The European Central Bank (ECB) has launched the €750 billion Pandemic Emergency Purchase Programme (PEPP) in a bid to calm EU markets left reeling by the COVID-19 pandemic.
The new temporary asset purchase programme of the private and public sector securities aims to counter the “serious risks” to the monetary policy transmission mechanism and will last until the end of 2020.
It will also include all the asset categories eligible under the existing purchase programme (APP).
For the purchases of public sector securities, the benchmark allocation across jurisdictions will continue to be the capital key of the national central banks.
The ECB is also waiving the eligibility requirements for securities issued by the Greek government for purchases under PEPP.
Furthermore, the central committed to expanding the range of eligible assets under the corporate sector purchase programme to non-financial commercial paper, making all commercial papers of sufficient credit quality eligible for purchase under CSPP.
Finally, it will ease the collateral standards by adjusting the main risk parameters of the collateral framework.
In particular, the ECB is set to expand the scope of additional credit claims to include claims related to the financing of the corporate sector. This will ensure that counterparties can continue to make full use of the Eurosystem’s refinancing operations, the ECB says.
Going forward, the ECB Governing Council says it will do “everything necessary within its mandate” and is “fully prepared to increase the size of its asset purchase programmes” by as much as necessary and for as long as needed.
The governing council will terminate net asset purchases under PEPP once it judges that the coronavirus crisis is over, but not before the end of the year.
"Extraordinary times require extraordinary action,” ECB president Christine Lagarde wrote on Twitter. "There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate."
The ECB's efforts to calm markets came as Schengen member states of Europe shut down their borders in a bid to tackle the deadly virus, this prompted a further investor sell-off across stock markets.
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