New ECB Pandemic Emergency Purchase Programme (PEPP)
Last updated: 17 June 2020
On 18 March 2020 after an evening meeting of its Governing Council, the ECB announced the launch of a new temporary asset purchase programme of private and public sector securities to counter the serious risks to the monetary policy transmission mechanism and the outlook for the euro area posed by the outbreak and escalating diffusion of the coronavirus, COVID-19. The ECB has since published a Decision and Questions and Answers outlining the PEPP further. Purchases under the PEPP began on 26 March 2020.
On 4 June 2020, the ECB announced its decision to expand the funds available for the PEPP by €600 billion to a total of €1,350 billion and extended the programme such that purchases will be conducted until at least the end of June 2021.
Key points the Governing Council of the ECB decided were as follows:
- The PEPP has an overall envelope of €1,350 billion. Purchases will be conducted until at least the end of June 2021 and include all the asset categories eligible under the ECB’s existing asset purchase programme (APP)  . The Decision clarified that purchases under the PEPP will be separate from, and in addition to, purchases carried out under the APP. Net asset purchases under PEPP will be terminated once the ECB judges that the coronavirus Covid-19 crisis phase is over, but in any case not before the end of June 2021.
- The ECB acknowledges that the PEPP has been established due to the current exceptional, fast-evolving and uncertain circumstances and therefore requires a high degree of flexibility in its design and implementation compared with the APP. Consequently it notes that its monetary policy objectives are not identical to that of the APP.
- To qualify for the PEPP, the eligibility criteria under the APP for the relevant asset class will need to be fulfilled, save for relaxation of the requirements in respect of Greek Government bonds and maturity requirements in respect of public sector securities (both discussed below).
- The residual maturity of public sector securities purchased under the PEPP ranges from 70 days up to 30 years and 364 days – this allows public sector securities with maturities shorter than those purchased under the existing PSPP to be purchased under the PEPP.
- For private securities eligible under the CSPP, the maturity range is from 28 days up to 30 years and 364 days. For ABSPP and CBPP3-eligible securities, no maturity restrictions apply.
- A waiver of the eligibility requirements for securities issued by the Greek government will be granted for purchases under the PEPP. This is the first time since the Greek financial crisis.
- For the purchases of public sector securities, the benchmark allocation across jurisdictions will continue to be the capital key of the national central banks. At the same time, purchases under the new PEPP will be conducted in a flexible manner. This allows for fluctuations in the distribution of purchase flows over time, across asset classes and among jurisdictions.
 The APP comprises four separate programmes: (i) the corporate sector purchase programme (CSPP); (ii) the public sector purchase programme (PSPP), (iii) the asset-backed securities purchase programme (ABSPP) and (iv) the third covered bond purchase programme (CBPP3).
Expansion of CSPP