The ECB Releases The Details Of Its Debt Monetization And Money Printing Program

Tyler Durden's picture

Those curious to learn why Greece is the only country excluded form the ECB' QE (for now) as the soon to be former Greek PM Samaras said moments ago...

  • GREEK PM SAMARAS SAYS WITHOUT CLOSING THE CURRENT REVIEW, GREECE WILL BE EXCLUDED FROM ECB BOND-BUY PROGRAMME

... will not find any additional information in the ECB's supplement on its asset purchase program. Neither will they learn why something that is in effect monetary financing, and is prohibited by Article 123, is not monetary financing. However, they will learn that the proceeds from the ECB's money printing can be used "to buy other assets and extend credit to the real economy." The ECB adds that "In both cases, this contributes to an easing of financial conditions." Actually the only thing it will contribute to is making the world's billionaires into the world's trillionaires.

 

Finally, anyone wondering if the ECB's purchases are pari passu, here is the answer: "Regarding creditor treatment, the Eurosystem accepts the same (pari passu) treatment as private investors with respect to securities purchased by the Eurosystem, in accordance with the terms of such securities."

Full details from the ECB:

ECB announces expanded asset purchase programme

  • ECB expands purchases to include bonds issued by euro area central governments, agencies and European institutions
  • Combined monthly asset purchases to amount to €60 billion
  • Purchases intended to be carried out until at least September 2016
  • Programme designed to fulfil price stability mandate

The Governing Council of the European Central Bank (ECB) today announced an expanded asset purchase programme. Aimed at fulfilling the ECB’s price stability mandate, this programme will see the ECB add the purchase of sovereign bonds to its existing private sector asset purchase programmes in order to address the risks of a too prolonged period of low inflation.

The Governing Council took this decision in a situation in which most indicators of actual and expected inflation in the euro area had drifted towards their historical lows. As potential second-round effects on wage and price-setting threatened to adversely affect medium-term price developments, this situation required a forceful monetary policy response.

Asset purchases provide monetary stimulus to the economy in a context where key ECB interest rates are at their lower bound. They further ease monetary and financial conditions, making access to finance cheaper for firms and households. This tends to support investment and consumption, and ultimately contributes to a return of inflation rates towards 2%.

The programme will encompass the asset-backed securities purchase programme (ABSPP) and the covered bond purchase programme (CBPP3), which were both launched late last year. Combined monthly purchases will amount to €60 billion. They are intended to be carried out until at least September 2016 and in any case until the Governing Council sees a sustained adjustment in the path of inflation that is consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term.

The ECB will buy bonds issued by euro area central governments, agencies and European institutions in the secondary market against central bank money, which the institutions that sold the securities can use to buy other assets and extend credit to the real economy. In both cases, this contributes to an easing of financial conditions.

The programme signals the Governing Council’s resolve to meet its objective of price stability in an unprecedented economic and financial environment. The instruments deployed are appropriate in the current circumstances and in full compliance with the EU Treaties.

As regards the additional asset purchases, the Governing Council retains control over all the design features of the programme and the ECB will coordinate the purchases, thereby safeguarding the singleness of the Eurosystem’s monetary policy. The Eurosystem will make use of decentralised implementation to mobilise its resources.

With regard to the sharing of hypothetical losses, the Governing Council decided that purchases of securities of European institutions (which will be 12% of the additional asset purchases, and which will be purchased by NCBs) will be subject to loss sharing. The rest of the NCBs’ additional asset purchases will not be subject to loss sharing. The ECB will hold 8% of the additional asset purchases. This implies that 20% of the additional asset purchases will be subject to a regime of risk sharing.

For media queries, please contact Stefan Ruhkamp, tel.: +49 69 1344 5057.

Notes:

A technical annex is published alongside this press release with further operational details.

