Minimum reserves

 

SUMMARY OF:

Council Regulation (EC) No 2531/98 — application of minimum reserves by the European Central Bank

Regulation (EC) No 1745/2003 of the European Central Bank on the application of minimum reserves

WHAT IS THE AIM OF THE REGULATIONS?

KEY POINTS

Institutions subject to minimum reserve requirements

Maintenance periods

Averaging provision

An institution complies with its reserve requirement if, over the maintenance period, the average daily balances on its reserve account are not less than its reserve requirement. This means that the institution’s capital may fluctuate freely around its reserve requirement, but the average assets of the current account must be at least equal to the reserve requirement over the entire maintenance period.

Calculation of minimum reserves

To determine the amount of the minimum reserves of each institution, its reserve base is multiplied by a reserve ratio. Institutions can deduct a uniform lump-sum allowance of the amount of €100,000 from their reserve requirement.

Reserve base

The reserve base is defined in relation to the institution’s balance sheet before the start of the maintenance period. It is composed of different categories of the institution’s liabilities, e.g. deposits and debt securities.

Reserve ratio

The ECB defines the reserve ratios that apply to the relevant liabilities in the reserve base. It may set reserve ratios between 0 % and 10 %. There may be different reserve ratios for specific liability categories (e.g. deposits with agreed maturity over 2 years or deposits redeemable at notice over 2 years). In January 2012, the reserve ratio that applies to most of the short-term liabilities on the institutions’ balance sheet was set at 1 %.

Remuneration

To ensure that the minimum reserve requirement is not burdensome and does not hinder the efficient allocation of resources, the national central banks in the euro area pay interest to the institutions on the capital of their minimum reserves.

Exemption

An institution may be exempted from meeting the minimum reserve requirements if:

Collection and verification of information

Sanctions

The ECB may impose sanctions on an institution that fails to hold all or part of its required minimum reserves.

FROM WHEN DO THE REGULATIONS APPLY?

BACKGROUND

MAIN DOCUMENTS

Council Regulation (EC) No 2531/98 of 23 November 1998 concerning the application of minimum reserves by the European Central Bank (OJ L 318, 27.11.1998, pp. 1-3)

Successive amendments to Regulation (EC) No 2531/98 have been incorporated in the original text. This consolidated version is of documentary value only.

Regulation (EC) No 1745/2003 of the European Central Bank of 12 September 2003 on the application of minimum reserves (ECB/2003/9) (OJ L 250, 2.10.2003, pp. 10-16)

See consolidated version.

RELATED DOCUMENTS

Consolidated version of the Treaty on the Functioning of the European Union — Protocol (No 4) on the statute of the European System of Central Banks and of the European Central Bank (OJ C 202, 7.6.2016, pp. 230-250)

Regulation (EU) No 1071/2013 of the European Central Bank of 24 September 2013 concerning the balance sheet of the monetary financial institutions sector (recast) (ECB/2013/33) (OJ L 297, 7.11.2013, pp. 1-50)

See consolidated version.

last update 27.02.2017