Central Banks

Europe’s Back-Door Bond-Buying

bdf picture-alliance
France's central bank has quietly bought  a massive amout of bonds.
  • Why it matters

    Why it matters

    The revelation of large-scale bond-buying by national central banks – before quantitative easing was launched – could undermine confidence in the central banking system governing the 19-nation euro zone.

  • Facts


    • Since 2006, the combined securities portfolios of Europe’s national banks jumped from €200 billion to about €575 billion at the end of 2014 through transactions that were not made public, claims a finance expert in Berlin.
    • The Bank of France has been the biggest buyer, accounting for €170 billion, while Germany’s central bank, the Bundesbank, is at the other end of the spectrum.
    • The Agreement on Net Financial Assets between the ECB and national central banks regulates securities transactions, but its contents are kept secret from the public.
  • Audio


  • Pdf

They are doing it on a grand scale and they are doing it in secret – or at least they were.

National central banks within the euro-zone have been gobbling up securities and pumping hundreds of billions of euros into markets in recent years in transactions that were separate from official European Central Bank channels.

But now that secret is out, thanks in large part to a recently published dissertation from a finance expert in Berlin, Daniel Hoffmann, who revealed details of the clandestine bond-buying.

The news has triggered suspicions that the European Central Bank has been tacitly approving the opaque financing measures. National central banks from the 19-nation euro zone are typically charged with carrying out decisions of the Frankfurt-based central bank, which dictates monetary policy for the entire currency bloc.

Details of Mr. Hoffman’s dissertation emerged over the past week, showing a drastic rise in securities transactions by national central banks, without public knowledge, since the onset of the European debt crisis.

The research shows that since 2006, the combined securities portfolios of Europe’s national banks jumped from €200 billion, or $220 billion, to about €575 billion by the end of 2014.

These purchases were carried out well before the ECB in January of this year agreed a massive bond-buying plan, which was launched in March. Since then, bond buying has been official policy: The ECB has directed national central banks to buy about €60 billion in assets per month until at least March 2017.

Want to keep reading?

Subscribe now or log in to read our coverage of Europe’s leading economy.