Transmission Protection Instrument | Mirage News

The Board of Governors today approved the Transport Protection Instrument (TPI). The Governing Council considered that the establishment of the TPI was necessary to support the effective transmission of monetary policy. In particular, as the Governing Council pursues the normalization of monetary policy, the TPI will ensure that the monetary policy stance is transmitted smoothly across all euro area countries. The single monetary policy of the Governing Council is a prerequisite for the ECB to be able to fulfill its price stability mandate.

The TPI will complement our toolbox and can be activated to counter unwarranted and disorderly market dynamics that seriously threaten the transmission of monetary policy in the Eurozone. By preserving the transmission mechanism, the TPI will enable the Governing Council to fulfill its price stability mandate more effectively.

Subject to compliance with the established criteria, the Eurosystem may make purchases on the secondary market of securities issued in jurisdictions experiencing a deterioration in funding conditions not justified by the fundamentals specific to each country, in order to counter the risks weighing on the transmission mechanism to the extent necessary. The extent of TPI purchases would depend on the severity of monetary policy transmission risks. Purchases are not limited ex ante.

Purchase Settings

TPI purchases would be focused on public sector securities (marketable debt securities issued by central and regional governments as well as agencies, as defined by the ECB) with a residual maturity of between one and ten years. Purchases of private sector securities could be considered, if necessary.


The Governing Council will review a cumulative list of criteria to assess whether the jurisdictions in which the Eurosystem can make purchases under the TPI pursue sound and sustainable fiscal and macroeconomic policies. These criteria will contribute to the decision-making of the Board of Governors and will be dynamically adjusted according to the risks and current conditions to be addressed.

In particular, the criteria include: (1) compliance with the EU fiscal framework: not being subject to an excessive deficit procedure (EDP) or not being assessed as not having taken effective measures in response to a recommendation from the Council of the EU under Article 126(7) of the Treaty on the Functioning of the European Union (TFEU); (2) absence of serious macroeconomic imbalances: not being subject to an excessive imbalance procedure (EIP) or not being assessed as not having taken the recommended corrective action linked to a recommendation of the Council of the EU under Article 121(4) TFEU; (3) fiscal sustainability: to determine whether the public debt trajectory is sustainable, the Governing Council will take into account, where appropriate, debt sustainability analyzes carried out by the European Commission, the European Stability Mechanism, the international monetary and other institutions, as well as internal ECB analysis; (4) sound and sustainable macroeconomic policies: comply with the commitments submitted in the Recovery and Resilience Plans for the Recovery and Resilience Facility and the country-specific recommendations of the European Commission in the budgetary area within the framework of the Semester European.


A decision by the Board of Governors to activate the TPI will be based on a comprehensive assessment of market and transmission indicators, an assessment of the eligibility criteria and a judgment that the activation of purchases under the TPI is proportionate to the achievement of the primary objective of the ECB.

The purchases would be terminated either in the event of a sustained improvement in transmission or based on an assessment that the continuing tensions are due to the fundamentals of the country.

Treatment of creditors

The Eurosystem accepts the same treatment (pari passu) as private or other creditors with respect to bonds issued by euro area governments and purchased by the Eurosystem under the TPI, in accordance with the terms of such bonds.

Relationship to monetary policy stance

To avoid potential interference with the appropriate monetary policy stance, in the event of TPI activation, the Governing Council will consider the implications of TPI purchases for the size of the overall portfolio of monetary policy debt securities. of the Eurosystem and the amount of excess liquidity. Purchases under the TPI would be carried out in such a way as not to have a persistent impact on the overall balance sheet of the Eurosystem and hence on the stance of monetary policy.

PEPP reinvestment flexibility

The reinvestment flexibility of the PEPP will continue to be the first line of defense to counter the risks on the transmission mechanism linked to the pandemic.

Outright Money Transactions (OMT)

The OMT is part of the Eurosystem’s toolbox. The Board of Governors reserves the discretion to perform OMT for countries that meet the criteria required for OMT.

/Public release. This material from the original organization/authors may be ad hoc in nature, edited for clarity, style and length. The views and opinions expressed are those of the author or authors. See in full here.

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