EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 9 December 2010 
on the increase of Banque de France’s capital and statutory reserve 
(CON/2010/88) 
 
Introduction and legal basis  
On 11 November 2010, the European Central Bank (E CB) received a request fro m the French Ministry 
for Economic Affairs, Industry and Employment fo r an opinion on a draft decree on Banque de France  
budgetary and financial provisions (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 the third indent  of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Ce ntral Bank by national authorities regarding draft 
legislative provisions1, as the draft law relates to the Banque de France. In accordance with the first 
sentence of Article 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 The draft decree provides for an incr ease of Banque de France’s capital from around 
EUR 457 million2 to EUR 1 billion, and for an increase of the ceiling of the statutory reserve, 
which is equal to the amount of Banque de France’s capital3, to double that amount, i.e. 
EUR 2 billion. 
1.2 In addition, the draft decree sp ecifies that the capital increase will be made by incorporating into 
the capital, (a) funds taken from the statutory reser ve up to an amount equal to the current amount 
of Banque de France’s capital; and (b) funds  taken from the unallocated reserve fund. 
 
                                                 
1 OJ L 189, 3.7.1998, p. 42. 
2 Article R.144-10 of the French Monetary and Financial Code  currently provides that the Banque de France’s capital shall 
be EUR 457 347 051.71. 
3 Article R.144-4, paragraph 2, of the French Monetary and Financial Code currently provides that a deduction of 5% of 
the net result for the financial year shall be allocated to a specific reserve that will no longer be funded when it reaches an  
amount equal to the Banque de France's capital. The ECB u nderstands that the specific reserve referred to in this 
provision corresponds to the statutory reserve in the annual accounts of Banque de France as published in Banque de 
France’s annual report. 
2 2. General observations  
2.1 The ECB welcomes the proposed increase of Banque de France’s capital and statutory reserve and 
understands that this decision has been made in close cooperation with Ba nque de France. The ECB 
considers it important from the perspective of ce ntral bank independence that such decisions are 
initiated and taken in close cooperation with the re levant national central bank (NCB) which is best 
placed to assess its required level of reserve capital4. The principle of financial independence 
requires an NCB to have sufficient means not onl y to perform its ESCB or Eurosystem-related 
tasks but also its national tasks (e.g. financing its administration and ow n operations). Financial 
independence also implies that an NCB should always be sufficiently capitalised5. In particular, the 
ECB is of the view that the higher the level of capital, reserves and provisions against financial 
risks is, the higher the safeguards against future losses are6. As mentioned in the ECB’s 
Convergence Report 20107, any situation should be avoided wher eby for a prolonged period of time 
an NCB’s net equity is below the level of its stat utory capital or is even negative, including where 
losses beyond the level of capital and the reserv es are carried over. Any such situation may 
negatively impact on the NCB’s ability to perform  not only its ESCB or Eurosystem-related tasks 
but also its national tasks. Moreover, such a situa tion may affect the credibility of the Eurosystem’s 
monetary policy. Therefore, the event of an N CB’s net equity becoming less than its statutory 
capital or even negative would require that the r espective Member State provides the NCB with an 
appropriate amount of capital at least up to the level of the statutory capital within a reasonable period of time so as to comply with the principle of financial independence. 
2.2 The ECB understands that the existing statutory reser ve will be fully incorporated into the capital in 
order to finance its increase. As provided for by the draft decree
8, such reserve will in subsequent 
years be gradually built up again up to a higher am ount, equal to double the new capital amount, i.e. 
EUR 2 billion. The ECB welcomes the increase of the ceiling of the statutory reserve. This should contribute to ensuring that the financial protection deemed necessary to safeguard the real value of an NCB’s capital and assets is strengthened before remaining profits may be distributed to the State 
budget, in accordance with the requirements resulting from the principle of financial 
independence
9. The ECB notes that the draft decree does not propose modifying the level of the 
deduction of the net result for the financial year to  be allocated to the regulatory reserve, which is 
set to 5% of the net result. In order to safeguard the real value of its capital and assets, it is essential 
that Banque de France rebuilds its reserves in a period of time it considers appropriate and that 
Banque de France independently builds up an y financial provisions deemed necessary. 
                                                 
4 See the ECB’s Convergence Report 2010, p. 23. 
5 See the ECB’s Convergence Report 2010, p. 21. 
6 See also, in this regard, Opinion CON/2008/34, paragraph 4.2, available on the ECB’s website at www.ecb.europa.eu. 
7  See the ECB’s Convergence Report 2010, pp. 21-22. 
8 Pursuant to Article R.144-4, paragraph 2, of the French Mone tary and Financial Code, as modified by the draft decree, a 
deduction of 5% of the net result for the financial year shal l be allocated to a specific reserve that will no longer be 
funded when it reaches an amount equal to the double of Banque de France's capital. 
9 See the ECB’s Convergence Report 2010, p. 23. 
3  
This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 9 December 2010. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET