Opinion of the European Central Bank at the request of the Banque de France under Articles 109l (2) and 109f (6) of the Treaty establishing the European Community (hereinafter referred to as the "Treaty") and Article 5.3 of the Statute of the European Monetary Institute (hereinafter referred to as the "EMI") on a draft Decision of the Council for Monetary Policy of the Banque de France, completed by an Instruction of the Banque de France, amending the regime of minimum reserves in Metropolitan France for the period starting on 16 October 1998 and ending on 31 December 1998 (CON/98/43)
Date: 1998-09-23
Institutions: European Central Bank
Subjects: France, foreign-exchange reserves, monetary policy, national law

OPINION OF THE EUROPEAN CENTRAL BANK

at the request of the Banque de France under Articles 109l (2) and 109f (6) of the Treaty

establishing the European Community (hereinafter referred to as the “Treaty”) and Article 5.3

of the Statute of the European Monetary Institute (hereinafter referred to as the “EMI”) on a

draft Decision of the Council for Monetary Policy of the Banque de France, completed by an

Instruction of the Banque de France, amending the regime of minimum reserves in

Metropolitan France for the period starting on 16 October 1998 and ending on 31 December

1998. 

CON/98/43

1. 

On  8  September  1998  the  European  Central  Bank  (hereinafter  referred  to  as  the  “ECB”)

received a request from the Banque de France for an opinion on a draft Decision (hereinafter

referred  to  as  the  “Decision”)  of  the  Council  for  Monetary  Policy  of  the  Banque  de  France,

completed  by  an  Instruction  (hereinafter  referred  to  as  the  “Instruction”)  of  the  Banque  de

France,  amending  the  regime  of  minimum  reserves  in  Metropolitan  France  for  the  period

starting on 16 October 1998 and ending on 31 December 1998 .

2.

In  accordance  with  Article  109l  (2)  of  the  Treaty,  the  ECB  has  taken  over  the  advisory

functions of the EMI, which went into liquidation upon the establishment of the ECB on 1 June

1998. The ECB’s competence to deliver an opinion is based on Article 1.1, second indent, of

the Council Decision (93/717/EC) of 22 November 1993 on the consultation of the EMI by the

authorities of the Member States on draft legislative provisions, as the Decision and Instruction

contain  rules  on  monetary  policy  instruments.  In  accordance  with  Articles  12.4  and  47.1,

second  indent,  of  the  Statute  of  the  European  System  of  Central  Banks  and  of  the  European

Central  Bank  (hereinafter  referred  to  as  the  “Statute”),  this  Opinion  has  been  adopted  by  the

Governing Council of the ECB with the contribution of the General Council of the ECB.

3. 

The aim of the Decision is to prepare the system of minimum reserves in Metropolitan France

for the situation in 1999, when minimum reserves will be imposed by the ECB. To that end and

taking  account  of  the  Recommendation  of  the  ECB  of  7  July  1998  for  a  Council  Regulation

concerning  the  application  of  minimum  reserves  by  the  ECB,  the  Decision  introduces  the

following amendments:

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Institutions  subject  to  reserve  requirements:  Institutions  with  total  liabilities  not

exceeding  500,000,000  FF  will  loose  their  exemption  from  reserve  requirements

after 15 November 1998. In addition, an allowance of 1,000,000 FF to be deducted

from the amount of the reserve requirement shall be granted to each institution;

-  Reserve  basis  and  amount:  The  reserve  basis  is  extended  in  accordance  with  the

specifications  set  forth  in  the  General  Documentation.  By  way  of  transition:  1)

liabilities  vis-à-vis  correspondents  outside  the  euro  area  are  excluded  from  the

reserve basis for technical reasons, and 2) all outstanding debt securities, including

those  held  by  other  credit  institutions  subject  to  reserve  requirements,  with  initial

maturity of less than two years, are taken into account for the application of the 2%

reserve ratio;

-  Maintenance periods: Two maintenance periods are defined for the end of 1998: 1)

from 16 October till 15 November, and 2) from 16 November till 31 December;

-  Reserve  ratio  and  calculation  of  reserve  requirements:  The  Council  for  Monetary

Policy of the Banque de France decided to set a reserve ratio of 2% applicable to all

liabilities  included  in  the  reserve  basis  and  a  reserve  ratio  of  0%  applicable  to

repurchase  agreements,  deposits  with  agreed  maturity  over  two  years  and  debt

securities  with  agreed  maturity  over  two  years.  Reserves  will  be  remunerated  at  a

level  which  is  the  average  of  the  7  day  fixed  rate  tender  offers  by  the  Banque  de

France for the relevant maintenance period. Such remuneration will be paid within a

period of maximum two days following the last day of the maintenance period.

-  Sanctions:  In  case  of  non-compliance  with  minimum  reserve  requirements  the

Banque de France will levy a penalty interest fixed at 3% above the rate set by the

Banque  de  France  for  repurchase  agreements  between  5  and  10  days.  A  higher

penalty interest, with a maximum of 0,1% per day, may be used to sanction serious

or repeated offences as well as deceptive declarations.

The ECB understands that in Stage Three of Monetary Union the minimum reserves regime of

the Banque de France will cease to extend to credit institutions established in Monaco.

The  ECB  notes  that  Article  3  of  the  Instruction  maintains  a  penalty  for  late  data  submission

which is set at 10% above the reserve requirement applicable on the basis of the last available

data.  This  rule  appears  less  strict  than  the  sanctions  regime  for  infringement  of  reporting

obligations that will be introduced in Stage Three. 

With respect to Annex 3 to the Instruction, the ECB deems it advisable to clarify that excess

reserves will not be remunerated.

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4. 

The  ECB  welcomes  the  proposal,  which  is  aimed  at  facilitating  the  changeover  to  the  new

regime for minimum reserves that will apply as from 1 January 1999.

5. 

The ECB confirms that it has no objection to this Opinion being made public by the competent

French authorities at their discretion.

Done at Frankfurt am Main on 23 September 1998

The Vice-President of the ECB

[signed]

C. Noyer