Consolidated opening financial statement of the European System of Central Banks (Eurosystem) as at 1 January 1999
According to Article 15.2 of the Statute of the ESCB, a consolidated financial statement of the ESCB shall be published each week. The Governing Council of the European Central Bank (ECB) has decided that the reporting day for this weekly financial statement shall be Friday, and that publication will take place on the following Tuesday. The first weekly financial statement of the ESCB in the composition of the Eurosystem (comprising the ECB and the national central banks of the 11 EU Member States participating in Stage Three of EMU from the start) will therefore be drawn up for the reporting date 8 January 1999[1]
The weekly financial statement contains the assets and liabilities held by the Eurosystem vis-à-vis third parties as they arise in the accounts of the 11 euro area national central banks (NCBs) and the ECB. An overview of the definitions of the individual items is annexed to this press release. It should be noted that claims and liabilities between the NCBs and the ECB (intra-Eurosystem claims and liabilities) will cancel each other out and are therefore not shown. Furthermore, the financial statement excludes the assets and liabilities of the EU NCBs whose Member States are not participating in the euro area.
The purpose of the weekly financial statement of the Eurosystem is to provide a source of information especially on monetary policy operations and on changes in foreign reserves. The weekly financial statements will therefore be accompanied by an explanatory note providing information on the Eurosystem's monetary policy and foreign exchange operations with counterparties.
The data contained in the weekly financial statement refer to fixed reporting days (namely Fridays) and may therefore be distorted by random incidents. In addition, the weekly changes are to a considerable extent the result of typical recurrent fluctuations within a year and especially within a month. Therefore no immediate conclusions should be drawn from the weekly financial statement concerning medium or longer-term monetary tendencies. For such assessment, additional complementary statistics and analysis are necessary, which are published, for example, in the Monthly Bulletin of the ECB.
According to the opening financial statement of the Eurosystem on 1 January 1999, the most important single item on the asset side of the Eurosystem's balance sheet was external assets. The net position in foreign currency (asset items 2 and 3 minus liability items 6, 7 and 8) amounted to EUR 227.4 billion, whereby assets of EUR 237.0 billion were opposed to liabilities of EUR 9.6 billion. These figures refer to non-euro area currencies, since euro area currency denominated foreign exchange positions held on 31 December 1998 were transformed automatically into domestic positions through the transition to Stage Three (and are displayed, for example, under asset item 6). In addition, the stock of gold (asset item 1) of the Eurosystem amounted to EUR 99.6 billion.
The lending of the Eurosystem to financial sector counterparties of the euro area (asset item 5) includes, in the opening balance sheet, liquidity-providing monetary policy operations initiated by participating NCBs in Stage Two that continue into Stage Three. These operations will progressively mature within the following weeks and will then quickly be replaced by the Eurosystem's liquidity providing monetary policy operations. Even though the operations inherited from Stage Two did not correspond exactly to the types of operations foreseen for the Eurosystem, they were sufficiently similar in most cases to permit assignment to the individual sub-items of asset item 5 of the Eurosystem's balance sheet. Only the liquidity-providing operations which had no similarity with any of the Eurosystem's types of monetary policy operations were assigned to the asset item 5.7 (other lending).
The liquidity-providing monetary policy operations overlapping from Stage Two are included within asset item 5 and amount to EUR 185.1 billion. Operations similar to the Eurosystem's main refinancing operations (asset item 5.1) amounted to EUR 144.9 billion, being composed of operations conducted by Nationale Bank van België/Banque Nationale de Belgique (EUR 4.6 billion), the Banco d'España (EUR 23.1 billion), the Deutsche Bundesbank (EUR 83.1 billion), the Banque de France (EUR 19.8 billion), the Central Bank of Ireland (EUR 1.8 billion), the Banca d'Italia (EUR 2.1 billion), De Nederlandsche Bank (EUR 8.5 billion), the Oesterreichische Nationalbank (EUR 0.7 billion) and Banco de Portugal (EUR 1.2 billion). Operations with similarities to longer-term operations (asset item 5.2) amounted to EUR 24.7 billion, all of which was contributed by the Deutsche Bundesbank (through its discount credit instrument). A volume of EUR 6.7 billion of fine-tuning reverse operations (asset item 5.3) was outstanding, composed of EUR 5.7 billion contributed by the Banque de France, EUR 0.4 billion contributed by the Central Bank of Ireland, and EUR 0.6 billion contributed by Suomen Pankki. Finally, lending facilities of NCBs which have a character similar to the Eurosystem's marginal lending facility were used by counterparties at end-1998 with a volume of EUR 6.4 billion. The small amount of credits related to marginal calls (asset item 5.6) of EUR 0.03 billion was contributed by the Banco d'España. Finally, a volume of EUR 2.4 billion was assigned to other lending (asset item 5.7). Partly related to previous monetary policy operations are also holdings of marketable securities issued by euro area residents and denominated in euro (asset item 6) which amounted to EUR 21.6 billion.
