Reserve requirements

CHAPTER 7 Box 15 Minimum reser ves

CHAPTER 7 Box 9 Minimum reserves

The control of the amount of money in the economy is known as monetary policy.

BOX 14 Calculation of the remuneration of holdings of required reserves The holding of required reserves is remunerated according to the following formula Ht .

Maintenance of reserve holdings Maintenance period The maintenance period is one month , starting on the 24th calendar day of each month and ending on the 23rd calendar day of the following month .

Calculation of the remuneration of holdings of required reserves The holding of required reserves is remunerated according to the following formula H t nt MRi i 1 n t 100 360 n

128 Features of reserve requirements in EU Member States .....

0 ) The information in this column is on the money market cash reserve .

MINIMUM RESERVE SYSTEM Credit institutions in the euro area must hold minimum reserves on accounts with the NCBs .

BOX 10 Calculation of the remuneration of holdings of required reserves The holding of required reserves is remunerated according to the following formula Ht nt rt Rt 100 360

Table 16 Features of Reserve Requirements in EU Member States ( Situation as of end 1994 )

MINIMUM RESERVE SYSTEM Credit institutions in the euro area must hold minimum reserves on accounts with the NCBs .

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LIST OF MFIs FOR STATISTICAL PURPOSES

Under systems of compulsory reserves , banks are required to keep a minimum amount of reserves in deposit accounts with the central bank , which may or may not be remunerated

Reserve holdings Each institution must hold its minimum reserves on one or more reserve accounts with the national central bank in the Member State in which it is established .

by the ECB in advance of the first maintenance period for which the change is effective . CALCULATION OF RESERVE REQUIREMENTS The reserve requirement of each individual institution is calculated by applying , to the amount of eligible liabilities , the reserve ratios for the corresponding categories of liabilities .

The amount of minimum reserves to be held by each institution is determined in relation to its reserve base .

The operational framework is supplemented by the system of minimum reserves to be held by credit institutions with the NCBs ( see Box 13 ) .

Non compliance with minimum reserve obligations The reserve base items for the application of minimum reserves are calculated by the institutions subject to minimum reserves themselves and are reported to the national central banks within the general framework of the ECB 's money and banking statistics ( see Annex 4 ) .

In a majority of EU countries , reserve requirements are imposed on the banking system , usually with the aim of achieving a combination of different monetary policy purposes ( a ) enlarging the banks demand for reserves

The amount of minimum reserves to be held by each institution is determined in relation to its reserve base .

4 The amount of required reserves to be held by each institution is determined by its reserve base .

BOX 15 Calculation of the remuneration of holdings of required reserves The holding of required reserves is remunerated according to the following formula Ht n t r t 100 360 nt X Mri i ¼ 1 Rt

The remuneration is paid on the second NCB business day following the end of the maintenance period over which the remuneration was earned . b. Reserve holdings Each institution must hold its minimum reserves on one or more reserve accounts with the national central bank in the Member State in which it is established .

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The main differences concern ( a ) the definition of the bank liabilities that are subject to the reserve requirements ( types of instrument , currency denomination , holding sectors )

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It is resolved in the new law by deleting all references to minimum reserves the power to impose such reserves will be derived directly from the Statute ( Article 19 ) in conjunction with references in the new law to the framework of the ESCB , of which the Bank will form part , and to Articles 1 and 3 ( revised ) in particular .

The amount of required reserves to be held by each institution is determined by its reserve base multiplied by a reserve ratio .

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The EMI is currently carrying out the preparatory work necessary to enable the ESCB to impose minimum reserve requirements as from the start of Stage Three .

Another area where central bank rules could potentially grant the public sector privileged access is in the field of minimum reserves .

In addition , preparations are being made to enable the ESCB to implement a minimum reserve system should the Governing Council of the ECB decide to do so .

Of these two components , the reserve requirements are generally known with a high degree of accuracy a few days after the start of the maintenance period , while the estimate of the autonomous factors is less certain .

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The MFI balance sheet therefore supplies the main 29 .

Remuneration of reserve holdings Holdings of required reserves are remunerated at the average , over the maintenance period , of the ECB 's rate ( weighted according to the number of calendar days ) on the main refinancing operations , calculated using the formula specified in Box 10 .

REMUNERATION OF RESERVE HOLDINGS Holdings of required reserves are remunerated at the average , over the maintenance period , of the ECB 's rate ( weighted according to the number of calendar days ) on the main refinancing operations , calculated using the formula specified in Box 15 .

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Until recently , in some Member States , public debt instruments such as Treasury bills were considered eligible assets for meeting reserve requirements .