06 July 2017
Madrid
Reporter: Drew Nicol

Spain taps Deutsche Bank for PSPP lending programme


Banco de España, the Spanish central bank, has chosen Deutsche Bank to manage its securities lending programme, which begins this month.

The programme will make the securities that Spain’s central bank purchased under its public sector purchase programme (PSPP) available to borrow in order to replenish EU market liquidity.

Banco de España has opened itself up to lending through repo and reverse repo against cash as collateral with primary dealers of euro area bonds and at other institutions with "an important role for market liquidity".

Cash and sovereign bond collateral will carry a 4 percent haircut.

The fee is the difference between the repo rate and the reverse repo rate.

The interest rate to borrow securities against securities as collateral will either be a fixed minimum fee of 10 basis points (bps), or a fee based on prevailing market rates, whichever is higher.

The interest rate to borrow securities against cash as collateral will either be the rate of the deposit facility minus 30 bps or the prevailing market repo rate, whichever is lower.

Transactions have an open term and will be recalled at the latest for value 90 calendar days following the start of the loan.

Regarding borrow limits, an individual counterparty may borrow up to 2.5 percent of the amount outstanding of a single issue, with a maximum of €200 million for any such issue.

Transactions should be split into tickets with a maximum nominal size of €50 million.

Banco de España will also set limits for each individual counterparty for the overall borrowing volume and the borrowing volume against cash collateral.

Transactions will be settled either on the same day or on the following business day or two business days later.

Iberclear and Euroclear have taken on responsibility for providing a facility for fails mitigation lending.

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