Council Regulation (EC) No 2531/98 of 23 November 1998 concerning the application of minimum reserves by the European Central Bank
Date: 1998-11-23
Institutions: Council of the European Union
Subjects: European Central Bank, financial institution, financial legislation, foreign-exchange reserves

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Official Journal of the European Communities

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I

(Acts whose publication is obligatory)

COUNCIL REGULATION (EC) No 2531/98

of 23 November 1998

concerning the application of minimum reserves by the European Central Bank

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Protocol (No 3) on the Statute of the
European System of Central Banks and of the European
Central Bank (the ‘Statute') and in particular to Article
19.2 thereof,

Having regard to the recommendation of the European
Central Bank (the ‘ECB') (1),

Having regard to the opinion of the European Parlia-
ment (2),

Having regard to the opinion of the Commission (3),

Acting in accordance with the procedure laid down in
Article 106(6) of the Treaty establishing the European
Community (hereinafter referred to as the ‘Treaty') and in
Article 42 of the Statute and under the conditions set out
in Article 43.1 of the Statute and paragraph 8 of the
Protocol (No 11) on certain provisions relating to the
United Kingdom of Great Britain and Northern Ireland,

(1) Whereas Article 19.2,

in conjunction with Article
43.1 of the Statute, paragraph 8 of Protocol No 11
and paragraph 2 of the Protocol (No 12) on certain
provisions relating to Denmark, are not to confer any
rights or impose any obligations on a non-particip-
ating Member State;

(2) Whereas Article 19.2 of

the Statute requires the
Council to define, inter alia, the basis for minimum
ratios
and the maximum permissible
reserves
between those reserves and their basis;

(3) Whereas Article 19.2 of the Statute also requires the
Council to define the appropriate sanctions in cases
of non-compliance with those requirements; whereas
specific sanctions are set out herein; whereas this
Regulation refers to Council Regulation (EC) No
2532/98 of 23 November 1998, concerning the
powers of
the European Central Bank to impose
sanctions (4) for the principles and procedures relating
to the imposition of sanctions and provides for a
simplified procedure for the imposition of sanctions

(1) OJ C 246, 6. 8. 1998, p. 6.
(2) OJ C 328, 26. 10. 1998.
(3) Opinion delivered on 8 October 1998 (not yet published in

the Official Journal).

(4) See page 4 of this Official Journal.

in the event of certain kinds of
infringements;
whereas, in the event of a conflict between the provi-
sions of the Regulation (EC) No 2532/98 and the
provisions of this Regulation enabling the ECB to
impose sanctions, the provisions of this Regulation
should prevail;

(4) Whereas Article 19.1 of the Statute provides that the
Governing Council of the ECB may establish regula-
tions concerning the calculation and determination
of the required minimum reserves;

among participating Member

(5) Whereas, in order to be effective as an instrument for
the performance of money market management and
monetary control functions, the system for the impo-
sition of minimum reserves needs to be structured so
that the ECB has the ability and flexibility to impose
reserve requirements within the context of, and
dependent upon, changing economic and financial
conditions
States;
whereas in this respect the ECB must have the flex-
ibility to react to new payment technologies such as
the development of electronic money; whereas the
ECB may impose minimum reserves on liabilities
resulting from off-balance-sheet items, in particular
those that are either individually or in combination
with other on-balance-sheet or off-balance-sheet
items, comparable with liabilities recorded on the
balance sheet, in order to limit the possibilities of
circumvention;

(6) Whereas the ECB, in establishing detailed regulations
for the imposition of minimum reserves, including
determining the actual
reserve ratios, any remu-
neration of reserves, any exemptions from minimum
reserves or any modifications to such requirements
applicable to any specific group or groups of institu-
tions, is bound to act in pursuance of the objectives of
the European System of Central Banks (the ‘ESCB') as
set out in Article 105(1) of the Treaty and as reflected
in Article 2 of the Statute; whereas this implies, inter
alia, the principle of not inducing significant un-
desirable delocation or disintermediation; whereas the

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Official Journal of the European Communities

27. 11. 98

imposition of such minimum reserves may constitute
an element of the definition and implementation of
the monetary policy of the Community, being one of
the basic tasks of the ESCB as specified in the first
indent of Article 105(2) of the Treaty and as reflected
in the first indent of Article 3.1 of the Statute;

4.

5.

‘reserve ratio' shall mean such percentage of the basis
for minimum reserves as the ECB may specify in
accordance with Article 19.1 of the Statute;

shall mean

‘sanctions'
penalty
payments, penalty interest and non-interest-bearing
deposits.

periodic

fines,

(7) Whereas the sanctions provided in the event of non-
compliance with the obligations set out in this Regu-
lation are without prejudice to the possibility of the
ESCB establishing appropriate enforcement provi-
sions in its relations with counterparties, including
the partial or total exclusion of an institution from
monetary policy operations in the case of serious
infringements of the minimum reserve requirements;

(8) Whereas the ESCB and the ECB have been entrusted
with the task of preparing the monetary policy instru-
ments to allow for their full operation in the third
stage of Economic and Monetary Union (hereinafter
referred to as ‘Stage Three'); whereas an essential
element of preparation is the adoption, ahead of Stage
Three, of ECB regulations requiring institutions to
hold minimum reserves as from 1 January 1999;
whereas it is desirable to inform market participants
during 1998 of the detailed provisions which the
ECB may deem necessary to adopt for the imple-
mentation of the minimum reserves system; whereas
it is therefore necessary to provide the ECB from the
date of entry into force of this Regulation with a
regulatory power;

(9) Whereas the provisions of this Regulation can only
be effectively applied in their entirety if participating
Member States adopt the necessary measures with a
view to ensuring that
their authorities have the
powers to assist and collaborate fully with the ECB in
carrying out the collection and verification of infor-
mation as required by this Regulation, in accordance
with Article 5 of the Treaty,

HAS ADOPTED THIS REGULATION:

Article 1

Definitions

For the purposes of this Regulation:

‘participating Member State' shall mean a Member
State which has adopted the single currency in accord-
ance with the Treaty;

‘national central bank' shall mean the central bank of a
participating Member State;

1.

