Document Type

Case Study

Case Series

Market Liquidity Programs

JEL Codes

G01, G28


In July 2009, the European Central Bank introduced a nonstandard measure to revitalize the European covered bond market, which at the time financed about one-fifth of mortgages in Europe. The market struggled after the collapse of Lehman Brothers as the global financial crisis intensified in 2008. Over the course of the program, which lasted 12 months, European central banks, collectively known as “the Eurosystem,” conducted direct purchases in both primary and secondary markets to a total of €60 billion of covered bonds. The Eurosystem held the purchased covered bonds until maturity and made them eligible for lending to counterparties as of March 2010. Some evaluations consider the first CBPP a success, as the covered bond market began to function normally after the program’s implementation. However, the CBPP operated at the same time as other crisis-combatting programs within both the Eurosystem and individual member countries, and its results occurred during a general improvement in conditions.

In November 2011, the European Central Bank introduced the second iteration of its covered bond purchase programs to stimulate funding to credit institutions and facilitate lending at the onset of the sovereign debt crisis. The program ran for one year and fell far short of its targeted €40 billion in purchases; at its completion, Eurosystem central banks had purchased €16.4 billion of covered bonds. It is difficult to holistically evaluate the program; while CBPP2 generally had a positive impact on the covered bond market, it was much less effective than CBPP1.

Date Revised