As these securities are backed by loans to firms and households, the price increase encourages banks to issue more loans so that they can be used to issue more asset-backed securities and covered bonds. This increase in loan issuance also fosters competition and lowers borrowing costs for firms and households.
At the beginning of 2015, the inflation outlook had deteriorated and there was an increasing risk of a too prolonged period of low inflation. As a result, in January 2015 the Governing Council announced the expanded asset purchase programme (APP), which encompassed the CBPP3 and the ABSPP as well as the introduction of a public sector purchase programme (PSPP).