2.

3.

Article 2

Right to exempt institutions

The ECB may, on a non-discriminatory basis, exempt
institutions from minimum reserves in accordance with
criteria established by the ECB.

Article 3

Basis for minimum reserves

1.
The basis for minimum reserves which the ECB may
require institutions to hold according to Article 19.1 of
the Statute shall include, subject to the provisions speci-
fied in paragraphs 2 and 3 of this Article:

(i) liabilities of the institution resulting from the ac-

ceptance of funds, together with

(ii) liabilities resulting from off-balance-sheet items, but

excluding

(iii) fully or partly liabilities which are owed to any other
institution according to modalities which shall be
specified by the ECB, and

(iv) liabilities which are owed to the ECB or to a national

central bank.

2.
For liabilities in the form of negotiable debt instru-
ments, the ECB may specify, as an alternative to the
provision in paragraph 1 (iii), that liabilities which are
owed by one institution to another shall be fully or partly
deducted from the basis for minimum reserves of the
institution to which they are owed.

The ECB may, on a non-discriminatory basis, allow
3.
the deduction of specific types of assets from categories of
liabilities forming part of the basis for minimum reserves.

Article 4

Reserve ratios

1. Reserve ratios, which the ECB may specify according
to Article 19.1 of the Statute, shall not exceed 10 % of
any relevant
the basis for
liabilities forming part of
minimum reserves but may be 0 %.

‘institution' shall mean any entity in a participating
Member State which, under the terms of Article 19.1 of
the Statute, the ECB may require to hold minimum
reserves;

Subject to paragraph 1, the ECB may, on a non-
2.
discriminatory basis, specify differing reserve ratios for
specific categories of liabilities forming part of the basis
for minimum reserves.

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Article 5

Regulatory power

For the purpose of Articles 2, 3 and 4, the ECB shall
adopt, where appropriate, regulations or decisions.

Article 6

Right to collect and verify information

1.
The ECB shall have the right to collect from institu-
tions the information necessary for the application of
minimum reserves. Such information shall be confiden-
tial.

The ECB shall have the right to verify the accuracy
2.
and quality of the information which institutions provide
to demonstrate compliance with the minimum reserve
requirements. The ECB shall notify the institution of its
decision to verify data or to effect
their compulsory
collection.

3.

The right to verify data shall include the right to:

(a) require the submission of documents;

(b) examine the books and records of the institutions;

(c) take copies or extracts from such books and records;

and

(d) obtain written or oral explanations.

When an institution obstructs the collection and/or verifi-
cation of information, the participating Member State in
which the relevant premises are located shall afford the
necessary assistance,
including ensuring access to the
premises of the institution, so that the abovementioned
rights can be exercised.

4.
The ECB may delegate to the national central banks
the execution of the rights to which paragraphs 1 to 3
refer. In accordance with the first indent of Article 34.1 of
the Statute,
the ECB shall be empowered to specify
further in a regulation the conditions under which the
right to verify may be exercised.

Article 7

Sanctions in cases of non-compliance

1. Where an institution fails to hold all or part of the
imposed in accordance with this
minimum reserves
Regulation and ECB regulations or decisions associated
herewith, the ECB may impose either of the following
sanctions:

(a) a payment of up to 5 percentage points above the
ESCB’s marginal lending rate or twice the ESCB’s
marginal lending rate, in both cases applied to the
amount of the minimum reserves which the relevant
institution fails to provide;

(b) the requirement for the relevant institution to estab-
lish a non-interest-bearing deposit with the ECB or
the national central banks up to 3 times the amount
of the minimum reserves which the relevant institu-
tion fails to provide. The maturity of the deposit shall
not exceed the period during which the institution
fails to hold the minimum reserves.

2. Whenever a sanction is imposed in accordance with
paragraph 1, the principles and procedures set out in
Regulation (EC) No 2532/98 shall apply. However, Article
2(1) and (3) and Article 3(1), (2), (3) and (4) of that Regula-
tion shall not be applicable, and the periods referred to in
Article 3(6), (7) and (8) thereof shall be reduced to fifteen
days.

3. Where an institution fails to comply with the obliga-
tions deriving from this Regulation or ECB regulations or
decisions associated therewith, other than those set out in
paragraph 1, sanctions in cases of such failure and the
limits and conditions relating to the imposition of such
sanctions shall be those set out in Regulation (EC) No
2532/98.

Article 8

Final provisions

This Regulation shall enter into force on the day of its
publication in the Official Journal of the European
Communities.

Article 5 shall apply from the date of entry into force of
this Regulation. The remaining Articles shall apply from
1 January 1999.

This Regulation shall be binding in its entirety and directly applicable in all Member
States.

Done at Brussels, 23 November 1998.

For the Council

The President

R. EDLINGER