ECB’s US Dollar Reserve Assets

Foreign Reserves of the Eurosystem

Under the Statute of the European System of Central Banks (ESCB), one of the basic tasks of the System is to hold and manage the official reserves of Member States.

Thus, our foreign currency holdings form part of the foreign reserves of the Eurosystem.

ECB Foreign Reserves:

  • The Treaty on European Union (the Maastricht Treaty) provided for the initial transfer by National Central Banks (NCB) of up to €50 billion of foreign reserve assets to the ECB.
  • In January 1999 the Governing Council of the ECB decided that €39.5 billion - that is, €50 billion adjusted downwards for the shares of the countries (UK, Sweden and Denmark) not participating in the euro area - should be transferred to the ECB at the commencement of EMU.
  • Each NCB’s contribution to the ECB reserves was in proportion to its shareholding in the ECB, which, in turn, is a function of each Member State’s shares of the euro-area’s GDP and population.
  • When foreign exchange intervention takes place, the foreign reserve assets of the ECB are used.
  • The Central Bank’s portion amounted to €0.4 billion.
  • Under the EU Treaty, the ECB may make further calls of foreign currency assets from NCBs’ foreign exchange reserves.
  • Further reserves were transferred to the ECB as other countries joined EMU.
  • Following a request from the Central Bank of Malta, we also manage Malta’s share of the ECB’s US dollar pooled reserves since 1 January 2008.
  • At the end of 2015, the ECB’s net foreign reserve assets amounted to €68 billion.
  • The combined value of the Bank’s and Malta’s ECB’s US dollar pooled reserves is €0.96 billion.

ECB Investment Policy

  • The foreign reserves transferred to the ECB are managed in a decentralised manner by the NCBs. Each NCB manages a proportion of the ECB’s reserves.
  • NCBs act on behalf of the ECB on a disclosed agency basis so that market participants can differentiate between operations carried out on behalf of the ECB and those undertaken on NCBs’ own behalf.
  • The basic objectives of ECB investment policy are to:
      1. Protect the value of the ECB’s reserves
      2. Ensure that their assets are sufficiently secure and liquid
      3. Support the ECB’s monetary policy.
  • Investment functions of the ECB are to:
      1. Determine the investment parameters
      2. Make policy decisions
      3. Set performance benchmarks
      4. Approve counterparties
      5. Set permitted risk levels
      6. Perform control and monitoring functions.
  • The benchmarking framework is set at both strategic and tactical levels.
  • Each NCB’s performance is measured against the tactical benchmark and against the other NCBs.
  • Each NCB undertakes management and settlement functions associated with their portion of the ECB reserves.
  • The Central Bank enters trades onto the ECB reserve management system, which permits the ECB to monitor positions and exposures and to carry out performance measurement.