Sovereign Bond Purchases and Risk Sharing Arrangements: Implications for Euro Area Monetary Policy

The European Central Bank's asset purchases program is well designed and calibrated for the characteristics of the euro area bond market and is likely to generate profits. The risk sharing and accounting arrangements and the ECB loss absorption capabilities look adequate for the potential risks of the program. Should losses materialize, a prompt recapitalization by member governments would maintain the credibility of monetary policy and the independence of the ECB.