In April 2020, the Governing Council of the European Central Bank decided to offer a series of additional longer-term refinancing operations (LTROs) with favourable terms called pandemic emergency longer-term refinancing operations (PELTROs) to tackle the effects of the COVID-19 pandemic (coronavirus crisis). They are intended to support liquidity conditions in the euro area and contribute to preserving the smooth functioning of money markets.

The pandemic emergency purchase programme (PEPP) was initiated in March 2020 to counter the risks to the monetary policy transmission mechanism posed by the coronavirus pandemic. Among the securities that can be purchased are those that are also eligible under the asset purchase programme (APP). The Governing Council discontinued net asset purchases under the PEPP at the end of March 2022. The Governing Council intends to reinvest the principal payments from maturing securities purchased under the PEPP until at least the end of 2024.

The amount stated (printed) on a security. The par or nominal value of an exchange-traded security can differ substantially from its market value.

Parity means defining the value of a currency against a yardstick, which may deviate from the actual exchange rate in the market. Examples of parity are a set rate of exchange between a currency and gold (gold parity), between two currencies (e.g. dollar parity) or between a currency and an artificial accounting unit (eg ECU parity)

At the request of the payment service user, a payment order relating to a payment account held with another payment service provider is initiated. A payment initiation service enables access to an online payment account held by another payment service provider.

Payment service providers are companies which offer payment services. They are defined in the Payment Services Oversight Act (Zahlungsdiensteaufsichtsgesetz, or ZAG). Besides companies, electronic money institutions, central banks (such as the ECB or the Bundesbank) and central, state and local governments are also deemed to be payment service providers if they provide payment services.

Payment services are defined in the Payment Services Oversight Act (Zahlungsdiensteaufsichtsgesetz, or ZAG). Amongst other things, these include the inpayment or outpayment of cash to or from an account and the transmission of funds via direct debit, card payment or credit transfer. A payment service is provided by a payment service provider.

The Payment Services Directive (PSD) is an EU Directive which lays down uniform rights and obligations with regard to payment transactions at the European level, creating a level playing field and improving consumer protection. The PSD, which came into force in December 2007, was replaced by the revised PSD2 on 13 January 2018. One objective of the PSD2 is to facilitate market entry, especially for new payment service providers. Banks are now required to allow payment service providers to access the account details of their customers, provided the customers have given their consent to this. This is designed to boost competition and, at the same time, enhance payment security.

The Payment Services Directive 2 is the revised version (by European legislators) of the payment services directive which has been implemented in German law since January 2018. A number of rules have been adopted to increase security in payment transactions and to allow further competition between payment institutions. Key points are the inclusion of “third-party payment service providers”, which offer payment initiation services, account information services and the issuance of payment cards, as well as the obligation to ensure “strong customer authentication”. Furthermore, the consumer protection rules have been strengthened.

The transfer of payment instruments within an economy using cash and cashless payment media. Cash payments are made using banknotes and coins, while cashless payments involve the transfer of deposit money from one account to another using cashless payment media (e.g. credit transfer, direct debit, cheque or card payment).

The directive on the comparability of payment account fees, payment account switching and access to a basic payment account ensures that every consumer has the right of access to a payment account with basic functions (basic payment account). In addition, the directive contains rules on account switching and improves the comparability of payment accounts.

Pension funds are legally independent institutions that are used to finance funded occupational pension schemes for employees. Owing to the size and long-term nature of their pooled assets, pension funds number among the most significant institutional investors on international capital markets.

Rather than showing pure price developments, a performance index also reflects all other developments in the securities in question, thus illustrating the overall performance of the investment. Unlike a price index, a performance index therefore also takes into account the dividend and interest payments of the underlying securities.

A personal loan is a form of credit taken out by a household to finance consumer goods (mostly durable goods like furniture or cars). Personal loans often have terms of three to five years.

A Pfandbrief is a covered bond that may only be issued by banks that are licensed by the Federal Financial Supervisory Authority (BaFin). These Pfandbrief banks can issue mortgage, ship, aircraft and public Pfandbriefe. Mortgage Pfandbriefe are used to finance real estate loans that are provided by the Pfandbrief issuer and secured by mortgages. Public Pfandbriefe can be covered using claims (loans or public sector bonds) on the central, state and local governments of certain countries and are therefore used to finance public sector lending.

