Chart of the Week
To invest their excess liquidity (customer deposits) and maintain their Net Interest Income (NII), commercial banks in the Eurozone have significantly increased their bond purchases in financial markets since 2021.
OUR ANALYSIS
It’s interesting to note that while commercial banks’ bond purchases have increased, the ECB’s asset purchases have gradually come to a halt at the same time.
Starting in 2015, the ECB launched several asset purchase programs (mainly Sovereign debt), with the most recent being the PEPP initiated during the COVID-19 crisis. In 2021, the ECB’s purchases still amounted to nearly €100 billion per month. In 2022, the ECB started to phase out its net asset purchases, although it continued to reinvest the amounts repaid. Since January 1, 2025, the ECB has ceased all interventions and is now allowing the bonds to mature without reinvestment.
This marks a shift from a long period of Quantitative Easing (purchasing securities in the markets) to a phase of Quantitative Tightening (reducing the size of its balance sheet).
Consequently, commercial banks’ investments absorb a significant portion of the bonds available in the markets. Since early 2025, the amounts invested by commercial banks have even surpassed the €100 billion net per month threshold, mirroring the most active periods of the ECB’s quantitative easing.
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Written on 20 june 2025. Opinions subject to change.
See also: Ireland, a source of economic volatility for the Eurozone
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