Monetary policy framework

The monetary policy framework of the Eurosystem comprises the general rules for Eurosystem monetary policy instruments and procedures, which are used to implement decisions made by the Governing Council of the ECB on monetary policy in the euro area in a decentralised manner. The Eurosystem’s monetary policy operations are executed under uniform terms and conditions in all member states. The Deutsche Bundesbank is responsible for implementing Eurosystem monetary policy with German counterparties.

The monetary policy framework consists of a set of monetary policy instruments. The Eurosystem conducts open market operations, offers standing facilities and requires credit institutions to hold minimum reserves on accounts in the Eurosystem. The Eurosystem's monetary policy framework is formulated with a view to ensuring the participation of a broad range of counterparties. Institutions subject to minimum reserves may access the Eurosystem's standing facilities and participate in Eurosystem open market operations that are based on standard tenders. For outright transactions, no restrictions are placed a priori on the range of counterparties.

Pursuant to Article 18.1 of the Statute of the ESCB, all Eurosystem credit operations (ie liquidity-providing monetary policy operations and intraday credit) have to be based on adequate collateral. The Eurosystem accepts a wide range of assets to underlie its operations and has developed a single framework for eligible collateral common to all Eurosystem credit operations.

The Governing Council of the ECB may, at any time, change the instruments, conditions, criteria and procedures for the execution of Eurosystem monetary policy operations.

Temporary non-standard monetary policy measures

Since the onset of the banking, financial and sovereign debt crisis in 2007, the ECB Governing Council has taken a series of non-standard monetary policy measures and has thus changed the way in which the monetary policy framework is used to implement monetary policy measures. Within this framework, all regular monetary policy refinancing operations are currently being conducted as fixed rate tender procedures with full allotment. In addition, the minimum reserve requirements have been lowered, the collateral framework has been expanded, and foreign currency liquidity has been offered.

Moreover since 2014, the Governing Council of the ECB decided to temporarily carry out outright purchases as well as targeted longer-term refinancing operations (TLTROs) as a complement to the existing monetary policy framework.

The expanded asset purchase programme (APP) includes the third covered bond purchase programme (CBPP3), the asset-backed securities purchase programme (ABSPP) and, since January 2015, a purchase programme for bonds issued by euro-area central governments, agencies and European institutions (public sector purchase programme (PSPP)). The APP was expanded to include a corporate sector purchase programme (CSPP) in June 2016. The volume of purchases under the APP came to €80 billion per month up until March 2017. Since April 2017, the Eurosystem has been making monthly purchases in the amount of €60 billion and will continue to do so until at least December 2017.

The first series of TLTROs was adopted by the ECB Governing Council in June 2014 and encompassed eight operations due to mature in September 2018 (including an early repayment option) with the aim of supporting lending to the euro-area's non-financial sector. In order to further boost lending, in March 2016 a second series (TLTRO II) was adopted with a total of four operations, each with a four-year maturity (and an early repayment option). The final operation of the second series was conducted in March 2017.

Since April 2015, the Eurosystem has been making securities purchased under the PSPP and CBPP3 available to the market through a securities lending programme. Furthermore, since July 2016 it has also been possible to borrow securities purchased under the CSPP.

All non-standard monetary policy measures are explicitly of a temporary nature and can be discontinued by the Governing Council of the ECB for monetary policy reasons. The latest press releases by the European Central Bank can be found on the ECB’s website.