(1)

Decision ECB/2010/23 (1) has been substantially amended several times (2). Since further amendments are to be made, it should be recast in the interests of clarity.

(2)

Pursuant to Article 32.1 of the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’), monetary income is the income accruing to the national central banks (NCBs) in the performance of the monetary policy function. Pursuant to Article 32.2 of the Statute of the ESCB, the amount of each NCB's monetary income is equal to its annual income derived from its assets held against notes in circulation and deposit liabilities to credit institutions. These assets are to be earmarked by NCBs in accordance with the guidelines of the Governing Council. NCBs should earmark the assets ensuing from the performance of the monetary policy function as assets held against the notes in circulation and deposit liabilities to credit institutions. Pursuant to Article 32.4 of the Statute of the ESCB, the amount of each NCB's monetary income is reduced by an amount equivalent to any interest accrued, paid or received on liabilities included within the liability base.

(3)

Pursuant to Article 32.5 of the Statute of the ESCB, the sum of the monetary income of the NCBs is allocated to them in proportion to their paid-up shares in the capital of the European Central Bank (ECB).

(4)

Pursuant to Articles 32.6 and 32.7 of the Statute of the ESCB, the Governing Council is empowered to establish guidelines for the clearing and settlement by the ECB of the balances arising from the allocation of monetary income and to take all other measures necessary for the application of Article 32.

(5)

Pursuant to Article 10 of Council Regulation (EC) No 974/98 (3), the ECB and the NCBs put euro banknotes into circulation. Article 15 of this Regulation provides that banknotes denominated in national currency units remain legal tender within their territorial limits until 6 months from the respective cash changeover date at the latest. The cash changeover year should thus be regarded as a special year, since banknotes in circulation denominated in national currency units may still account for a considerable proportion of the banknotes in circulation.

(6)

Article 15(1) of Guideline ECB/2006/9 (4) provides that euro banknotes frontloaded to eligible counterparties are debited in those counterparties' accounts with their NCB at their face value, in accordance with the following ‘linear debiting model’: the total amount of frontloaded euro banknotes are debited in three equal instalments, on the settlement date of the first, fourth and fifth Eurosystem main refinancing operations following the cash changeover date. The calculation of monetary income for the cash changeover year needs to take account of this ‘linear debiting model’.

(7)

This Decision is related to Decision ECB/2010/29 (5), which provides that the ECB and the NCBs issue euro banknotes. Decision ECB/2010/29 establishes the allocation of euro banknotes in circulation to the NCBs in proportion to their paid-up shares in the capital of the ECB. It also allocates to the ECB 8 % of the total value of euro banknotes in circulation. The allocation of euro banknotes among Eurosystem members gives rise to intra-Eurosystem balances. The remuneration of these intra-Eurosystem balances on euro banknotes in circulation has a direct effect on the income of each Eurosystem member, and therefore it should be regulated under this Decision. The income accruing to the ECB on the remuneration of its intra-Eurosystem claims on NCBs related to its share of euro banknotes in circulation should in principle be distributed to the NCBs in accordance with Decision ECB/2014/57 (6) in proportion to their shares in the subscribed capital key in the same financial year it accrues.

(8)

The net balance of the intra-Eurosystem claims and liabilities on euro banknotes in circulation should be remunerated by applying an objective criterion defining the cost of money. In this context, the main refinancing operations rate used by the Eurosystem in its tenders for main refinancing operations is regarded as appropriate.

(9)

The net intra-Eurosystem liabilities on euro banknotes in circulation should be included in the liability base for the purposes of the calculation of the NCBs' monetary income pursuant to Article 32.2 of the Statute of the ESCB as they are equivalent to banknotes in circulation. The settlement of interest on intra-Eurosystem balances on euro banknotes in circulation will therefore result in the distribution of a substantial amount of the Eurosystem's monetary income among NCBs in proportion to their paid-up shares in the capital of the ECB. These intra-Eurosystem balances should be adjusted to allow for a gradual adaptation of the NCBs' balance sheets and profit and loss accounts. The adjustments should be based on the value of banknotes in circulation of each NCB during a period prior to the introduction of euro banknotes. These adjustments should apply on a yearly basis in accordance with a fixed formula for no more than 5 years thereafter.

