Guideline of the European Central Bank of 17 December 2007 amending Guideline ECB/2006/16 on the legal framework for accounting and financial reporting in the European System of Central Banks (ECB/2007/20)
Date: 2007-12-17
Institutions: European Central Bank
Subjects: European Central Bank, European System of Central Banks, exchange of information, exchange transaction, financial instrument, financial situation, participating country (euro area), standardised accounting system

16.2.2008

EN

Official Journal of the European Union

L 42/85

GUIDELINES

EUROPEAN CENTRAL BANK

GUIDELINE OF THE EUROPEAN CENTRAL BANK

of 17 December 2007

amending Guideline ECB/2006/16 on the legal framework for accounting and financial reporting in
the European System of Central Banks

(ECB/2007/20)

(2008/122/EC)

THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK,

Having regard to the Statute of the European System of Central
Banks and of the European Central Bank, and in particular
Articles 12.1, 14.3 and 26.4 thereof,

Having regard to the contribution of the General Council of the
European Central Bank (ECB) pursuant to the second and third
indents of Article 47.2 of the Statute,

Whereas:

(1)

(2)

Guideline ECB/2006/16 of 10 November 2006 on the
legal framework for accounting and financial reporting in
the European System of Central Banks (1) does not
contain specific rules on the accounting of synthetic
instruments, which are
in the
financial markets. The development of generic accounting
rules for synthetic instruments is appropriate since it
that can accommodate the full
provides clear
range of
clear
and provide
framework for the Eurosystem external auditors.

such instruments

increasingly

rules

used

a

Express

Transfer

Article 14(2) of Guideline ECB/2007/2 of 26 April 2007
on a Trans-European Automated Real-time Gross
system (TARGET2) (2)
settlement
provides that
replace the
the TARGET2 system will
current TARGET system. The national central banks
(NCBs) of Member States that have adopted the euro
(hereinafter
States) will
the participating Member
migrate to TARGET2 in accordance with the schedule
specified in Article 13 of Guideline ECB/2007/2.
Furthermore, certain NCBs of Member States that have
not adopted the euro will connect to TARGET2 on the

(1) OJ L 348, 11.12.2006, p. 1.
(2) OJ L 237, 8.9.2007, p. 1.

basis of a separate agreement with the ECB and the NCBs
of participating Member States. It is therefore necessary
to amend references to ‘TARGET’ and related concepts in
Guideline ECB/2006/16,

HAS ADOPTED THIS GUIDELINE:

Article 1

Amendments

Guideline ECB/2006/16 is amended as follows:

1. the following Article 9a is inserted:

‘Article 9a

Synthetic instruments

1.
Instruments combined to form a synthetic instrument
shall be recognised and treated separately from other
instruments,
in accordance with the general provisions,
valuation rules, income recognition and instrument-specific
requirements set out in this Guideline.

2.
In derogation from Articles 3(b), 7(3), 11(1) and 13(2),
the following alternative treatment may be applied to the
valuation of synthetic instruments:

(a) unrealised gains and losses of the instruments combined
to form a synthetic instrument are netted at the year-end.
In such case, net unrealised gains shall be recorded in a
revaluation account. Net unrealised losses shall be taken
to the profit and loss account if they exceed previous net
revaluation gains registered in the corresponding reva-
luation account;

L 42/86

EN

Official Journal of the European Union

16.2.2008

(b) securities held as part of a synthetic instrument shall not
form part of the overall holding on these securities but
shall be part of a separate holding;

(c) unrealised losses taken to the profit and loss account at
the year-end and the corresponding unrealised gains shall
be separately amortised in subsequent years.

or

exercised,

If one of the instruments combined expires,

is sold,
3.
terminated
shall
discontinue prospectively the alternative treatment specified
in paragraph 2 and any unamortised valuation gains credited
in the profit and loss account in previous years shall be
immediately reversed.

reporting

entity

the

The alternative treatment specified in paragraph 2 may

4.
only be applied if the following conditions are met:

(a)

individual

instruments

the
are managed and their
performance is evaluated as one combined instrument,
based on either a risk management or
investment
strategy;

(d) availability of

the
fulfilment of the conditions set up in the preceding para-
graphs a, b and c to be verified.’;

formal documentation allowing

2. the word ‘TARGET’

is replaced by the words ‘TARGET/
in Article 10(1)(a) and the following parts of

TARGET2’
Annex IV:

(a)

in the table headed ‘Assets’, in relation to balance sheet
item 9.5; and

(b) in the table headed ‘Liabilities’,

in relation to balance

sheet items 6 and 10.4;

3. Annex II

to Guideline ECB/2006/16 is
accordance with the Annex to this Guideline.

amended in

Article 2

Entry into force

This Guideline shall enter into force on 1 January 2008.

Article 3

Addressees

(b) on initial recognition,

the individual

instruments are

structured and designated as a synthetic instrument;

This Guideline applies to all Eurosystem central banks.

(c)

the application of the alternative treatment eliminates or
significantly reduces a valuation inconsistency (valuation
mismatch) that would arise from applying general rules
set out in this Guideline at an individual
instrument
level; and

For the Governing Council of the ECB
The President of the ECB

Jean-Claude TRICHET

Done at Frankfurt am Main, 17 December 2007.

16.2.2008

EN

Official Journal of the European Union

L 42/87

ANNEX

Annex II to Guideline ECB/2006/16 is amended as follows:

1. the definition of ‘interlinking’ is deleted;

2. the following definition is added after ‘strike price’:

‘Synthetic instrument: a financial instrument created artificially by combining two or more instruments with the aim of
replicating the cash flow and valuation patterns of another instrument. This is normally done via a financial inter-
mediary.’;

3. the definition of ‘TARGET’ is replaced by the following:

‘TARGET: the Trans-European Automated Real-time Gross settlement Express Transfer system, pursuant to Guideline
ECB/2005/16 of 30 December 2005 on a Trans-European Automated Real-time Gross settlement Express Transfer
system (TARGET) (*).;
___________
(*) OJ L 18, 23.1.2006, p. 1. Guideline as amended by Guideline ECB/2006/11 (OJ L 221, 12.8.2006, p. 17).’

4. the following definition is added after the definition of ‘TARGET’:

‘TARGET2: the Trans-European Automated Real-time Gross settlement Express Transfer system, pursuant to Guideline
ECB/2007/2 of 26 April 2007 on a Trans-European Automated Real-time Gross settlement Express Transfer system
(TARGET2) (*).
___________
(*) OJ L 237, 8.9.2007, p. 1.’