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Euromoney's round-up of the European Central Bank's CSPP, including the eligibility criteria and process.
Background
As a result of the global financial crisis, key interest rates have come close to their effective lower bound (ELB). The ECB has elected to undertake non-standard measures in an attempt to return inflation to 2% - the Governing Council's definition of price stability. Asset purchases are one of the non-standard measures the ECB is using to achieve this objective.
The ECB buys a range of assets including government bonds, securities issued by European supranational institutions, asset-backed securities, covered bonds, and now corporate bonds, at a pace of EUR 80 billion per month, through its expanded asset purchase programme (APP). Purchases made via the APP are intended to influence broader financial conditions, encourage economic growth and help inflation rates return to levels below, but close to, 2% in the medium term. These purchases are intended to be carried out until the end of March 2017.
Investment grade euro-denominated bonds issued by non-bank corporations established in the euro area are now eligible assets for regular purchases under the corporate sector purchase programme (CSPP).
On March 10, the ECB decided on a number of non-standard monetary policy measures, including the launch of the CSPP as an additional component of the asset purchase programme (APP). From April 2016, the ECB has also increased the combined monthly purchases under the APP from EUR 60 billion to EUR 80 billion.
The CSPP kicked off on June 8; on the first day, the ECB was reportedly already buying five-year utility bonds in the secondary market.
Asset eligibility
The ECB collateral eligibility framework - the rules that lay down which assets are acceptable as collateral for monetary policy credit operations - are used to determine the eligibility of corporate sector securities purchased under the CSPP.
Eligible issuers holding debt instruments for purchase under the CSPP:
must be non-bank corporations;
must be a corporation established in the euro area. Corporate debt instruments issued by corporations incorporated in the euro area whose ultimate parent is not based in the euro area are also eligible for purchase under the CSPP, provided they fulfil all the other eligibility criteria.
Debt instruments eligible for purchase must fulfil the following criteria:
bonds must...