2.4 Net asset purchases under monetary policy purchase programmes ended in 2022
In 2022, the Eurosystem’s asset purchase programmes entered a reinvestment phase, with flexibility applied to ensure the smooth transmission of monetary policy across the euro area. Climate performance was added as a criterion in corporate bond purchases.
In line with the monetary policy objectives of the European Central Bank (ECB), the Bank of Finland purchases Finnish public sector debt securities, Finnish covered bonds and a broad range of corporate bonds. One of the goals is to reduce the environmental footprint of the Eurosystem’s corporate bond purchases and support the attainment of the goals of the Paris Agreement.
The Bank of Finland itself bears the risk in public sector securities purchases, but the risks in the private sector purchase programmes are shared among the Eurosystem’s central banks.
Flexibility and a new instrument enhanced the smooth transmission of monetary policy across the euro area
In the subsequent reinvestment phase, principal payments from maturing securities are reinvested into the market.
PEPP reinvestments can be adjusted flexibly across time, asset classes and jurisdictions at any time to ensure the smooth transmission of monetary policy.
At its meeting in July, the Governing Council of the ECB approved the Transmission Protection Instrument (TPI), a new monetary policy tool to prevent interest rate spreads from widening.
In 2022, the Eurosystem’s holdings of assets purchased under the APP increased from EUR 3.123 trillion to EUR 3.254 trillion. The ECB publishes the Eurosystem’s PEPP holdings every two months. At the end of November 2022, they amounted to about EUR 1.683 trillion, an increase of EUR 147 billion compared with a year earlier.
APP and PEPP holdings on the Bank of Finland balance sheet in 2022
In 2022, holdings of monetary policy-related securities on the Bank of Finland’s balance sheet increased from EUR 90 billion to EUR 96 billion. Of this total, securities purchased under the APP amounted to EUR 68 billion, and under the PEPP to EUR 28 billion.
At the end of 2022, the amount of Finnish government bonds and government-related bonds purchased under the APP on the Bank of Finland’s balance sheet totalled EUR 37.3 billion, and bonds issued by European supranational institutions amounted to EUR 2.1 billion.
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.
Holdings of Finnish central government bonds are published by Statistics Finland on a quarterly basis in the national financial accounts. At the end of September 2022, the Bank of Finland held 38.7% of the total stock of Finnish central government bonds.
At the end of 2022, the amount of corporate bonds purchased under the APP on the Bank of Finland’s balance sheet totalled EUR 16.5 billion, and covered bonds issued by banks amounted to EUR 11.7 billion.
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 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.
ECB incorporated climate change considerations into corporate sector purchase programme in 2022
The ECB announced on 4 July 2022 the incorporation of climate change considerations into the Eurosystem’s purchases of corporate sector securities, encompassing both the corporate sector purchase programme (CSPP) and the PEPP.
As of October 2022, the ECB has included climate performance criteria in its corporate bond purchases. The aim is to gradually decarbonise the Eurosystem’s corporate bond holdings on a path aligned with the goals of the Paris Agreement.
To this end, the Eurosystem is tilting its reinvestments of corporate bonds towards issuers with a better climate performance. Performance is measured by calculating a specific climate score for each issuer.
Detailed information on the climate measures applied to the purchase programmes can be found on the ECB’s website. These climate measures will be pursued without prejudice to the Eurosystem’s primary objective of maintaining price stability.
In addition, the Eurosystem has adopted a differentiated bidding approach in the primary market which favours issuers with higher climate scores as well as green bonds that meet certain criteria.