The Pfandbrief Act (Pfandbriefgesetz) defines a Pfandbrief bank as a bank that conducts Pfandbrief business, ie issuing covered bonds on the basis of mortgages granted (also on ships and aircraft) and loans to public sector bodies (public Pfandbriefe). 

Physical risks in the context of green finance encompass risks representing the immediate consequences of climate change. Physical risks arise, for example, as a result of the growing frequency of extreme weather events associated with climate change such as floods, droughts, or rising sea levels. These extreme weather events are able to destroy and devalue property. Moreover, climate change can also have a direct impact on the setting in which enterprises operate. For instance, higher commodity prices may have lasting adverse effects on an enterprise’s business model. In the case of insured risk, for example, the insurance sector would be particularly hard hit.

The point of sale (POS) is the place at which goods or services are sold and paid for.  This usually means a retail outlet, but can also apply to other places, such as when services provided by tradesmen in households are provided on a delivery-versus-payment basis, or when online or mail order purchases are paid for.

The portrait hologram is one of many security features of euro banknotes and can be found in the silvery hologram stripe on the right-hand side on the front of the banknotes. The € symbol, the main motif and the value numeral of the banknote appear in this hologram stripe on all banknotes in the Europa series when tilted. When the banknotes are held up to the light, it is possible to see Europa’s portrait in the hologram stripe. This portrait is depicted in a window on €20, €50, €100 and €200 euro banknotes. Several rainbow-coloured value numerals appear in this window on the reverse side of the banknotes when tilted.

Potential output means the highest possible overall economic output that can be achieved assuming normal utilisation of the available production factors of labour and capital, and taking account of technical progress.

A prepaid card is a cashless payment instrument. Payment is made by transferring credit that is stored on a chip integrated in a plastic card. The chip can be loaded with any amount up to the value of €200 either by means of a cash payment or by debiting a giro account. The girogo scheme was launched in 2012. Since then it has been possible to pay with such a card without putting it in a card reader but simply by holding it in front of a contactless terminal.

A price index is a statistical measure used to determine the price level of a specific group of goods. The extent to which a price index changes compared with a previous period describes the average price development. To calculate a price index, a representative sample of goods is weighted by the quantities sold; a survey is then carried out of the prices for these goods in the respective markets. The result is the weighted average of prices of the defined group of goods. In Germany, the Federal Statistical Office (Statistisches Bundesamt) computes a broad range of price indices, eg for industrial and agricultural products, real estate and rents, imports and exports as well as for various services. The best known is the consumer price index, which measures general price developments. Using the various price indices, economic data can be shown in time series after elimination of the effect of price changes.

The price level is the weighted average of the prices of goods and services in a given category, eg consumer goods or industrial goods. If the price level rises, the purchasing power of money falls, and vice versa.

The term “price level stability” has generally been replaced by the shorter, though less precise term “price stability”.

Price stability is achieved when there is very little movement in the price level despite individual prices fluctuating. The ECB Governing Council uses the Harmonised Index of Consumer Prices (HICP) to measure changes in the price level in the euro area. The change in the HICP is expressed as a percentage and referred to as the inflation rate. The Governing Council considers that price stability is best maintained by aiming for 2% inflation over the medium term. The Governing Council’s commitment to this target is symmetric. Symmetry means that the Governing Council considers negative and positive deviations from this target as equally undesirable.

Price-level targeting is a monetary policy strategy which, rather than looking at annual developments in the inflation rate, instead bases its analysis on long-term developments in price levels. When targeting price levels, monetary policymakers use corrective measures to respond to any deviations from the target path for the price level. For instance, if, in a certain year, the inflation rate rises at a faster pace than envisaged, monetary policymakers try to offset this overshooting in the following period through undershooting so as to ensure a return to the long-term target path for the price level. By contrast, the Eurosystem focuses on a target for the medium-term inflation rate. As long as this is within the bounds of the Eurosystem’s target figure for price stability, the target has been achieved. There are no attempts to correct targets missed in previous years in the years thereafter and thus no changes to the target rate of inflation. To date, price-level targeting has only been practised in Sweden in the 1930s.

