In contrast to the Fed, the ECB normally does not buy bonds outright. The normal procedure used by the ECB for manipulating the money supply has been via the so-called refinancing facilities. In these facilities, bonds are not purchased but used in reverse transactions: repurchase agreements, or collateralised loans. These two transactions are similar, i.e. bonds are used as collaterals for loans, the difference being of legal nature. In the repos the ownership of the collateral changes to the ECB until the loan is repaid. COUNT 4
QSN1 Who retains ownership of the collateral until the debt is paid? ANS1 ECB QSN2 Since the ECB doesn't buy bonds outright, how are they used? ANS2 refinancing facilities QSN3 What is the manner in which bonds are used at refinancing facilities? ANS3 repurchase agreements, or collateralised loans QSN4 Who buys the bonds instead of using them in reverse transactions? ANS4 the Fed