European Central Bank Vice President Vitor Constancio said 1 trillion euros of asset-backed securities and covered bonds are eligible for the institution’s purchase program.
“The overall purchasable amount of ABS and covered bonds is sufficient to ensure that asset purchases can be carried out on a large scale,” Constancio said in Frankfurt on Wednesday.
“We are, of course, aware that the amounts that we will be able to buy will be lower than the theoretical amount.”
The euro-area recovery is still “weak and fragile,” with the prolonged period of low inflation raising “serious concerns,” Constancio added.
“Central banks simply cannot run the risk of observing inflation expectations starting to become unanchored, given the challenges in controlling them ex-post.”
While Greek and Cypriot securities will not be excluded from the purchase program despite their rating below investment grade, “risk mitigation measures, such as demanding overcollateralization and considerably limiting the amount of each issue that can be bought” will be put in place, Constancio said.
“We are definitely not intending to buy junk securities with a high risk of default,” he said.