On the liabilities side the stock of banknotes in circulation (liability item 1) amounted to EUR 341.7 billion. This item is expected to decline in the following weeks reflecting the usual seasonal pattern. The following balance sheet items display relevant amounts of liquidity-absorbing monetary policy operations which overlap from Stage Two into Stage Three: use of deposit facilities (item 2.2, EUR 1.0 billion); fixed term deposits (item 2.3, EUR 1.9 billion); debt certificates issued (item 3, EUR 13.8 billion). The debt certificates stem from the Banco d'España (EUR 6.3 billion), the Banco de Portugal (EUR 6.7 billion) and Suomen Pankki (EUR 0.8 billion). While the latter amount will mature in the following days, the former two will mature gradually only in the course of the coming years.
The current account holdings of euro area financial sector counterparties with the Eurosystem (liability item 2.1), which amounted to EUR 84.4 billion at the start of Stage Three, consist almost entirely of holdings which related to the fulfilment of minimum reserves in 1998. These holdings will also contribute to the fulfilment by individual credit institutions of minimum reserves in the first maintenance period of Stage Three, which started on 1 January 1999 and will end on 23 February 1999. The Eurosystem's minimum reserve system includes averaging provisions, implying that credit institutions have to comply with the reserve requirement on average over this maintenance period. The exact reserve requirements in this first maintenance period are yet unknown to the Eurosystem. They will be calculated on the basis of the opening balance sheets of credit institutions as at 1 January 1999, data for which will only become available on a consolidated basis in early February 1999. At the present juncture, the Eurosystem estimates the reserve requirement in this maintenance period to be around EUR 100 billion. This estimate is based on November 1998 monetary data, taking into account seasonal factors.
Among the other balance sheet items general government debt (asset item 7) which reflects the outstanding remainder of lending to general government contracted before 1 January 1994, when Article 104 of the Treaty establishing the European Union introduced a ban on central bank lending to the public sector) amounted to EUR 60.1 billion and the liabilities to general government (liability item 4.1) to EUR 58.6 billion, resulting in a small net asset position towards governments of EUR 1.5 billion. Net liabilities to non-euro-area residents denominated in euro amounted to EUR 1.1 billion (asset item 4: EUR 8.9 billion; liability item 5: EUR 10.0 billion). The revaluation accounts amounted to EUR 59.9 billion and capital and reserves (liability item 11) to EUR 52.6 billion. Other assets of the Eurosystem (asset item 8) amounted to EUR 84.7 billion, and other liabilities (liability item 9) to EUR 60.7 billion.
The accompanying Annex provides general information on the structure, accounting conventions and content of the Eurosystem's consolidated weekly statements.
ANNEX
Background information on the structure, accounting conventions and content of the consolidated weekly financial statement of the European System of Central Banks (Eurosystem)
Structure of the consolidated weekly financial statement
The consolidated weekly financial statement of the European System of Central Banks (Eurosystem)[2] distinguishes between euro area residents and non-euro area residents; the distinction is made according to the statistical rules of the European Union and of the International Monetary Fund. Further distinctions are made between foreign currency-denominated and euro-denominated items; the latter include the national denominations of the euro.
Within the euro area, financial sector counterparties, general government and other euro area residents can be distinguished. A detailed breakdown is provided of the various transactions conducted with financial sector counterparties. This structure differs from the usual balance sheet structures of credit institutions and has been chosen to support the analysis of liquidity developments within the euro area from an economic point of view.
The consolidated weekly financial statement shows balances as at close of business on the reporting day together with changes compared with the previous week. All figures are expressed in millions of euro.
Accounting conventions
The consolidated weekly financial statement shows all assets and liabilities of the European Central Bank (ECB) and of the euro area national central banks (NCBs), including all their branches. It does not contain investments in subsidiaries or companies in which the euro area NCBs hold participating interests.
