1.4 Recommencement of net purchases under asset purchase programme
Net purchases under the Eurosystem's asset purchase programme ended in January 2019 but were recommenced in November. The Bank of Finland participates in implementing the ECB's public sector, corporate sector and asset-backed securities purchase programmes. The Bank of Finland's holdings of securities purchased under these monetary policy operations increased to EUR 46 billion.
The Eurosystem's asset purchase programme (APP) consists of the public sector purchase programme and three private sector purchase programmes. The latter comprise the asset-backed securities purchase programme, the covered bond purchase programme and the corporate sector purchase programme. The asset purchase programme is an example of a non-standard monetary policy measure.
The Eurosystem increased its holdings under the asset purchase programme
The ECB Governing Council ended its net purchases under the asset purchase programme at the end of 2018. In the following months, from January to October 2019, the Eurosystem only reinvested principal payments from maturing securities.
At its monetary policy meeting in September, the Governing Council decided to recommence net purchases at a monthly pace of EUR 20 billion as from November 2019, as well as to continue to reinvest principal payments from maturing securities.
The Governing Council expects these net purchases to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key policy interest rates.
The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period past the date when it starts raising the key policy rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
The Eurosystem’s holdings of securities acquired under the asset purchase programme increased from EUR 2,570 billion to EUR 2,580 billion in 2019. The public sector purchase programme accounted for EUR 2,103 billion and the corporate sector purchase programme for EUR 477 billion of these purchases, respectively. Time series data on the asset purchase programme are available on the ECB website.
Bank of Finland involved in implementation of corporate sector purchase programme
The Bank of Finland has acquired assets under all of the individual purchase programmes except for the asset-backed securities programme. In 2019, the Bank of Finland's holdings of assets purchased under the APP increased from EUR 45.6 billion to EUR 46 billion.
Under the public sector purchase programme, the Bank of Finland purchased Finnish government bonds and bonds issued by Finnvera and Municipality Finance. In 2019, the Bank of Finland did not purchase bonds issued by European supranational institutions. At the end of the year, the Bank of Finland's balance sheet included EUR 29.3 billion in government bonds and government-related bonds, which includes EUR 0.6 billion of assets purchased under the Securities Markets Programme (SMP). In addition, the Bank's balance sheet contains EUR 3 billion in bonds issued by European supranational institutions.
Under the corporate sector purchase programme, the Bank of Finland acts as one of six national central banks tasked with carrying out purchases on behalf of the entire Eurosystem. The Eurosystem has decided that the Bank of Finland is responsible for purchasing Finnish corporate bonds but also bonds issued by Irish, Austrian, Latvian, Lithuanian and Estonian firms. These securities were purchased from Finnish and international banks that are eligible securities trading counterparties to the Bank of Finland.
The Bank of Finland concentrated its purchases under the covered bond purchase programme on the Finnish bond market. Purchases under the private sector purchase programme stood at EUR 13.7 billion at the end of 2019, comprising EUR 7.4 billion in covered bonds and EUR 6.3 billion in corporate bonds.
Securities lending slowed on previous year
The Eurosystem has made securities purchased under the APP available for lending, as appropriate. Securities lending helps maintain the liquidity of the euro area’s bond markets. Securities are made available for lending in a decentralised manner.
The Bank of Finland’s holdings are available for lending against securities collateral through its securities depository, Euroclear Bank. In addition, the Bank of Finland engaged in bilateral securities lending against cash collateral with assets purchased under the public sector purchase programme. In 2019, securities lending declined from previous years’ levels, as the liquidity of the secured segment of the euro area interbank market has largely satisfied the demand for loans.