More information on the Eurosystem’s securities lending can be found in: Taking stock of the

Eurosystem’s asset purchase programme after the end of net asset purchases, 3. Implementation issues, Economic

Bulletin Issue 2, 2019.

The aim of securities lending is to support bond and repo market liquidity without unduly curtailing normal repo

market activity. The Eurosystem is primarily targeting market participants with market-making obligations and is

monitoring the securities lending activities closely so as to ensure the ongoing effectiveness of the arrangements.

Lending of securities purchased under the expanded asset purchase programme (APP) and pandemic emergency purchaseLucknow Wealth Management

programme (PEPP) is conducted by the Eurosystem in a decentralised manner.

Eurosystem central banks use various lending channels for that purpose. These channels include bilateral securities

lending, lending via specialised securities lending agents and via the lending infrastructure of international

central securities depositories (ICSDs)Indore Investment. The Eurosystem endeavours to offer effective and accessible securities

lending arrangements.

Eurosystem central banks also either make their APP holdings available for the so-called fails mitigation lending

programmes of international or domestic central securities depositories, or alternatively ensure that comparable

arrangements are in place in their jurisdiction.

Lending of APP/PEPP public sector securities holdings takes place against securities or cash collateral. Lending against securities as

collateral means that repo transactions are accompanied by fully offsetting reverse repo transactions for the same

value date, and typically with the same counterparty. For securities lending against cash collateral, such

offsetting transactions are not needed, but this variant is subject to an overall limit which, as of 10 November

2022, is set at €250 billion.

The individual Eurosystem central banks determine the securities lending modalities of their respective APP/PEPP

holdings, including collateral eligibility, pricing, haircut, term and counterparty eligibility, so as to support

market liquidity. This allows Eurosystem central banks to reflect domestic infrastructures and market practices.

Eurosystem central banks adhere to a pricing principle that ensures that the Eurosystem securities lending

facilities serve as an effective backstop, supporting bond and repo market liquidity without unduly curtailing

normal repo market activity.

As of 2 November 2020, Eurosystem central banks allow eligible counterparties to:

borrow securities against other securities as collateral at a fixed minimum fee of 5 basis points, or a fee

based on prevailing market rates, whichever is higher (fee is generally understood as the difference between theLucknow Investment

repo and reverse repo rates);

borrow securities against cash as collateral at a rate equal to the rate of the deposit facility minus 20 basis

points or the prevailing market repo rate, whichever is lower.