Promissory notes ("Schuldscheine") are taken out in response to demand from financial institutions, insurance companies and other institutional investors if this form of borrowing offers a financing advantage for the Federal Government. However, borrowing via promissory notes has been modest in recent years, falling sharply from € 73 bn of overall borrowing between the start of the millennium and 2010 to around € 12 bn and since then decreased slightly to a level of little more than € 5 bn at the end of 2022.
Promissory notes are eligible as collateral for Eurosystem credit operations (ECB eligible assets). In order to ensure that all outstanding promissory notes maintain their ECB eligibility after the guideline (EU) 2016/2298 of the ECB will take effect, the Federal Republic of Germany waived its rights to offset claims against the Deutsche Bundesbank in connection with the promissory notes. In addition, the contractual terms for any future promissory notes have been modified as well in order to make sure that the criteria for ECB eligibility are met.
Supplementary Federal notes
Since November 2022, the Economic Stabilisation Fund (ESF) set up in 2020 in the wake of the Corona pandemic has also been used to finance measures to mitigate the impact of the energy crisis. The Stabilisation Fund Act (StFG) has been extended for this purpose and provides for a debt authorisation of € 200 bn for 2022 to finance these measures for a specific purpose (section 26b in conjunction with section 26a StFG).
This will be done through additional borrowings by the Federal government ("additional issues / BZE") in the amount of the difference from the € 200 bn authorisation less the expenses already financed. The additional issues are transferred directly to the portfolio of the Economic Stabilisation Fund (ESF) and are not sold on the market or used for repo transactions.
The first supplementary issue by the Federal government was issued on 28 December 2022.
Characteristics of the Supplementary Federal note
In subsequent years 2023 and 2024, the additional issue added to the ESF in 2022 will be gradually reduced in line with actual expenses. This is done via regular deletions during the year in the amount of the funds drawn down.
At the same time as the maturity, a new issue (value date) is made at the end of the year for follow-up financing with a then suitable volume and a term of one year.
Expenditures for measures pursuant to section 26a StFG are possible for a limited period until 30 June 2024.