TECHNICAL ANNEX ?ECB ANNOUNCES OPERATIONAL MODALITIES OF THE EXPANDED ASSET PURCHASE PROGRAMME

The expanded asset purchase programme will comprise the ongoing purchase programmes for asset-backed securities (ABSPP) and covered bonds (CBPP3), and, as a new element, purchases of additional euro-denominated securities that meet the following eligibility criteria:

  1. They fulfil the collateral eligibility criteria for marketable assets in order to participate in Eurosystem monetary policy operations, as specified in Guideline ECB/2011/14, as amended, subject to the fulfilment of the additional criteria listed in points 2-4 below.
  2. They are issued by an entity established in the euro area classified in one of the following categories: central government, certain agencies established in the euro area or certain international or supranational institutions located in the euro area.
  3. They have a first-best credit assessment from an external credit assessment institution of at least CQS3 for the issuer or the guarantor, provided the guarantee is eligible in accordance with Guideline ECB/2011/14, as amended.
  4. Securities that do not achieve the CQS3 rating will be eligible, as long as the Eurosystem’s minimum credit quality threshold is not applied for the purpose of their collateral eligibility. Moreover, during reviews in the context of financial assistance programmes for a euro area Member State, eligibility would be suspended and would resume only in the event of a positive outcome of the review.

Inflation-linked and floating rate securities issued by central governments, certain agencies established in the euro area and certain international or supranational institutions located in the euro area are eligible for purchase under the expanded asset purchase programme.

All eligibility criteria and other modalities of the ABSPP and CBPP3 remain unaltered under the programme. In addition it was decided that:

  • Securities purchased under the expanded asset purchase programme that are not covered by the ABSPP or CBPP3 must have a minimum remaining maturity of 2 years and a maximum remaining maturity of 30 years at the time of purchase.
  • Securities purchased under the expanded asset purchase programme that are not covered by the ABSPP or CBPP3 will be subject to an issue limit, an aggregate holding limit and other operational modalities specified, in particular, with the aim of preserving market functioning and allowing the formation of a market price on a given security. Moreover, the limits ensure that the application of collective action clauses for a bondholder decision is not obstructed.
  • Regarding creditor treatment, the Eurosystem accepts the same (pari passu) treatment as private investors with respect to securities purchased by the Eurosystem, in accordance with the terms of such securities.
  • Purchases of securities under the expanded asset purchase programme that are not covered by the ABSPP or CBPP3 will be allocated across issuers from the various euro area countries on the basis of the ECB’s capital key.
  • Holdings of securities issued by central governments, certain agencies established in the euro area and certain international or supranational institutions located in the euro area will be valued at amortised cost, in line with Guideline ECB/2010/20 on the legal framework for accounting and financial reporting in the ESCB, as amended.
  • The eligible counterparties for purchases shall be those eligible for the Eurosystem’s monetary policy instruments, together with any other counterparties used by the Eurosystem for the investment of its euro-denominated portfolios.
  • Holdings of securities issued by central governments, certain agencies established in the euro area and certain international or supranational institutions located in the euro area purchased under the expanded asset purchase programme will be eligible for securities lending.
  • Transactions in securities purchased under the programme will be published in a weekly report which will list holdings at amortised cost by asset type. In addition, for securities purchased under the expanded asset purchase programme that are not covered by the ABSPP or CBPP3, a report of the amounts held, valued at amortised cost, and the weighted average remaining maturity by issuer residence will be released on a monthly basis.

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hedgeless_horseman's picture

 

 

The bankers sure did a great job preparing the battle field to make sure that most of the new "money" doesn't go into Rubles, or to oil producers, but to the banks.

PartysOver's picture

All Systems Nominal.  Lets go with Throttle Up.

To the Moon Alice.

 

Edit:

The moon is sooooo yesterday and now too easy.  To Alpha Centauri Alice!

pods's picture

Heck of a job Brownie, remove the only good collateral from the debt market.

pods

RockRiver's picture

We have now made sure that the rest of the world goes in the shitter along with us....

