The European Central Bank (ECB) Governing Council has announced the creation of a €750 billion Pandemic Emergency Purchase Programme (PEPP) in response to the economic impact caused by COVID-19.
The PEPP will act as 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 Governing Council stated that it will terminate net asset purchases under PEPP once it judges that the coronavirus Covid-19 crisis phase is over, unlikely to be before the end of 2020.
The ECB also announced their intention to expand the range of eligible assets under the corporate sector purchase programme (CSPP) to non-financial commercial paper, making all commercial papers of sufficient credit quality eligible for purchase under CSPP.
Additionally, plans to ease the collateral standards by adjusting the main risk parameters of the collateral framework were announced. In particular, the expansion of the scope of Additional Credit Claims (ACC) to include claims related to the financing of the corporate sector. This will ensure that counterparties can continue to make full use of the Eurosystem’s refinancing operations.
The ECB concluded by underlining its commitment to supporting the Euro, and confirmed it will explore all options and all contingencies to support the economy through the shock.