Securities lending for central banks

Clearstream’s Global Liquidity Hub is increasingly the channel of choice for central banks to inject liquidity into the market. Central banks can benefit from a comprehensive suite of fails lending (ASL) and strategic securities lending services (ASLplus).

A liquidity management tool

Whereas central banks usually resort to securities lending to meet their monetary policy objectives, securities lending is gaining importance as a quantitative easing tool. The European Central Bank (ECB) implemented an unprecedented quantitative easing programme, the so-called Public Sector Purchasing Programme (PSPP), in March 2015 to reduce the risk of deflation.

During a period of at least 18 months, the respective national central banks are buying back securities worth EUR 60 billion monthly. Over 90% of the securities will be purchased by Eurozone national central banks in the form of domestic bonds issued by their respective local governments and recognised agencies.

PSPP lending

To avoid the creation of a collateral shortage through this significant withdrawal of high-quality liquid assets (HQLA) from the market, the ECB actively encourages Eurozone national central banks to reinject the securities into the market via securities lending. The central banks can benefit from Clearstream’s fails lending service ASL and the unique strategic securities lending service ASLplus under the Global Liquidity Hub to meet this request.

A growing number of central bank lenders

Central banks worldwide have been using Clearstream’s ASLplus service to lend their foreign reserves since 2006 – 10 of the top 13 lenders in ASLplus are central banks. The Global Liquidity Hub has become an even more attractive tool for central banks to increase liquidity in capital markets under the quantitative easing programme. For example, Deutsche Bundesbank and the Banca d’Italia make securities purchased under the PSPP available for lending via Clearstream.