Monetary policy

Securities lending of holdings under the public sector purchase programme (PSPP) and pandemic emergency purchase programme (PEPP)

Securities lending is lending of securities by one party to another, which requires that the borrower provides the lender with collateral. The latter can be either in form of cash or non-cash securities and of value equal to or greater than the loaned securities. As payment of the loan, the parties negotiate a fee, quoted as a percentage of the value of the loaned securities, calculated on an annual basis. For the time in which the security is loaned, the title of ownership is transferred from the lender to the borrower. Key lenders of securities include central banks, mutual funds, insurance companies, pension funds and other institutions with large investment portfolios. Borrowers usually consist of market makers, who are required to maintain two-sided quotes (bid and ask) for securities and thereby need to ensure there is a buyer for every sell order and a seller for every buy order at any time.

PSPP and PEPP securities lending

As of 2 April 2015, the securities purchased under the public sector purchase programme (PSPP) are made available for securities lending in a decentralized manner by a number of Eurosystem central banks. The aim of securities lending is to maintain bond and repo market liquidity by supporting market making for the securities, which the Eurosystem purchases, without unduly curtailing normal repo market activity. Since the implementation of the temporary pandemic emergency purchase programme (PEPP) on 26 March 2020, securities purchased under PEPP are also available for lending.

More information regarding securities lending is available on the ECB's website:
http://www.ecb.europa.eu/mopo/implement/omo/pspp/html/pspp-lending.en.html

The Bank of Slovenia's securities lending

Bonds purchased by the Bank of Slovenia under PSPP and PEPP are available for lending via two separate channels, i.e. via the agent Deutsche Bank AG and via the Euroclear Bank SA/NV's Securities Lending and Borrowing Programme.

Agency lending general principles:

  • The lending programme is aimed at primary dealers and market makers in the Slovenian government bond market. It is available also to other market participants, at the discretion of the Bank of Slovenia, provided that they sign the relevant legal documentation with the agent.
  • Transactions can take place against non-cash or cash collateral. Margins/haircuts are applied, according to market practice.
  • A spread fee of at least 5 basis points will be charged for securities lending against non-cash collateral. The pricing for PSPP securities lending against cash consists of a maximum repo rate equal to the deposit facility rate minus 20 basis points.
  • The following lending terms are available: open basis, maturities of up to one week and a maturity of three months, in the latter two cases with the possibility of applying roll-overs.
  • Lending limits are applied at discretion of the Bank of Slovenia in respect of the share of individual ISIN lent to a single counterparty, amount of lending to a counterparty, total amount of lending and the maximum amount of each transaction. In addition, the total amount of lending for three months and a total value cash collateral are also limited.
  • The eligible collateral consists of senior unsecured, non-convertible, non-structured debt securities, rated min. BBB-/Baa3, issued by central governments, agencies, supranational institutions or by financial or non-financial enterprises based in the euro area (however, some non-euro area issuers are also eligible), fitting into the Bank of Slovenia's risk management framework.

Market participants can contact the Bank of Slovenia for further information at BS_PSPP_securities_lending@bsi.si or the Agency Securities Lending desk of Deutsche Bank AG at bsi.pspp@list.db.com or by phone at +44 20 7545 1233.

The Bank of Slovenia participates also in Euroclear Bank SA/NV's Securities Lending and Borrowing Programme (SLB) for purposes of mitigating settlement fails. The terms and conditions of the programme are the standard conditions defined by Euroclear SA/NV.

A list of PSPP and PEPP bonds available for lending is publicly available.

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