Written answers

Wednesday, 4 February 2015

Department of Finance

European Central Bank

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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18. To ask the Minister for Finance the way the ECB’s quantitative easing programme will be implemented by the Central Bank of Ireland and the ECB; and if he will make a statement on the matter. [4653/15]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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As widely anticipated, the ECB, announced an expanded asset purchase programme on January 22nd to include bonds issued by euro area central governments, agencies and European institutions. Under this expanded programme, the combined monthly purchases of public and private sector debt securities will amount to €60 billion. These monthly purchases are intended to be carried out from March until end-September 2016 and will, in any case, be conducted until inflation moves onto a path consistent with price stability, in line with the mandate of the ECB.  In principle, this would see the ECB balance sheet expand to over €1 trillion.

Many details in terms of the implementation of the expanded asset purchase programme are not, as yet, publically available and these are, of course, an internal matter for the ECB and the National Central Banks. The ECB has, however, indicated that its asset purchase programme in relation to sovereign bonds will be restricted to bonds with a remaining maturity of greater than 2 but less than 30 years.  It has also indicated limits on the Eurosystem's holdings of any one issuer's bonds, taking into account existing holdings.  These limits refer to the same 2 to 30 year maturity window. 

To be precise, holdings within the 2 to 30 year remaining maturity window will not exceed 33 per cent of an issuers' tradable bonds within the same window.  The majority of the bonds acquired by the Central Bank of Ireland (CBI) in exchange for the Promissory Notes have more than 30 years remaining.  Currently, this is the case for €19 billion out of the original €25 billion nominal issuance.  Therefore, the holding of these bonds by the CBI will, in practice, have no impact on the amounts that can be purchased by the CBI.  While other bonds within the 2-30 year maturity window that are already held by the CBI and other National Central Banks will be taken into account for the purposes of calculating the amounts that can be purchased, I understand that this still leaves ample room for participation by the CBI in the asset purchase programme.

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