The euronoteS

Context around the euronotes.

As you can see, one of the things about the Euronotes is that they are signed.

by the president of the European Central Bank.

This is a letter she wrote; it says something maybe about the context of the euronotes.:

Honourable Members of the European Parliament, dear Mr Zanni, Ms Donato, Mr Grant, Mr Rinaldi, Thank you for your letter, which was passed on to me by Ms Irene Tinagli, Chairwoman of the Committee on Economic and Monetary Affairs, accompanied by a cover letter dated 4 December 2019.

First, let me highlight that the corporate sector purchase programme (CSPP) forms part of the Eurosystem’s expanded asset purchase programme (APP) and was introduced to strengthen the pass-through from the Eurosystem’s asset purchases to financing conditions in the real economy. The universe of CSPP-eligible bonds is broad and its composition is primarily guided by monetary policy and risk management considerations. CSPP purchases are guided by a benchmark that proportionally reflects the nominal value of eligible bonds in the CSPP-eligible universe. The purchases are also conducted with a view to preserving the price discovery mechanism and limiting distortions in market liquidity. In addition, the Eurosystem conducts regular credit risk and due diligence assessments with regard to the purchasable assets.

On the basis of these assessments, the Eurosystem may apply additional risk management measures as it deems necessary. 2 As disclosed on the ECB’s website, 3 the Eurosystem currently holds six individual securities of the specific issuer you refer to, LVMH, under the CSPP. The disclosure of more detailed, disaggregated data on the size of CSPP holdings for individual issuers could undermine the level playing field upon which issuers operate. Such disclosure would jeopardise the ECB’s aim of minimising the impact of the CSPP on the functioning of the euro area corporate bond market. Ultimately, this could compromise the effectiveness of monetary policy and impair the ECB’s ability to pursue its primary objective of price stability.

In the context of corporate business plans, issuers of bonds bought under the CSPP are free to make their own business decisions on how to allocate their resources. As regards future CSPP purchases of newly issued corporate bonds, the Eurosystem will continue to assess whether these securities are eligible for the programme and the Eurosystem’s collateral framework will remain the basis for determining CSPP eligibility. Let me conclude by briefly highlighting the impact of the CSPP on euro area financing conditions and therefore economic growth.

The programme has improved the financing conditions of eligible euro area nonfinancial corporations since it was announced on 10 March 2016. It has also had positive knock-on effects on the wider financing environment for euro area companies. These companies also include those that do not rely on capital markets for their financing, such as small and medium-sized enterprises (SMEs). 4 The CSPP has thus contributed to ensure the very favourable financing conditions that are necessary to secure a sustained convergence of inflation rates towards levels below, but close to, 2% over the medium term.

Yours sincerely,

Christine Lagarde

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