(10)

The adjustments to the intra-Eurosystem balances on euro banknotes in circulation have been calculated in order to compensate for any significant changes in the NCBs' income positions as a consequence of the introduction of euro banknotes and the subsequent allocation of monetary income.

(11)

The general rules laid down in Article 32 of the Statute of the ESCB also apply to the income resulting from the write-off of euro banknotes that have been withdrawn from circulation.

(12)

Article 32.5 of the Statute of the ESCB specifies that the sum of the NCBs' monetary income is allocated to the NCBs in proportion to their paid-up shares in the ECB's capital. Pursuant to Article 32.7 of the Statute of the ESCB, the Governing Council is competent to take all other measures necessary for the application of Article 32. This includes the competence to take account of other factors when deciding on the allocation of income resulting from the write-off of euro banknotes that have been withdrawn from circulation. In this context, the principles of equal treatment and fairness require that account be taken of the time period during which the withdrawn euro banknotes were issued. The allocation key for this specific income must therefore reflect both the relevant share in the ECB's capital and the length of the issue phase.

(13)

The withdrawal of euro banknotes needs to be regulated by separate decisions to be taken pursuant to Article 5 of Decision ECB/2003/4 (7).

(14)

Purchases under Decision ECB/2009/16 (8), Decision ECB/2011/17 (9), and Decision (EU) 2015/774 of the European Central Bank (ECB/2015/10) (10) which refers to purchases of debt instruments issued by central, regional and local governments and recognised agencies and substitute debt instruments issued by public non-financial corporations, should be deemed to generate income at the reference rate,

(a)

‘NCB’ means a national central bank of a Member State whose currency is the euro;

(b)

‘credit institution’ means either: (a) a credit institution within the meaning of Article 4(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council (11) that is subject to supervision by a competent authority; or (b) another credit institution within the meaning of Article 123(2) of the Treaty that is subject to scrutiny of a standard comparable to supervision by a competent authority;

(c)

‘liability base’ means the amount of qualifying liabilities, within the balance sheet of each NCB, specified in accordance with Annex I to this Decision;

(d)

‘cash changeover date’ means the date on which euro banknotes and coins become legal tender in a Member State whose currency is the euro;

(e)

‘cash changeover year’ means a period of 12 months starting on the cash changeover date;

(f)

‘intra-Eurosystem balances on euro banknotes in circulation’ means the claims and liabilities arising between an NCB and the ECB and between an NCB and the other NCBs as a result of the application of Article 4 of Decision ECB/2010/29;

(g)

‘subscribed capital key’ means the NCBs' shares, expressed as percentages, in the ECB's subscribed capital that result from applying to the NCBs the weightings in the key referred to in Article 29.1 of the Statute of the ESCB and as applicable for the relevant financial year;

(h)

‘withdrawn euro banknotes’ means any euro banknote type or series that has been withdrawn from circulation by a decision of the Governing Council taken pursuant to Article 5 of Decision ECB/2003/4;

(i)

‘issue phase’, in relation to a euro banknote type or series, means the period starting on the date on which the first issue of a euro banknote of this type or series is recorded in the liability base and ending on the date on which the last issue of a euro banknote of this type or series is recorded in the liability base;

(j)

‘reference rate’ means the latest available marginal interest rate used by the Eurosystem in its tenders for main refinancing operations under Article 6 of Guideline (EU) 2015/510 of the European Central Bank (ECB/2014/60) (12). Where more than one main refinancing operation is conducted for settlement on the same day, a simple average of the marginal rates of the operations conducted in parallel is used;

(k)

‘earmarkable assets’ means the amount of assets held against the liability base, within the balance sheet of each NCB, specified in accordance with Annex II to this Decision;

(l)

‘reference period’ means a period of 24 months starting 30 months before the cash changeover date;

(m)

‘daily foreign exchange reference rate’ means the daily foreign exchange reference rate that is based on the regular daily concertation procedure between central banks within and outside the European System of Central Banks, which normally takes place at 14.15 Central European Time (13);

(n)

‘write off’ means to eliminate withdrawn euro banknotes from the balance sheet item ‘banknotes in circulation’;

(o)

‘issue key’ means the average subscribed capital key during the issue phase of a type or series of withdrawn euro banknotes;

(p)

‘harmonised balance sheet’ (HBS) means the harmonised balance sheet as set out in Annex VIII to Guideline (EU) 2016/2249 of the European Central Bank (ECB/2016/34) (14).