The effects of the Eurosystem’s corporate sector purchase programme on Spanish companies

In March 2016, the ECB announced the extension of the asset purchase programme (APP) to investment-grade bonds issued by non-financial corporations established in the euro area. Following the announcement of this new programme (known as the CSPP), there was a significant fall in the interest rates on bonds issued by Spanish companies eligible for purchase by the Eurosystem, which also extended to those on lower-rated securities, through the usual rebalancing of investment portfolios. At the same time, a significant increase was seen in bond issuance, as a result of which Spanish bond issuers (usually large corporations) reduced their demand for bank credit. Resident banks responded by shifting their credit offering towards other firms that do not have the same ability to issue bonds and that tend to be smaller in size. The analysis presented in this article reveals that for each euro reduction in the outstanding debt of large companies with Spanish banks during the three months after the announcement of the programme, some 78 cents were diverted to other non-issuing firms, including SMEs. These firms, in turn, increased their levels of real investment significantly.