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 € 4 bn at the end of 2023.
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), which was established in 2020 in the wake of the coronavirus pandemic, has also been used to finance measures to mitigate the consequences of the energy crisis. The Stabilisation Fund Act (StFG) was extended for this purpose and provided for a loan authorisation for 2022 to provide the ESF with an additional € 200 bn in earmarked funds (Section 26b StFG).
This was done by issuing an additional bond from the federal government ("additional issues / BZE") in the amount of the difference from the authorisation framework of € 200 bn less the expenditure already financed. The additional issue was transferred directly to the portfolio of the Economic Stabilisation Fund (ESF) and was not sold on the market or used for repo transactions.
Characteristics of the Supplementary Federal note
In 2023, the additional issue transferred to the ESF in 2022 was then repaid in line with actual expenditure. This was done via regular deletions during the year in the amount of the funds drawn down. On 19 December 2023, the additional bond issued on 28 December 2022 with a volume of € 136,935,607,513.70 was fully deleted.