A price-wage spiral is a mutually reinforcing process of price and wage increases. A rise in prices, for instance for oil and gas imports, leads to higher wages, as a consequence of which enterprises charge higher prices. This distributional struggle between wage bargaining partners is one possible cause of inflation.

The primary income is an item in the current account. Its main components are labour income flows and investment income flows between residents and non-residents. These include interest and dividend payments. Primary income has to be distinguished from secondary income.

The primary market is the part of the capital market in which securities such as equity shares and bonds are first issued and offered for sale. The primary market is also known as the new issue market.

Private banks operating as universal banks, which traditionally conduct primarily short-term credit operations, but also have an important role in underwriting business, for example. These include the big banks, regional banks and other commercial banks, as well as branches of foreign banks.

Private equity is the capital invested by private corporations and investors in non-listed enterprises. The aim of such investment is typically to restructure the enterprise and then sell it on, often via an initial public offering. In general, private equity comes from specialised funds, which invest in several enterprises in parallel in order to diversify risk. 

Private sector financial assets include, in particular, cash holdings, bank deposits, securities (equity shares, fixed-rate securities and investment fund shares) and claims on insurance and pension funds held by domestic non-financial enterprises, households, (including non-profit organisations) and the government. Together with non-financial assets, they form the (gross) financial assets of the non-financial sector. In Germany, financial assets and liabilities are calculated and published by the Deutsche Bundesbank as part of the macroeconomic financial accounts.

Profitability is the general term for the ratio of profit to capital invested. The return on equity is the ratio of net profit in a period to equity, expressed as a percentage. Profitability is sometimes used as a synonym for return.

Protectionism refers to a trade policy which attempts to protect specific sectors of an economy from foreign competition through tariffs, quantitative restrictions or other requirements (non-tariff trade barriers). Protectionism is the opposite of free trade.

A public Pfandbrief is issued as a fixed-income debt security by private mortgage banks and public credit institutions, the proceeds of which are used to grant mostly longer-term loans to public sector entities. Unlike mortgage Pfandbriefe, these securities are not backed by real estate collateral, but by the general economic and tax-raising powers of a public entity.

Under the public sector purchase programme (PSPP), Eurosystem central banks have been purchasing public sector assets such as government bonds and the debt securities of European institutions and agencies since March 2015. There are detailed rules for purchases under the PSPP. For example, due to the prohibition of monetary financing, central banks may only acquire government bonds on the secondary market. One of the peculiarities of the PSPP is that the distribution of possible losses arising from the securities purchased is governed by rules differing from those for the other Eurosystem monetary policy operations. Under this programme, only 20% of the securities purchased are subject to joint liability at the Eurosystem level. The remaining securities issued by the public sector that are purchased by the national central banks are not subject to risk-sharing. The PSPP is by far the largest component of the asset purchase programme (APP). The APP is also referred to as "quantitative easing". This is taken to mean the purchase of debt securities by the central bank for monetary policy purposes with the aim of exerting downward pressure on the level of market interest rates. Net asset purchases under the asset purchase programme (APP) ended as of 1 July 2022. The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP as long as necessary to maintain an appropriate monetary policy stance.

Purchasing power is the value of money expressed as a quantity of goods. It indicates the quantity of goods that can be purchased for a specific amount of money. If the price level rises (inflation), purchasing power decreases, because fewer goods can be bought for the same amount of money as before. If the price level sinks (deflation), purchasing power increases.

This theoretical concept is used to explain exchange rate movements and states that the exchange rate between two currencies is formed based on the price differential between the domestic and foreign markets. According to this theory, if a good is cheaper at home than abroad, then total demand will be concentrated at home. The price at home increases and the price abroad decreases; the exchange rate between the two currencies changes at the same time. This arbitrage comes to an end when the good is equally expensive at home and abroad (absolute purchasing power parity theory). The relative purchasing power parity theory states that the expected percentage change in the exchange rate is commensurate to the relative difference in expected gross inflation rates.