EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 11 August 2010 
on reserve requirements for credit institutions 
(CON/2010/68) 
 
Introduction and legal basis  
On 20 July 2010 the European Central Bank (ECB) received a request from the Magyar Nemzeti Bank 
(MNB) for an opinion on a draft decree on reserve re quirements (hereinafter the ‘draft decree’).  
The ECB’s competence to deliver an  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and Article 2(2)  of Council Decision 98/415/EC of 29 June 1998 on 
the consultation of the European Central Bank by  national authorities regarding draft legislative 
provisions1, as the draft decree relates to instruments of monetary policy of a Member State whose 
currency is not the euro. In  accordance with the first sentence of Artic le 17.5 of the Rules of Procedure of 
the European Central Bank, the Governing Council has adopted this opinion. 
 1. Purpose of the draft decree 
1.1 According to the explanatory memorandum attach ed to the consultation request, in November 2008 
the MNB reduced the minimum reserve ratio in a si ngle step from 5 %, the reserve ratio which had 
been in effect from 2002, to 2 %, which is the r eserve ratio currently applying to the Eurosystem. 
This was done in response to the confidence crisis  affecting the Hungarian  interbank market. The 
reduction of the reserve ratio was prompted mainly  by liquidity shortages experienced by a number 
of large Hungarian banks due to their foreign exch ange exposures. It also contributed significantly 
to the increase in these credit ins titutions’ surplus HUF liquidity, ther eby mitigating the risks to the 
stability of the banking sector. However, the lowe r reserve requirement posed a challenge for a 
number of smaller banks in the Hunga rian market in coping with large fluctuations in their liquidity 
needs. This problem has been exacerbated by the fact that the interbank market is still weak 
compared to the period before the crisis in 2008, due to, inter alia , risk aversion.  
1.2  Pursuant to Decree 15/2008 (XI.24.) of the G overnor of the MNB on the reserve requirement ratio, 
the current reserve ratio applicable to Hungarian credit institutions subject to reserve requirements 
is 2 %. The purpose of the draft decree is to  enable credit institutions subject to reserve 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2 requirements to choose from one of the following reserve ratios: 2 %, 3 %, 4 % or 5 %. The draft 
decree will enter into force upon approv al by the MNB’s Monetary Council. 
 2. General observations  2.1 Experience from the recent crisis has shown the importance of the buffering function played by 
reserves held at the central bank. This may imply that it is beneficial for some banks to have a 
reserve ratio that is not too low. In this c ontext, the ECB understands the MNB’s approach of 
transferring the responsibility for determining the r eserve ratio to the banking system. At the same 
time, incentives encouraging credit institutions to ha ve active liquidity management are needed to 
ensure a dynamic and efficient interbank market . In this regard, a continual and long-term 
monitoring of the possible impacts of the me asures introduced by the draft decree on the 
functioning of the Hungarian interbank market is  recommended. Similarly, alternative ways of 
reducing the size and frequency of liquidity shocks s hould be considered. It could also be beneficial 
to address the sources of the liquidity shocks th at led the MNB to introduce the draft decree.  
2.2 More specifically, the difficulties some Hungarian banks had in coping with large shocks in their 
liquidity demand, e.g. due to large transactions from their clients, appear to be a key reason behind 
the significant accumulation of overnight deposits. In the short term and during the convergence 
process towards joining the euro area, the MNB may need greater flexibility to address liquidity 
shocks and market inefficiencies which hinder the implementation of national monetary policy. 
Member States whose currency is not the euro retain  their powers in the field of monetary policy. 
However, in the implementation of the single mone tary policy, consistency with the Eurosystem’s 
operational framework at an early stage will be re quired. Credit institutions in such Member States 
will need to be familiar with requirements that w ill apply to them when the euro is introduced, such 
as the single reserve ratio of 2 %. 
 3. Specific observations  Upon adoption of the euro in Hungary, the ECB’s mini mum reserves framework will apply, in particular. 
(a) Article 19 of the Statute of the European System of Central Banks and of th e European Central Bank; 
(b) Council Regulation (EC) No 2531/98 of 23 Nove mber 1998 concerning the application of minimum 
reserves by the European Central Bank
2; (c) Regulation ECB/2003/9 of 12 September 2003 on the 
application of minimum reserves3; and (d) in relation to the definiti on and calculation of the reserve base, 
Regulation ECB/2008/32 of 19 December 2008 concerni ng the balance sheet of the monetary financial 
institutions sector (recast)4. Article 11 of and Annex III to Regula tion ECB/2008/32 requires statistical 
information reported by credit institutions under Re gulation ECB/2008/32 to be used for the purpose of 
                                                 
2  OJ L 318, 27.11.1998, p. 1.  
3  OJ L 250, 2.10.2003, p. 10. 
4  OJ L 15, 20.1.2009, p. 14. 
3 minimum reserves. Special rules set out in this Regulation prevail over Regulation ECB/2003/9 and 
concern small credit institutions, group reporting a nd reserve requirements in the case of mergers. 
 This opinion will be published on the ECB’s website two months after the date of its adoption. 
  Done at Frankfurt am Main, 11 August 2010. 
 
[signed] 
 
The Vice-President of the ECB 
Vítor CONSTÂNCIO