Tuesday, November 26, 2013

ECB - A first assessment of the ECB's management of foreign reserve assets

I Current management OF foreign reserve assets at the ECB
I.1 Amount involved

"At the beginning of 1999, the NCBs participating in the euro area transferred foreign reserves worth approximately EUR 40 billion to the ECB. These foreign reserves are now owned by the ECB and appear on its balance sheet.

More specifically, Article 30.1 of the Statute of the European System of Central Banks and of the European Central Bank provides for transfer from the NCBs to the ECB of foreign reserve assets up to an amount equivalent to EUR 50 billion; in addition, it is envisaged that the conditions and the limits permitting the ECB to make further calls on the NCBs’ foreign reserve assets will be defined in secondary legislation of the European Community. The ECB has put forward a Recommendation in this respect, which is currently being examined.

With regard to the initial transfer of the foreign reserves, the Governing Council decided that it should take place at the very beginning of 1999; the Governing Council also decided that the initial transfer would be for the permitted maximum amount of EUR 50 billion, adjusted downwards by deducting the shares in the ECB’s capital subscription key of those EU central banks that did not participate in the euro area from the outset. The transfer was therefore equal to 78.91% of EUR 50 billion, i.e. approximately EUR 39.46 billion. Fifteen percent of this transfer was effected in gold and 85% in the major foreign currencies, i.e. US dollars and Japanese yen.


Foreign reserves represent a very large share of the asset side of the ECB’s balance sheet. The ECB’s foreign reserves have increased since the initial transfer in euro, primarily as a result of revaluations, but they also reflect the accrual of income from reserve management operations."
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I.3 Passive management
The currency distribution, i.e. the shares in the ECB’s foreign reserves in the different currencies, expressed as percentages, is kept stable. That currency distribution is defined by the Governing Council of the ECB. While the Governing Council might decide to change the currency distribution if deemed appropriate, there is no active management of the currency distribution in order to avoid any interference with the single monetary policy.

In accordance with the Agreement of 26 September 1999, signed by many of the EU central banks, including the Eurosystem, the ECB (and the entire Eurosystem) will not increase its gold leasing operations and its use of gold futures and options.


Source: http://www.ecu-activities.be/documents/publications/publication/2000_1/rueff.html

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