COVID-19: ECB launches €750bn Pandemic Emergency Purchase Programme and other measures in response to the pandemic

The European Central Bank (ECB) has announced a €750bn temporary asset purchase programme of private and public sector securities to assist the eurozone in the wake of the COVID-19 pandemic. This is in addition to the €120bn increase the ECB announced to its €20bn per month programme of asset purchases last week.

The ECB has noted that the Pandemic Emergency Purchase Programme (PEPP) will enable it to intervene in the entire yield curve and prevent financial fragmentation and distortion in credit pricing.

It has indicated that purchases under the PEPP will:

• include all of the asset categories eligible under the ECB's existing asset purchase programme
• be conducted until at least the end of 2020. After that period, the ECB can terminate purchases once it decides that the COVID-19 crisis phase is over. Notwithstanding that, the ECB has also sent a strong message that it is fully prepared to increase the size of its asset purchase programmes and to adjust their composition 'by as much as necessary and for as long as needed'; and  
• be conducted in a flexible manner and if necessary to fulfil its mandate, the ECB has indicated that it may consider revising geographical and other limits that exist on the bonds it acquires.

Significantly, the ECB has also committed to:

• broadening the range of eligible assets under the existing corporate sector purchase programme (CSPP) to include commercial paper issued by non-financial institutions, making all commercial paper of 'sufficient credit quality' eligible for purchase under CSPP. The technical details relating to credit quality have yet to be published, but the likelihood is that corporates with existing note programmes and an investment grade rating will be in a good position to access this programme; and
• make available up to €3 trillion in liquidity through its refinancing operations, at interest rates as low as -0.75%.

While the ECB had been criticised for being slow to take action in relation to the COVID-19 pandemic, the PEPP and the other measures outlined above have been widely welcomed, as has the ECB's clear message that it will not tolerate any risks to the smooth transmission of its monetary policy in all jurisdictions of the euro area.   

A&L Goodbody has previously advised financial institutions and other eligible counterparties on structuring Eurosytem eligible assets and we are well positioned to assist counterparties, including corporates that are looking to access the Eurosytem for the first time.

Our lawyers are also helping clients to respond to the profound range of legal issues now impacting their business. Our website is updated on an ongoing basis and hosts a hub of legal issues arising from COVID-19 across all of our practice areas, which are free to access.

For further information please contact any member of the Finance team. 

Date published: 20 March 2020