ECB enhances liquidity by cutting sec lending fees
05 April 2016 Frankfurt
Image: Shutterstock
The European Central Bank (ECB) has slashed its securities lending minimum fee by a quarter in an effort to boost bond and repo market liquidity.
Borrowers will now pay the higher of either a 30 basis point (bps) fee, down from 40 bps, over general collateral or a fee over general collateral based on market rates.
The fee is the difference between repo and reverse repo rates.
The term will be open repo, instead of a one-week fixed-term with rollovers.
In a statement on the change, the ECB said: 鈥淲hile, in principle, transactions have an open term and there is no fixed time limit on extending a borrowing transaction, loans with a duration of more than 30 calendar days will be monitored by the ECB to ensure that the facility is being used for its intended purpose of supporting secondary market liquidity.鈥�
The ECB鈥檚 fail fee will also be significantly reduced from approximately 145 bps to the fee at the time of fail plus 25 bps.
Additionally, covered bond purchase programmes 1, 2 and 3 holdings will now be made available via the agent, instead of being lent bilaterally.
The 4 percent haircut applied to borrower collateral in reverse repo transactions will remain unchanged.
Borrowers will now pay the higher of either a 30 basis point (bps) fee, down from 40 bps, over general collateral or a fee over general collateral based on market rates.
The fee is the difference between repo and reverse repo rates.
The term will be open repo, instead of a one-week fixed-term with rollovers.
In a statement on the change, the ECB said: 鈥淲hile, in principle, transactions have an open term and there is no fixed time limit on extending a borrowing transaction, loans with a duration of more than 30 calendar days will be monitored by the ECB to ensure that the facility is being used for its intended purpose of supporting secondary market liquidity.鈥�
The ECB鈥檚 fail fee will also be significantly reduced from approximately 145 bps to the fee at the time of fail plus 25 bps.
Additionally, covered bond purchase programmes 1, 2 and 3 holdings will now be made available via the agent, instead of being lent bilaterally.
The 4 percent haircut applied to borrower collateral in reverse repo transactions will remain unchanged.
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