LawsofPhysics's picture

Yep, seems to me we need to see some real "deflation" in bankers, financiers, and politicians.  Whay can't any productive business/person get access to billions at zero percent interest?

KnuckleDragger-X's picture

Hell, I'm already a trillionaire, of course it's Zimbabwe money but its government printed so its got to be good right?

medium giraffe's picture

and on that day, not a single shit was given.

wmbz's picture

So of the top 1% of the 1% who will become the first trillionaire?

mtndds's picture

The Rothschilds already hit that.

Spitzer's picture

Did someone assasinate Wolfgang Schäuble ? Why are the Germans caving ?

Wait What's picture

you haven't heard? apparently, that's what central banks do now.

falak pema's picture

'cos German banks are caving without QE. That simple.

Nobody wants recession to go full depression. They'll leave that to the next generation.

KnuckleDragger-X's picture

The next generation is screwed beyond belief but we won't have to wait for them cause Draghi is going to create enough toilet paper to cover the EU...except Greece....

monad's picture

Bribes, blackmail and death threats for some, disinformation, busy work and medication for the rest. SOP.

NoVa's picture

 "to buy other assets and extend credit to the real economy."

Real eCONomy - that is funny

 

surf0766's picture

If off... like a rocket.. Like someone is just printing the dow higher

spottirade's picture

Challenger also looked good for a moment 

Spitzer's picture

Under the non-risk sharing model, national central banks would buy bonds and take on all the risk themselves for the bonds purchased, while the ECB would – if buys anything at all – only buy risk-free assets such as AAA rated paper. A mix of both approaches – where a part of the bonds would be bought by the ECB and the remainder by national central banks – is also on the agenda.

According to the German officials, a condition for QE to be acceptable to Berlin would be that it is mostly or fully non risk-sharing in nature and a large chunk of the risk stays with national central banks.

KnuckleDragger-X's picture

The ECB is telling the EU governments to continue their bad monetary policies cause they'll buy all the debt, no matter how rotten. At this point I go a little paranoid wondering what Germany's secret plan is because they KNOW what this will do.

NoWayJose's picture

So many words and conditions it is hard to figure out exactly what this two headed flying pig is...  And don't believe for a minute that ANY of these conditions will not be changed in the future to further benefit big banks!

John McCloy's picture

  I cannot believe people actually believed the market was gonna stay red...we have been here before guys...we all know the ponzi masters would NEVER let the S&P & Dow not going complete V and smash higher on a big news day when money printing is announced...

    They are all buying ES hands over fist...later next week comes the gold manipulation smash...nothing ends...and it makes me physically sick from anger and frustration.

Thisisbullishright's picture

Then invest using that pattern and make a ton of "money" with that knowledge!!

PartysOver's picture

Yep, Buy the S&P and Dow Futures.  Cash out.  Buy PM's once the get crushed.

Wash, rense, repeat.  As often as you can.

sbenard's picture

It's a race to the bottom in the new currency war!

Thisisbullishright's picture

O for the days when you would just clip off a bit of gold or silver from your coin to "produce" more money......

NoWayJose's picture

Can't wait until we see he first German protest and lawsuit....   it might even be from some German entity besides Buba....  and will effectively delay or end this whole QE thing.

surf0766's picture

It is too late.. Germany is all in

falak pema's picture

when she was young Mutti in the nude was very presentable...so there is hope!

Young Muttis in the pipe line bitchezz.

Its all good surfing !

Devon's picture

Peter Gauweiler, a conservative MP who has launched multiple legal actions against the common currency, announced on Thursday that he had instructed a law professor to prepare a case.

Bernoulli's picture

Yeah, good luck with that. It's hopeless. No chance.

madbraz's picture

back in october 2014, the bankers halted trading in US treasuries as the 30 year bond surged in price and yields collapsed 30 basis points.  they couldn't let the safe haven asset go nuts and drive their short positions to the ground.

