Public Sector Purchase Programme (PSPP)
On 22 January 2015, the ECB unveiled the public sector purchase programme (PSPP), which consists of the purchase of bonds issued by euro area central governments, agencies and European institutions. On 3 December 2015, the ECB Governing Council decided to extend this to include regional and local government bonds. In its introductory statement to the press conference of 10 March 2016, the ECB Governing Council announced that it had decided to increase the issuer and issue share limits for the purchases of securities issued by eligible international organisations and multilateral development banks from 33% to 50%.
With regard to hypothetical losses under the PSPP, purchases of securities issued by European institutions will be subject to loss sharing. The ECB reduced the share of such securities purchased under the PSPP from 12% to 10% on 10 March 2016. These securities are purchased only by national central banks (NCBs). The remaining asset purchases are made by the NCBs and the ECB. The NCBs essentially focus on public sector bonds issued by their home country. Hypothetical losses stemming from bonds issued by central, regional and local governments as well as agencies are borne by the respective NCB. Consistent with the reduction in the purchase share of securities issued by European institutions to 10%, the ECB’s share of the PSPP purchases, for which potential losses would have to be shared, was increased from 8% to 10%. This implies that 20% of the asset purchases under the PSPP continue to be subject to a regime of risk sharing, while 80% of the purchases are excluded from risk sharing.
Purchases began on 9 March 2015 and only take place in the secondary market.