Lending of holdings of public sector securities and corporate bonds under the asset purchase programs

Banco de España has made available for lending the holdings of securities purchased under the current (APP y PEPP) and past monetary policy asset purchase programs. The securities lending is implemented under two transactions: a repo and a reverse repo. Additionally, transactions can take place against cash as collateral (up to a maximum limit) for securities purchased under the PSPP and PEPP public sector securities.

Agency Securities Lending Program

Effective July 2017, the implementation of securities lending has been delegated to Deutsche Bank AG, acting as securities lending agent, under the conditions determined by Banco de España.

Pricing and term

The interest rate to borrow securities against securities as collateral will be the higher of: i) a fixed minimum fee of 5 basis points, and ii) a fee based on prevailing market rates. The fee is the difference between the repo rate and the reverse repo rate.

The interest rate to borrow securities against cash as collateral will be the lower of: i) the rate of the deposit facility minus 20 basis points and ii) the prevailing market repo rate.

Transactions will have an open term or a term period up to 14 days and will be recalled at the latest for value 90 calendar days following the start of the loan. Loans outstanding more than 30 calendar days will be closely monitored.

Counterparty eligibility

The arrangements are aimed at primary dealers of euro area bonds and at other institutions with an important role for market liquidity, provided that they fulfil all the legal requirements for the given securities lending activities. This requires, in particular, the signing of the relevant contractual documentation with the securities lending agent, Deutsche Bank AG, subject to approval by Banco de España.

Collateral and haircut

The acceptable collateral consists of the full range of PSPP-eligible securities and PEPP-eligible public sector securities, 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, and cédulas and multicédulas with a minimum issuance amount of €500 million. A haircut of 4% applies for sovereign bonds and 8% for cédulas and multicédulas. A haircut of 4% applies for lending against cash.

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, Banco de España 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 will be settled 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 14:00 CET/CEST on the return settlement date; failure to return by this time will result in the loan being re-opened at a more punitive fee/rate than that charged on the preceding day.

Bilateral lending

Securities will be also loaned on a bilateral basis with the counterparties that have signed the relevant contractual documentation, under the terms and conditions specified in the legal documentation.

Fails mitigation lending

Banco de España also facilitates fails mitigation lending through Euroclear for the purpose of mitigating fails.

List of securities available for lending

The list of holdings of public sector securities and corporate bonds available for lending is updated on a weekly basis.

Contact information

For additional information, market participants can contact the Asset Management Division at Banco de España via this contact form Envío de correo electrónico: Abre en nueva ventanaOpens in new window