Opinion of the European Central Bank of 15 June 2007 at the request of the Central Bank of Malta on draft amendments to Central Bank of Malta Directive No 1 on minimum reserve requirements (CON/2007/16)
Date: 2007-06-15
Institutions: European Central Bank
Subjects: Malta, foreign-exchange reserves, monetary policy, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 15 June 2007  

at the request of the Central Bank of Malta on draft amendments to Central Bank of Malta 

Directive No 1 on minimum reserve requirements 

(CON/2007/16) 

Introduction and legal basis 

On 28 May 2007 the European Central Bank (ECB) received a request from the Central Bank of Malta 

(CBM) for an opinion on draft amendments to CBM Directive No 1 on minimum reserve requirements 
(hereinafter the ‘draft amendments’), issued pursuant to the Central Bank of Malta Act1. 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Article  105(4)  of  the  Treaty  establishing  the 

European  Community  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 provisions2, 

as the draft amendments relate to an instrument of monetary policy of a Member State with a derogation. 

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 amendments  

The draft amendments align the framework governing minimum reserve requirements in Malta with that 

of  the  Eurosystem.  In  particular,  the  draft  amendments:  (i)  redefine  the  reserve  base  in  Appendix  I  of 

Directive  No  1  to  align  it  with  that  of  the  Eurosystem  definition  in  Regulation  ECB/2003/9  of 
12 September 2003 on the application of minimum reserves3; and (ii) change the computation method so 

that each maintenance period is calculated on the basis of the reserve base referring to the calendar month 

two months before the maintenance period begins. It is intended that the draft amendments will enter into 

force on 15 July 2007.  

2.  General observations  

The  ECB  welcomes  the  draft  amendments  as  part  of  the  preparations  for  the  adoption  of  the  euro  in 

Malta. Within the framework of monetary policy, which remains a CBM competence until adoption of the 

1       Chapter 204 of the Laws of Malta. 
2  
OJ L 189, 3.7.1998, p. 42.  
3        OJ L 250, 2.10.2003, p. 10. 

 
 
 
 
 
                                                 
euro, the aim of the draft amendments is to make the Maltese minimum reserves system consistent with 

the Eurosystem standards that will apply after adoption of the euro. This step should help Maltese credit 

institutions become familiar with the Eurosystem’s requirements and ensure a smooth start to compliance 

with  the  Eurosystem’s  reserve  requirements  in  January 2008.  To  this  end,  the  draft  amendments 

adequately  reflect  the  Eurosystem  legal  framework  on  minimum  reserves,  especially  Regulation 

ECB/2003/9. 

3.   Reserve ratio 

Directive  No  1  gives  the  CBM’s  Governor  the  power  to  determine  the  reserve  requirement  ratio,  after 

taking  into  consideration  the  advice  of  the  Monetary  Policy  Advisory  Council.  In  this  respect  the  ECB 

notes that during the period before adoption of the euro, the CBM may decide which ratio it prefers, but 

once  the  euro  is  adopted,  Article  4  of  Regulation  ECB/2003/9  will  apply.  This  provides  that  a  reserve 

ratio of 2,0 % applies to all liabilities included in the reserve base other than those for which a reserve 

ratio of 0 % is stipulated.  

4. 

Procedure for calculating, notifying and acknowledging minimum reserves 

Directive  No  1  continues  to  be  silent  on  the  procedure  for  calculating,  notifying  and  acknowledging 

minimum reserves. The ECB understands that under the procedure which the CBM currently has in place, 

the CBM calculates – on the basis of the reserve base data submitted by credit institutions – the amounts 

of  reserves  required  and  notifies  these  to  credit  institutions  before  the  start  of  the  maintenance  period. 

While  credit  institutions  normally  acknowledge  the  amounts  by  remaining  silent,  they  are  allowed  to 

revise the reserve base data, even after the start of the maintenance period. In this respect the ECB notes 

that once Malta adopts the euro, Article 5(3) of Regulation ECB/2003/9 will apply. This provision sets 

out the principles to be followed by national central banks in establishing their procedures for notification 

and  acknowledgement  of  institutions’  individual  minimum  reserves.  Article  5(3)  stipulates  in  particular 

that, once acknowledged, an institution’s minimum reserves for the relevant maintenance period cannot 

be revised.  

5.   First maintenance period of 2008 

If the Council of the European Union decides to abrogate the derogation in respect of Malta with effect 

from  1  January  2008,  the  ECB  will  in  the  coming  months  issue  regulations  on  the  transitional  period 

applicable to institutions in Malta which would be subject to the ECB’s minimum reserve regime from 

2008. It is envisaged that, for the purposes of the first maintenance period of 2008, these regulations will, 

inter  alia,  redefine  the  reserve  base  which  must  be  reported  by  other  euro  area  institutions  subject  to 

minimum  reserve  requirements,  as  they  may  be  authorised  to  take  into  account,  for  the  purpose  of 

reporting  the  reserve  base  for  the  first  transitional  period,  the  liabilities  owed  to  the  abovementioned 

2 

 
 
 
 
Maltese  institutions.  These  regulations  will  not  affect  the  Maltese  minimum  reserve  regime  prior  to 

1 January  2008,  but  the  CBM  may  already  wish  to  take  this  factor  into  account  as  regards  the  first 

maintenance period of 2008. 

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

Done at Frankfurt am Main, 15 June 2007. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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