2.4 Asset purchase programmes in 2021
The total amount of securities purchased under the asset purchase programmes on the Bank of Finland’s balance sheet increased in 2021 to EUR 90 billion. A plan and timetable for reporting on the climate impacts of the corporate sector purchase programme (CSPP) were published by the Governing Council of the European Central Bank.
The aim of the Eurosystem’s asset purchase programmes has been to support economic growth in the euro area, promote achievement of the price stability objective and ensure the transmission of low interest rates in the euro area.
The purchase programmes are one of the most important ways in which monetary policy is implemented. Under these programmes the Eurosystem purchases securities from banks, thereby expanding the amount of money in the economy and pushing down the interest rates on securities.
The flexible planning and implementation of asset purchases has supported the transmission of low interest rates in the euro area during the COVID-19 pandemic.
End of net purchases under the pandemic emergency purchase programme (PEPP)
The ECB’s Governing Council decided at its meeting on 16 December 2021 to end net purchases under the temporary pandemic emergency purchase programme (PEPP) in March 2022.
At the same meeting, the Governing Council decided that the principal payments from maturing securities purchased under the PEPP will be reinvested at least until the end of 2024 instead of the end of 2023.
PEPP reinvestments can be directed flexibly over time, across asset classes and among jurisdictions as needed. Net purchases under the PEPP can also be restarted if necessary to prevent disruptions caused by the pandemic.
In addition to implementation of the PEPP, the Eurosystem also carried out net purchases under the asset purchase programme (APP) in 2021, in line with decisions taken by the Governing Council of the ECB.
The APP consists of the following programmes: a public sector purchase programme (PSPP), a corporate sector purchase programme (CSPP), the third covered bond purchase programme (CBPP3) and an asset-backed securities purchase programme (ABSPP).
All asset classes eligible for the APP are also eligible for the PEPP. In addition, securities issued by the Greek government and shorter-term public sector debt securities with a residual maturity of at least 70 days were made eligible for purchase under the PEPP.
In 2021, the Eurosystem’s holdings of assets purchased under the APP increased from EUR 2,909 billion to EUR 3,123 billion. The ECB publishes the Eurosystem’s PEPP holdings every two months, and at the end of November 2021 they amounted to around EUR 1,536 billion, compared with EUR 837 billion a year earlier.
APP and PEPP holdings on the Bank of Finland balance sheet in 2021
The Bank of Finland conducts asset purchases under all the purchase programmes except the asset-backed securities purchase programme (ABSPP, part of the APP).
In 2021, holdings of monetary policy-related securities on the Bank of Finland’s balance sheet increased from EUR 66 billion to EUR 90 billion. Of this total, securities purchased under the PEPP amounted to EUR 28.1 billion, and securities purchased under the APP amounted to EUR 61.7 billion.
At the end of 2021, the amount of government bonds and government-related bonds purchased under the APP on the Bank of Finland’s balance sheet totalled EUR 34.6 billion, and bonds issued by European supranational institutions amounted to EUR 2.4 billion.
The Bank of Finland’s balance sheet at the end of 2021 also included corporate and covered bonds purchased under the APP totalling EUR 13.7 billion and EUR 11.0 billion, respectively.
Securities purchased under the PEPP are reported as a single figure on the balance sheet. The Bank of Finland’s PEPP purchases consist mainly of public sector debt securities, but they also include corporate and covered bonds.
Bank of Finland one of six central banks conducting purchases of corporate securities for entire Eurosystem
In corporate securities purchases under the APP and the PEPP, the Bank of Finland acts as one of the Eurosystem’s six central banks conducting purchases on behalf of the entire Eurosystem.
Besides Finnish corporate bonds, the Bank of Finland is also responsible for purchasing Austrian, Estonian, Irish, Latvian and Lithuanian corporate bonds that meet the eligibility criteria of the purchase programmes.
In covered bonds, the Bank of Finland’s purchases focus on the Finnish covered bond market.
The Bank of Finland itself bears the risk in public sector securities purchases, but the risks in the corporate purchase programmes are shared among the Eurosystem central banks.
The Eurosystem makes the securities it has acquired under its asset purchase programmes available for securities lending, as appropriate. The aim of securities lending is to support the liquidity of euro area bonds. The lending is conducted within the Eurosystem on a decentralised basis, and the Bank of Finland’s securities holdings are available for lending through the securities depository Euroclear Bank, against securities collateral. The Bank of Finland also engages in bilateral securities lending using its holdings under the public sector purchase programme, against cash collateral.
Incorporating climate perspectives into the CSPP
On 8 July 2021, the ECB’s Governing Council published a plan for including climate considerations in the ECB’s monetary policy strategy.
Combating climate change is one of the European Union’s key objectives. The Eurosystem also considers that, within the limits of its mandate, it must further incorporate climate change considerations into its monetary policy framework.
The Eurosystem already takes climate risks into account in the issuer due diligence assessments for corporate sector asset purchases.
Looking ahead, the framework guiding the allocation of corporate bond purchases will be adjusted to incorporate climate change criteria, in line with the ECB and Eurosystem mandate.
Issuers will be assessed using various climate criteria, and these will take into account the requirements of EU legislation in relation to various climate-change related metrics or commitments of the issuers to such goals.
In addition, by the first quarter of 2023, the Eurosystem will start publishing information on the environmental effects of the corporate sector purchase programme.