk
  4. Includes issuers with The Netherlands as residence country and a country of risk other than Germany Spain or Italy

Note: The International Organization for Standardization’s “country of risk” concept, used here, applies a methodology based on four factors: management location, country of primary listing, country of revenue and reporting currency of the issuer.

Note: Testing of newly proffered securities or credit claims for compliance with eligibility criteria is typically conducted by Banque centrale du Luxembourg, on behalf of the NCB that is purchasing the relevant securities or credit claims.

• Issuers under the PSPP are central, regional or local 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.

•  Must comply with the eligibility criteria for marketable assets for Eurosystem credit operations pursuant to Part Four of Guideline (EU) 2015/510 of the European Central Bank (ECB/2014/60) subject to Article 3 of Decision (EU) 2020/188.
• As modified by the PEPP, Debt instruments must have a minimum remaining maturity of 70 days and a maximum remaining maturity of 30 years at the time of their purchase by the relevant Eurosystem central bank. The ECB has stated that, in order to facilitate smooth implementation, marketable debt instruments with a remaining maturity of 30 years and 364 days shall be eligible under the PEPP.
• Note: The PEPP includes a waiver of eligibility requirement for securities issued by the Greek Government. 

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

• NCBs purchase their respective sovereign bonds and cannot purchase those of other jurisdictions.
• For EU supranational bonds, the following NCBs can conduct purchases:
  • Eesti Pank
  • the Bank of Greece
  • the Banco de España
  • the Banque de France
  • Latvijas Banka
  • Národná Banka Slovenska
  • In addition, the Banque centrale du Luxembourg reinvests its redemptions of EU supranational bonds

• An eligible issuer is an issuer of an asset backed security (ABS) which is established in the euro area.
• The issuer is not an entity, whether publicly or privately owned, that: (a) has as its main purpose the gradual divestment of its assets and the cessation of its business; or (b) is an asset management or divestment entity established to support financial sector restructuring and/or resolution, including asset management vehicles resulting from a resolution action in the form of the application of an asset separation tool pursuant to Article 26 of Regulation (EU) No 806/2014 of the European Parliament and of the Council or national legislation implementing Article 42 of Directive 2014/59/EU of the European Parliament and of the Council.

• Must comply with the eligibility criteria for eligible collateral under the collateral framework for Eurosystem credit operations. (including being issued in New Global Note form (if bearer bonds) or being note issued through the new safekeeping structure (if registered bonds)). An ABS that is eligible as collateral is not automatically also eligible for purchases under the ABSPP;
• Must be denominated in euro;
• Must be secured by claims against non-financial private sector entities resident in the euro area of which a minimum share of 95% is euro denominated and of which a minimum share of 95% are resident in the euro area; and
• Must have a second-best credit assessment of at least CQS3, currently equivalent to an ECAI rating of BBB-/Baa3/BBBL.

Note: The position on credit assessment is slightly different criteria for ABSs with underlying claims against non-financial private sector entities resident in Greece or Cyprus.

Note: There is no minimum issuance volume under ABSPP. There is also no minimum and maximum maturity for the programme.

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

• Purchases under the ABSPP are conducted exclusively through the national central banks acting as internal asset managers. The national central bank you should contact depends on the country of the ABSs’ underlying collateral. In terms of the geographical coverage, the following allocation applies:
  • Nationale Bank van België/Banque Nationale de Belgique: Belgium
  • Deutsche Bundesbank: Germany
  • Banco de España: Spain
  • Banque de France: Finland, France, Ireland, Luxembourg and Portugal
  • Banca d’Italia: Italy
  • De Nederlandsche Bank: Netherlands

Note: Other markets will only be allocated once eligible issuance occurs.

• An eligible issuer is a euro area credit institution or in the case of multi-cédulas, by special purpose vehicles incorporated in the euro area.
• The issuer must not be an entity, whether publicly or privately owned, that:
  • has as its main purpose the gradual divestment of its assets and the cessation of its business; or
  • is an asset management or divestment entity established to support financial sector restructuring and/or resolution.

• Must be eligible under the collateral framework for Eurosystem credit operations (including being issued in New Global Note form (if bearer bonds) or being note issued through the new safekeeping structure (if registered bonds));
• Must be denominated in euro and held and settled in the euro area;
• Must have underlying assets that include exposure to private and/or public entities; and
• Must have a minimum first-best credit assessment equivalent to BBB-.

Note: The position on credit assessment is slightly different criteria for covered bonds which currently do not achieve the CQS3 rating in Cyprus and Greece

Note: There is no minimum issuance volume under CBPP3. There is also no minimum and maximum maturity for the programme.

• Eurozone banks.
• Other counterparties that are used by Eurosystem central banks for the investment of their euro-denominated investment portfolios, including non-euro area counterparties active in covered bonds.

• The purchases of euro-denominated covered bonds issued in the euro area are distributed across the euro area and are carried out progressively by the ECB and the Eurosystem NCBs by means of direct purchases.
• The purchases are conducted in both the primary and secondary markets.