 

now, as QE europe is "launched", italian 30 year bonds prices are surging and yields are collapsing by 26 basis points.   because it is a risk asset they speculate on, it's all good and no trading halt is needed.

 

that's corruption right there.

Whoa Dammit's picture

This asset/commodity inflation, wage deflation/consumer buying power erosion shit foisted upon us by the greedy lunatics who are in charge is getting really old. 

adr's picture

MO MONEY FOR BANKSTERS!!!! YAY GO DAVOS!!!!

Gulfstream better get cranking on some new jets. Those old ones are going to look like a 1999 Chevy Cavalier to the world's billionaires. When you can buy a car like the Lamborghini Reventon, a G6 looks like week old garbage.

At least the New York luxury condo market will have buyers again. God, you can't let a $70 million condo sit unsold even if it will never be occupied. Hotels are so 20th century. Penthouse suites at the Plaza is like dining with the homeless. Just in case a billionaire does go to New York he must have the piece of mind of having a 3500 sq ft condo all to himself for a lunch break while his private jet is refueled.

Can you imagine living any other way? It would be pure torture.

Soul Glow's picture

Greece excluded, please remain calm.

Racer's picture

How come sooooo many YEARS, later that this is necessary!!

Renov8's picture

Did anyone notice this QE package does not begin until March 2016?  That is over a year out.   Why not start it now?

 

A Buck says they will not do QE at all.   Mario is dragging his feet for another year.

Devon's picture

Are you sure? I thought it started March 2015

Renov8's picture

The articles I read said 2016.  They were posted on ZH.

Renov8's picture

I stand corrected......it starts in 2015.

 

 

My bad.

Devon's picture
  • Purchases will run from March to the end of September 2016, totalling €1.1tn  (@60Bn a month)
falak pema's picture

March 015--End sept 2016, but open ended; depends on where inflation is. If much below 2% the program goes on.

Youri Carma's picture

Euro plummets as ECB unleashes €60bn-a-month stimulus
http://www.telegraph.co.uk/finance/economics/11361863/ECB-Mario-Draghi-quantitative-easing-decision.html

• ECB to buy €60bn of private and public sector debt from March 2015 (??? Typo correction: Must be 2014 of course***) to September 2016 worth over €1 trillion
• National central banks to assume 80pc credit risk
• Euro plummets on news to 11-year low against the dollar
• Danish central bank slashes rates for the second time in three days to maintain krone peg
• It’s Europe’s last throw of the dice but will QE work?
• Economics explainer: What is Quantitative Easing?

***Make the calculation yourself: March 2014 - September 2016= 10 months in 2014 + 9 months in 2016= 19 months X €60 billion= €1,140 billion - €1.1 trillion, "
worth over €1 trillion"

ECB QE begins in March – CNBC
7 Hours Ago
http://video.cnbc.com/gallery/?video=3000348542

Why in March and not February? Answ: Draghi is smart and keeps one month over so the front-running can do the work for him, you see.

Billy Shears's picture

Yes, a program of counterfeiting and wealth dilution the politicians and bureaucrats can be soooooooooooooooo proud of; nice job, assholes!

Bernoulli's picture

Programme designed to fulfil price stability mandate

Oh really?? 

Grrrrrrrrrrrrrrrrrrrr....grrrrrrrrrrrrrrrrrrrrrrrrrr........ aaaaarrrrrgghhhhhh!!!

$ç@ü¨$#ä&%##!!!!!!

youngman's picture

There are many crooks in boardrooms right now trying to figure out how to game this....billions to be made or stolen....find out the name of the guy that does the buying..he is the guy that will get many paper bags full of cash to buy my shit first....lol...this will all come out in the next few years....

Devon's picture

Big news as this is in reality it is only putting a sticking plaster on the arm when the wound is on the leg. It doesn't do anything to solve the problems of the euro or the economies of the eurozone. 

Only benefit will be to Farrari, Lamborgini and other high end makers as the uber rich buy more toys with Draghi's free money.