The Governing Council of the ECB published the modalities for the new covered bond purchase programme (CBPP2). Among them, the purchases of euro-denominated covered bonds issued in the euro area will be carried out by the Eurosystem by means of direct purchases. In addition, the interest rate on the main refinancing operations of the Eurosystem will be decreased by 25 basis points to 1.25%. This latest decision has been announced by the new ECB President, Mr Mario Draghi.

The Governing Council of the European Central Bank (ECB) announced the technical modalities of the new covered bond purchase programme (CBPP2), following its decision of 6 October 2011 to launch it. Among the modalities announced, the purchases of euro-denominated covered bonds issued in the euro area, for an intended nominal amount of €40 billion, will be distributed across the euro area and will be carried out by the Eurosystem by means of direct purchases; and the purchases will be conducted in both the primary and the secondary markets. Furthermore, the counterparties qualified to participate in the CBPP2 are those counterparties that are eligible for the Eurosystem’s monetary policy operations, together with any other counterparties that are used by the Eurosystem for the investment of its euro-denominated portfolios.

The Governing Council has also decided to make its CBPP2 portfolio available for lending. This decision will be implemented by the Eurosystem. Lending will be voluntary and conducted through security lending facilities offered by central securities depositories, or via matched repo transactions with eligible counterparties. The purchases will start in the course of November 2011 and are expected to be fully implemented by the end of October 2012 at the latest.

In addition, Mario Dragui announced that the interest rate on the main refinancing operations of the Eurosystem will be decreased by 25 basis points to 1.25%, starting from the operation to be settled on 9 November 2011. Same decrease to the interest rate on the marginal lending facility. This will be to 2.00% and the interest rate on the deposit facility will be decreased by 25 basis points to 0.50%.

Mario Draghi, former Governor of the Banca d’Italia, has taken up his duties as President of the European Central Bank (ECB)on 1 November 2011. He was appointed on 23 June 2011 by the European Council for a term of office of eight years and he succeeds Jean-Claude Trichet.