ECB enhances liquidity by cutting sec lending fees
05 April 2016 Frankfurt
Image: Shutterstock
The European Central Bank (ECB) has slashed its securities lending minimum fee by a quarter in an effort to boost bond and repo market liquidity.
Borrowers will now pay the higher of either a 30 basis point (bps) fee, down from 40 bps, over general collateral or a fee over general collateral based on market rates.
The fee is the difference between repo and reverse repo rates.
The term will be open repo, instead of a one-week fixed-term with rollovers.
In a statement on the change, the ECB said: “While, in principle, transactions have an open term and there is no fixed time limit on extending a borrowing transaction, loans with a duration of more than 30 calendar days will be monitored by the ECB to ensure that the facility is being used for its intended purpose of supporting secondary market liquidity.”
The ECB’s fail fee will also be significantly reduced from approximately 145 bps to the fee at the time of fail plus 25 bps.
Additionally, covered bond purchase programmes 1, 2 and 3 holdings will now be made available via the agent, instead of being lent bilaterally.
The 4 percent haircut applied to borrower collateral in reverse repo transactions will remain unchanged.
Borrowers will now pay the higher of either a 30 basis point (bps) fee, down from 40 bps, over general collateral or a fee over general collateral based on market rates.
The fee is the difference between repo and reverse repo rates.
The term will be open repo, instead of a one-week fixed-term with rollovers.
In a statement on the change, the ECB said: “While, in principle, transactions have an open term and there is no fixed time limit on extending a borrowing transaction, loans with a duration of more than 30 calendar days will be monitored by the ECB to ensure that the facility is being used for its intended purpose of supporting secondary market liquidity.”
The ECB’s fail fee will also be significantly reduced from approximately 145 bps to the fee at the time of fail plus 25 bps.
Additionally, covered bond purchase programmes 1, 2 and 3 holdings will now be made available via the agent, instead of being lent bilaterally.
The 4 percent haircut applied to borrower collateral in reverse repo transactions will remain unchanged.
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