When the European Central Bank (ECB), the latecomer in the Quantitative Easing (QE) program announced its Public Sector Purchase Program (PSPP) in 2015, it was said that the program would follow the central bank’s capital key structure. The structure is based on individual countries or central bank’s contribution to European Central Bank’s (ECB) base capital. However, in reality, after years of PSPP, the deviation from key capital ratio is quite large and the gap is likely to grow if ECB continues further on its bond buying program.
According to data, while ECB bought more bonds than key capital for Italy, France, Germany, Spain, Netherlands, and Belgium, it has bought lesser amounts than the key capital for rest of the Eurozone. ECB didn’t buy any Greek bonds. The gap is highest for Franc and Italy with around €12 billion. And on the downside, the gap is largest for Portugal (approx. €10 billion).
The gap could continue for many economies and even expand if ECB continues to expand its balance sheet without changing the current rules. To give an example, as of now, ECB has bought €10 billion less of Portugal bonds than key capital ratio requires but the current bond purchase has already hit 30 percent issuer limit, whereas the rules bar ECB from buying more than 33 percent bonds for any issuer.


Japan Services Producer Prices Rise 3.2% in June, Supporting BOJ Rate Hike Expectations
BOJ Rate Hike Expectations Rise Ahead of September Meeting
China Holds Loan Prime Rates Steady for 14th Month as Economic Recovery Remains Uneven
Eurozone Bond Yields Fall as Oil Slump Eases Inflation Fears Ahead of Central Bank Meetings
FxWirePro: Daily Commodity Tracker - 21st March, 2022
BOJ Seen Holding Rates at 1% While Keeping Inflation Risk Warning
South Korea Raises Interest Rates to 2.75% as Inflation and Weak Won Drive Tightening