The consolidated opening financial statement of the Eurosystem reflects the initial valuation of the assets and liabilities of the Eurosystem. According to the harmonised accounting rules for the Eurosystem, gold, foreign exchange, security holdings and financial instruments of the Eurosystem will be revalued at market rates and prices at the end of each quarter. The revaluation will take place on an item-by-item basis for securities, interest rate swaps, futures, forward rate agreements and other interest rate instruments. Foreign exchange holdings (including special drawing rights) will be revalued on a currency-by-currency basis. The net effect of the quarterly revaluation will be shown separately for each balance sheet item in the first consolidated weekly financial statement of the Eurosystem after quarter-end. During the quarter, all transactions conducted by the Eurosystem will be recorded and booked at transaction rates and prices. The quarterly revaluation is intended to eliminate potential effects resulting from fluctuations in foreign exchange rates, gold and security prices which influence the size of the respective balance sheet items over time.
Unrealised gains arising from the quarterly revaluation will not be recognised as income, but will be credited to a revaluation account. Unrealised losses will be taken to the profit and loss account at the end of the year if they exceed previous revaluation gains registered in the revaluation accounts on the liabilities side. Such losses may only be reversed on subsequent realisation of the asset or liability in question and not against any future unrealised gains. These principles combine transparency with the prudent recognition of income. During the year, unrealised losses will not have an impact on the profit of the Eurosystem. Unrealised losses resulting from the revaluation of a given security, or a foreign currency or holding of gold are not netted against unrealised gains in other securities or currencies.
Pursuant to Article 26.4 of the Statute of the ESCB, the Governing Council of the ECB has approved an ECB Guideline which contains all substantive rules for the accounting and financial reporting of the Eurosystem. Application of these accounting principles is mandatory for all items material to the operations of the Eurosystem. A copy of this Guideline is available from the ECB on request.
Content of the consolidated weekly financial statement
Assets
- The item gold and gold receivables forms part of the foreign reserves of the Eurosystem. It consists of physical gold and non-physical gold in the form of gold deposit accounts.
- Claims on non-euro area residents denominated in foreign currency represent the main foreign exchange reserve assets of the Eurosystem. Receivables from the IMF consist of drawing rights within the reserve tranche (net, i.e. national quota minus balances in euro at the disposal of the IMF), special drawing rights and other claims such as the General Arrangements to Borrow (GAB), loans under special borrowing arrangements or deposits within the framework of the Enhanced Structural Adjustment Facility (ESAF). (A related balance sheet item is the liabilities item counterpart of special drawing rights allocated by the IMF, which shows the amount of special drawing rights that was originally allocated free of charge to the respective country/NCB on condition that the special drawing rights would have to be paid back under specific circumstances.) The sub-item balances with banks and security investments, external loans and other external assets consists of foreign currency assets other than gold and SDR holdings with non-euro area residents. This sub-item contains, inter alia, investments in notes and bonds, bills, money market paper and cash deposits.
- Claims on euro area residents denominated in foreign currency include foreign currency assets held with euro area residents, such as investments in notes and bonds, bills, money market paper and deposits.
- The item claims on non-euro area residents denominated in euro shows two sub-items. The sub-item balances with banks, security investments and loans contains current accounts, fixed-term deposits, day-to-day money, securities and loans. Under claims arising from the credit facility under the ERM II, the Eurosystem would show claims arising from intervention in the context of the new exchange rate mechanism. The counterpart of this balance sheet position is shown on the liabilities side of the balance sheet under liabilities arising from the credit facility under the ERM II.
- Lending to financial sector counterparties of euro area is broken down into seven positions and mainly reflects the liquidity-providing monetary policy instruments used by the Eurosystem. In the consolidated opening balance sheet of the Eurosystem this item shows the results of the monetary policy operations conducted by euro area NCBs in Stage Two which will mature in the first weeks of Stage Three. Main refinancing operations and longer-term refinancing operations are regular liquidity-providing open market operations executed by the Eurosystem in the form of reverse transactions. The former are conducted through weekly standard tenders and have a maturity of two weeks. The latter are executed through monthly standard tenders and have a maturity of three months. Fine-tuning reverse operations are irregular open market operations executed by the Eurosystem mainly in order to deal with unexpected liquidity fluctuations in the market. Structural reverse operations are liquidity-providing open market operations executed by the Eurosystem mainly with the aim of adjusting the structural liquidity position of the financial sector vis-à-vis the Eurosystem. The marginal lending facility is a standing facility of the Eurosystem which counterparties may use to obtain overnight liquidity at the pre-specified interest rate. Credits related to margin calls may arise from value increases in underlying assets regarding other credit to counterparties. In such cases, central banks may return excess cash to the counterparty. The sub-item other lending includes current accounts, short-term investments and assets resulting from the transformation of the former foreign currency reserves of the euro area. Any other claims stemming from monetary policy operations initiated by the euro area NCBs during Stage Two that do not correspond to the items described previously will be shown under this heading.
