From today (April 2 2015), securities bought under the eurozone quantitative easing programme are being made available for securities lending by a number of Eurosystem central banks. Other national central banks will follow soon. The reported aim is to support bond and repo market liquidity without unduly curtailing normal repo market activity. The European Central Bank (ECB) says Eurosystem is primarily targeting market participants with market making obligations.
It adds that the Eurosystem central banks will use various channels taking into account the diversity of existing securities lending arrangements and market characteristics in different jurisdictions, and the goal of starting securities lending without undue delay. The Eurosystem will endeavour to attain a further convergence of lending arrangements over time. Each Eurosystem central bank provides more detailed information on its own securities lending arrangements.
Eurosystem central banks will make their PSPP holdings available via effective lending channels, depending on their current practices. These channels may include bilateral securities lending and lending relying on specialised securities lending agents or on the lending infrastructure of international central securities depositories (ICSDs).
Furthermore, Eurosystem central banks will, in principle, also make their PSPP holdings available for so-called fails mitigation lending programmes of international or domestic central securities depositories or ensure that comparable arrangements are in place in their jurisdiction.
Lending of PSPP-securities holdings is to take place on a cash neutral basis. This means that repo transactions against cash collateral shall be accompanied by a fully offsetting reverse repo transaction for the same value date, and typically with the same counterparty.
The individual Eurosystem central banks determine the securities lending modalities of their respective PSPP holdings, including collateral eligibility, pricing, haircut, term and counterparty eligibility, so as to achieve the objective of supporting market liquidity. This allows Eurosystem central banks to reflect domestic infrastructures and market practices.
The Eurosystem PSPP securities lending activities will be monitored closely so as to ensure the ongoing effectiveness of the arrangements.
PSPP holdings of securities issued by supranational institutions
Securities issued by supranational institutions and purchased under the PSPP by Eurosystem central banks will be made available for securities lending under the co-ordination of Banque de France and Banco de España.
