Securities lending arrangements of the ECB
Updated on 30 October 2020
The ECB has made the holdings of securities purchased under the public sector purchase programme (PSPP) available for securities lending since 2 April 2015.
The implementation of this activity has been delegated to its lending agent Deutsche Bank AG under the terms and conditions determined by the ECB. The ECB may revise these terms and conditions if this is deemed necessary.
Holdings purchased by the ECB under the Securities Markets Programme (SMP) that are also eligible under the PSPP are available for lending under the same conditions.
As of 4 April 2016, holdings purchased by the ECB under its covered bond purchase programmes (CBPP1, 2 and 3) are also being made available for lending via the same channel.
As of 15 December 2016, the ECB makes its holdings under the PSPP also available for securities lending against cash as collateral, subject to certain conditions.
The Eurosystem started conducting purchases under the PEPP on 26 March 2020 and the ECB makes its holdings available for lending. The same conditions apply for securities lending transactions under the PEPP as under the APP. This means that, for example, public sector PEPP holdings can also be borrowed against cash as collateral.
Securities made available for lending (list of ISINs)
This list of holdings is updated on a weekly basis. Information on the availability of covered bonds holdings can be obtained directly from the securities lending agent.
Pricing and term
The ECB’s securities lending arrangements allow eligible counterparties, at any time, to borrow securities against securities as collateral at a fixed minimum fee of 5 basis points, or a fee based on prevailing market rates, whichever is higher. The fee is the difference between the repo and reverse repo rates.
The ECB also allows eligible counterparties to borrow securities against cash as collateral at a rate equal to the rate of the deposit facility minus 20 basis points or the prevailing market repo rate, whichever is lower.
While transactions have an open term or a term period of up to 14 days, loans that are outstanding for more than 30 calendar days will be monitored and may be recalled by the ECB to ensure that the facility is being used for its intended purpose of supporting secondary market liquidity. In any event, transactions will be recalled at the latest 90 calendar days following the start of the loan.
The arrangements are aimed at primary dealers of euro area sovereign bonds and at other institutions with market-making commitments, provided that they fulfil all the legal requirements for the given securities lending activities. This involves, in particular, the signing of the relevant contractual documentation with the securities lending agent, Deutsche Bank AG, subject to approval by the ECB.
Collateral and haircut
The transactions can take place against other securities or cash as collateral. Borrowers must propose eligible collateral that they intend to offer against the security they wish to borrow. The acceptable collateral consists of the full range of PSPP-eligible securities and cash denominated in euro. Moreover, securities with a remaining maturity of less than one year which are excluded from the PSPP purchases but fulfil all other PSPP requirements for eligibility under the PSPP are also eligible.
Under both options (i.e. lending against securities and lending against cash), a haircut of 4% applies.
Borrowing limits per counterparty
Subject to availability, an individual counterparty may borrow up to 2.5% of the amount outstanding of a single issue (as identified by the ISIN), with a maximum of €200 million for any such issue. Transactions should be split into tickets with a maximum nominal size of €50 million.
In addition, the ECB will set limits for each individual counterparty with regard i) to the overall borrowing volume and ii) to the borrowing volume against cash collateral.
Settlement and cut-off time
Transactions are settled through Euroclear either on the same day or on the following business day or two business days later (T+0, T+1, or T+2). The cut-off time for new transactions settling on the same day is 13:00 CET/CEST. The cut-off time for delivery of securities to be returned is 14:30 CET/CEST on the return settlement date.
Fails mitigation lending
The ECB also participates in Euroclear Bank SA/NV’s Securities Lending and Borrowing Programme (SLB) for the purpose of mitigating fails. The terms and conditions of this programme are the standard ones defined by Euroclear. Please contact Euroclear Bank SA/NV for further information.
Point of contact
For further information contact ECB_PSPP_securities_lending@ecb.int