- The position securities of euro area residents denominated in euro contains certain categories of marketable securities, which may potentially be used for monetary policy operations.
- General government debt denominated in euro shows outstanding non-marketable claims on euro area governments stemming from before 1 January 1994, from which date onwards EU NCBs could no longer provide credit facilities to governments or make direct purchases of debt instruments from governments. This debt will have to be redeemed by governments in due course.
- The position other assets is a collective item including, in particular, items in the course of settlement (settlement account balances, for example the float of cheques in collection), coins of euro area Member States and other financial assets (e.g. equity shares, participating interests, investment portfolios related to central banks' own funds, pension funds and severance schemes or securities held due to statutory requirements). This item also contains tangible and intangible fixed assets, revaluation differences on off-balance-sheet instruments as well as accruals and deferred expenditure.
Liabilities
- The banknotes in circulation figure represents the value of all banknotes issued by the Eurosystem. Until 2002, when euro banknotes will be issued for the first time, the position will show only banknotes denominated in the former national currencies of the euro area Member States.
- Liabilities to euro area financial sector counterparties denominated in euro are broken down into five sub-items. The sub-item current accounts (covering the minimum reserve system) shows the euro accounts of financial sector counterparties that have access to monetary policy operations of the Eurosystem, including their accounts used to hold minimum reserves according to the framework of the minimum reserve system of the Eurosystem. The deposit facility is a standing facility of the Eurosystem which counterparties may use to hold overnight deposits remunerated at the pre-specified interest rate. (This sub-item has to be seen in connection with the assets sub-item marginal lending facility. While the former instrument may be used for the short-term investment of excess liquidity, the latter instrument may serve to cover short-term liquidity shortages.) The fixed-term deposits are an instrument used by the Eurosystem for absorbing liquidity. Fine-tuning reverse operations are irregular open market operations executed by the Eurosystem mainly in order to absorb unexpected liquidity inflows to the market. Deposits related to margin calls may arise from value decreases in underlying assets provided against credit to counterparties. The Eurosystem may in this case require counterparties to supply additional cash or assets. Equivalents to the latter two balance sheet sub-items are shown on the assets side, namely the sub-item of the same name, fine-tuning reverse operations (see asset item 5.3 above), and the sub-item credits related to margin calls (see asset item 5.6 above).
- Debt certificates issued are discount paper, which could be issued on an ad hoc basis with the aim of absorbing liquidity. The initial balance reflects paper issued by euro area NCBs during Stage Two. In future, such debt certificates, if any, will be issued by the ECB through euro area NCBs, with a maturity of less than twelve months.
- For liabilities to other euro area residents denominated in euro a breakdown is provided between liabilities to general government and other liabilities.
- Liabilities to non-euro area residents denominated in euro consist of current accounts and deposits with the Eurosystem held by central banks, other banks, international/supranational institutions and other non-euro area depositors. The balances of the TARGET accounts of non-euro area NCBs are also shown under this item.
- Liabilities to euro area residents denominated in foreign currency are shown in a separate balance sheet item without a sectoral split (cf. point 4 above).
- Liabilities to non-euro area residents denominated in foreign currency consist of deposits, balances and other liabilities, and liabilities arising from the credit facility under the ERM II (see asset item 4 above).
- Counterpart of special drawing rights allocated by the IMF - (see asset item 2 above).
- The position other liabilities is a collective item including items in the course of settlement (settlement account balances, for example the float of giro transfers), the revaluation differences on off-balance-sheet instruments, accruals and deferred income. This position also includes provisions (for pensions, for exchange and price risks and for other purposes), current income (net accumulated profit) and the profit of the previous year (before distribution).
- In the item revaluation accounts, unrealised gains related to price movements and foreign exchange rate movements are disclosed, for reasons of substance and transparency. This item also includes the unrealised gains of euro area NCBs that have arisen due to the change from national accounting rules to harmonised accounting rules for the Eurosystem.
- The item capital and reserves consists of paid-up capital, legal reserves and other reserves.