• 
EUROPEAN CENTRAL BANK 
EUROSYSTEM 
AGREEMENT 
of 25 October 2019 on net financial assets 
(1)Nationale Bank van Belgie/Banque Nationale de Belgique
Boulevard de Berlaimont 14/de Berlaimontlaan 14 
1000 Brussels 
Belgium 
Deutsche Bundesbank 
Wilhelm-Epstein-Strasse 14 
60431 Frankfurt am Main 
Germany 
Eesti Pank 
Estonia pst 13 
15095 Tallinn 
Estonia 
Central Bank of Ireland 
New Wapping Street 
North Wall Quay 
Dublin 1 
D01 F7X3 
Ireland 
Bank of Greece 
21 E.Venizelos Avenue 
10250 Athens 
Greece 
AGREEMENT OF 25 OCTOBER 2019 ON NET FINANCIAL ASSETS ECB-PUBLIC 
1 

































ECB-PUBLIC
Annex II
35
AGREEMENT OF 2 5O CTOBER 2019 ON NET FINANCIAL ASSETSDESCRIPTION OF THE CALIBRATION MECHANISM
A. The calibration mechanism
For the formal description of the calibration mechanism, the following notation is introduced. A calibration
exercise in Q3 of year
 determines for each NCB
 ã ï ôô
 for the subsequent year
 õï the
entitlement ø
ô
÷and ceiling ø
ô
÷. For NCB
 the relative capital key share is denoted by
 , its
waived net financial assets by
 ô
, its expected net financial assets by
 ô
and its adjusted expected
NFA by
 ô
. Finally,
 denotes projected maximum net financial assets.
The calibration proceeds in two steps:
B. First step: Determination of net financial asset entitlements
The entitlements
 ô
, for
 ãï ôô
 minimise the distance to the proportional distribution of projected
Eurosystem maximum net financial assets, as defined below, while each NCB’s entitlement is at least as
large as its waived assets. For each NCB the distance to proportionality is weighted by its relative capital
key share so as to take into account the different size of NCBs. Formally, the entitlements solve the
following optimisation problem:
³·²ø
÷
ï
ô
ô
 ã ï ôô
ã 
Projected Eurosystem maximum net financial assets means, for the subsequent year, the Q3 average
outstanding Eurosystem euro banknotes plus Q3 average Eurosystem reserve requirements plus Q3
average securities lending activities with cash collateral minus the sum of all of the following: (i) the
Eurosystem minimum liquidity deficit or if applicable Eurosystem maximum surplus; (ii) the Q3 average
volume of Eurosystem liquidity-providing structural reverse operations;  (iii) Eurosystem outright portfolios
held for monetary policy purposes net of all redemptions in held-to-maturity Eurosystem outright portfolios
expected for the subsequent year; (iv) planned changes to the volume of  Eurosystem liquidity-providing
structural reverse operations for the subsequent year; (v) planned changes to the volume of Eurosystem
outright portfolios held for monetary policy purposes for the subsequent year (excluding redemptions) (vi)
lower required reserves resulting from planned reductions of the reserve ratio to become effective before
the end of the subsequent year; (vii) the sum of the expected liquidity surpluses of Member States joining
the euro area before the end of the subsequent year; and (viii) the Q3 average net financial asset
holdings of the ECB adjusted for the effect of Eurosystem liquidity providing operations denominated in
foreign currency. The respective Q3 average values refer to the year in which the calibration is
conducted.

ECB-PUBLIC
37
AGREEMENT OF 25OCTOBER 2019 ON NET FINANCIAL ASSETS
ô
ã
ô
ôif
ô
â
 ô
 ô
õ
 õ
 ô
 ô
 ô
ô
ôotherwise.
Thus, for NCBs that do not provide unused leeway in the current year
 , i.e. for which
 ô
 ô
, expected
NFA are not adjusted.
Determination of the net financial asset ceilings
The second step determines the ceilings of NCBs by redistributing unused leeway to those NCBs that
desire to hold net financial assets exceeding their entitlements such that these ceilings approximate
proportionality as closely as possible while satisfying the following restrictions: (i) the sum of all NCBs’
ceilings equals projected maximum net financial assets, (ii) the ceiling of each unconstrained NCB is the
smaller of its entitlement and its adjusted expected net financial assets plus the protection add-on, (iii) the
ceiling of all other NCBs is at least as large as their entitlements and does not exceed their expected net
financial assets.
Formally, the ceilings
 ô
, for
 ã ï ôô
 solve the following optimisation problem:
³·²ø
÷
ï
ã ³·²
 ô
 õ
 õ ­ 
 ô
 ô
 ô
ô
ô
 for
 ô
 ô
ô
ô  for 
ô
â 
 ô
ô
ô  for 
ô
â 
 ô
ã
Modifications to the second step of the calibration exercise
In case justified deviations according to Article 5.3 (including the specifications provided in Article 5.4)
are expected to occur in the next year, these deviations will be adjusted for as follows: if the total amount
of expected justified deviations for the next year is not larger than total unused leeway, then the latter is
reduced by the amount of the deviation before the remainder is distributed in the second step of the
calibration. If the total amount of expected justified deviations for the next year is larger than total unused
leeway, the first step of the calibration will be repeated, with the amount of maximum projected NFA being
reduced by the total amount of the expected deviation.
A special provision is necessary in an excess situation in which maximum Eurosystem leeway exceeds
the total amount of NCBs’ expected net financial assets as referred to in Article 2.3 (a). Hence, in this
case, the NFA ceilings of unconstrained NCBs are defined as follows:
ô
ã ³·²¥
 ô
õ
õ
 ô
 ô
ô
ô
£õ
 ô
ô   for 
ô
 ô
ô
with 
 ã
 ô
 æ
ô
 ô
denoting excess leeway, total unused leeway,
 ô
ã
ô
 ô
ô
ô
 ô
 ô
the share of NCB
 in total unused leeway and
ã 
 ô
³·²
 ô
ô
ô
õ
 õ
 ô
 ô
 æ
ô
 
ô
total unused leeway.