Opinion of the European Central Bank of 31 May 2005 at the request of Magyar Nemzeti Bank on a draft regulation on the calculation, method of allocation and placement of minimum reserves (CON/2005/14)
Date: 2005-05-31
Institutions: European Central Bank
Subjects: Hungary, credit institution, foreign-exchange reserves, monetary policy, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 31 May 2005 

at the request of Magyar Nemzeti Bank  

on a draft regulation on the calculation, method of allocation and placement of minimum reserves  

(CON/2005/14) 

1. 

On  29  April  2005  the  European  Central  Bank  (ECB)  received  a  request  from  Magyar  Nemzeti 

Bank  (MNB)  for  an  opinion  on  a  draft  regulation  on  the  calculation,  method  of  allocation  and 

placement of minimum reserves (hereinafter the ‘draft regulation’). 

2. 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  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  legislative  proposal  contains  provisions 

concerning the application of minimum reserve requirements for the implementation of monetary 

policy  in  a  Member  State  that  has  not  adopted  the  euro.  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. 

3. 

The draft regulation will apply to credit institutions with an operating licence which are located in 

Hungary, including branches of credit institutions registered outside Hungary. It defines the reserve 

base  and  how  the  minimum  reserves  are  to  be  held  with  MNB.  MNB  remunerates  the  required 

reserves according to a formula corresponding to the ECB’s, and the draft regulation amends the 

date  thereof.  Furthermore,  the  draft  regulation  lays  down  the  procedures  for  verification  and 

rectification  of  data,  and  procedures  in  the  event  of  infringement  of  the  minimum  reserve 

requirements.  Finally,  the  draft  regulation  specifies  the  sanctions  regime  to  be  applied  by  MNB 

where  an  infringement  of  the  minimum  reserve  requirements  has  been  identified.  Generally 

speaking, the draft regulation does not significantly modify the existing minimum reserve system 

in Hungary. It only modifies its scope of application and MNB’s powers to impose sanctions, as 

well as making a minor change to the remuneration date. 

4. 

This is the first opportunity for the ECB to comment on MNB’s minimum reserve framework, after 

Hungary’s accession to the European Union in 2004. In view of Hungary’s intention to adopt the 

euro and the single monetary policy this entails, the ECB acknowledges MNB’s intention to bring 

the Hungarian minimum reserve system into line with the ECB’s minimum reserve framework. For 

1  

OJ L 189, 3.7.1998, p. 42. 

 
 
 
                                                      
this reason the ECB has undertaken a detailed comparison of the proposed MNB minimum reserve 

regime with that of the Eurosystem. 

5. 

The  ECB  welcomes  the  draft  regulation  as  it  further  brings  into  line  the  Hungarian  minimum 

reserve framework with that of the ECB. The ECB welcomes the draft regulation’s introduction of 

an express reference to credit institutions with an operating licence that are registered in European 

Economic  Area  countries  and  that  conduct  business  in  Hungary,  thereby  accommodating  the 
‘European Passport’ established by the Consolidated Banking Directive2. 

6. 

The sanctions regime in Article 7 of the draft regulation distinguishes two cases in which sanctions 

may be applied: (a) where the average daily balance on the credit institution’s current account is 

insufficient,  on  the  basis  of  data  corrected  after  the  end  of  the  maintenance  period  by  the  credit 

institution;  and  (b)  where  the  MNB  identifies  a  shortfall,  either  through  regular  verification  of 

compliance on the basis of end-of-month supervisory balance sheet data or by extraordinary on-site 

inspection.  It  should  be  noted  that  the  ECB’s  framework  does  not  provide  for  such  a  distinction 

because  the  ECB  does  not  allow  revisions  to  the  reserve  requirement  data  after  the  start  of  the 

reserve  maintenance  period  to  which  the  reserve  requirement  refers.  Indeed,  any  error  in  the 

reporting of statistical data affecting the reserve base would be dealt with under the ECB’s specific 

statistical reporting sanctions regime. 

7. 

The  sanctions  provided  for  in  the  draft  regulation  in  the  event  of  a  ‘reserve  deficit’  require 

unremunerated funds equal to the average daily shortfall for that maintenance period to be held on 

a  separate  account  at  MNB.  In  the  second  instance  mentioned  in  paragraph  6  above  (i.e. 

infringements identified by MNB), the amount would be 1.5 times the average daily shortfall. In 

both cases the funds would be held on an unremunerated basis for 30 days. If the credit institution’s 

liquidity situation does not allow for the imposition of such a sanction, the holding of funds may be 

spread over several maintenance periods. Moreover, if the credit institution’s holdings at the central 

bank do not cover the required funds, the central bank grants credit to the credit institution for the 

missing  amount  at  a  rate  twice  MNB’s  base  rate.  On  the  other  hand,  the  ECB,  in  the  event  of 

infringement of the minimum reserve requirements, notifies the corresponding sanction, a nominal 

amount determined on the basis of a predetermined formula, to the credit institution and its right to 

appeal within five working days. If the credit institution does not appeal, the sanction is imposed 

on the infringing credit institution’s reserve account. 

2  

Directive  2000/12/EC  of  the  European  Parliament  and  of  the  Council  of  20  March  2000  relating  to  the  taking  up  and 
pursuit  of  the  business  of  credit  institutions,  OJ  L  126,  26.5.2000,  p.  1.  Directive  as  last  amended  by  Commission 
Directive 2004/69/EC (OJ L 125, 28.4.2004, p. 44). 

2 

                                                      
8. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 31 May 2005. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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