Opinion of the European Central Bank of 9 December 2010 on the increase of Banque de France’s capital and statutory reserve (CON/2010/88)
Date: 2010-12-09
Institutions: European Central Bank
Subjects: France, capital increase, central bank, foreign-exchange reserves, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 9 December 2010 

on the increase of Banque de France’s capital and statutory reserve 

(CON/2010/88) 

Introduction and legal basis 

On 11 November 2010, the European Central Bank (ECB) received a request from the French Ministry 

for Economic Affairs, Industry and Employment for an opinion on a draft decree on Banque de France 

budgetary and financial provisions (hereinafter the ‘draft decree’). 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning of the European Union and the third indent of Article 2(1) 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  draft  law  relates  to  the  Banque  de  France.  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 decree 

1.1  The  draft  decree  provides  for  an  increase  of  Banque  de  France’s  capital  from  around 
EUR 457 million2  to  EUR  1  billion,  and  for  an  increase  of  the  ceiling  of  the  statutory  reserve, 
which  is  equal  to  the  amount  of  Banque  de  France’s  capital3,  to  double  that  amount,  i.e. 

EUR 2 billion. 

1.2 

In addition, the draft decree specifies that the capital increase will be made by incorporating into 

the capital, (a) funds taken from the statutory reserve up to an amount equal to the current amount 

of Banque de France’s capital; and (b) funds taken from the unallocated reserve fund. 

1 
2 

3 

OJ L 189, 3.7.1998, p. 42. 
Article R.144-10 of the French Monetary and Financial Code currently provides that the Banque de France’s capital shall 
be EUR 457 347 051.71. 
Article R.144-4, paragraph 2, of the French Monetary and Financial Code currently provides that a deduction of 5% of 
the net result for the financial year shall be allocated to a specific reserve that will no longer be funded when it reaches an 
amount  equal  to  the  Banque  de  France's  capital.  The  ECB  understands  that  the  specific  reserve  referred  to  in  this 
provision  corresponds  to  the  statutory  reserve  in  the  annual  accounts  of  Banque  de  France  as  published  in  Banque  de 
France’s annual report. 

 
 
 
 
 
                                                 
2. 

General observations 

2.1  The ECB welcomes the proposed increase of Banque de France’s capital and statutory reserve and 

understands that this decision has been made in close cooperation with Banque de France. The ECB 

considers  it  important  from  the  perspective  of  central  bank  independence  that  such  decisions  are 

initiated and taken in close cooperation with the relevant national central bank (NCB) which is best 
placed  to  assess  its  required  level  of  reserve  capital4.  The  principle  of  financial  independence 

requires  an  NCB  to  have  sufficient  means  not  only  to  perform  its  ESCB  or  Eurosystem-related 

tasks  but  also  its  national  tasks  (e.g.  financing  its  administration  and  own  operations).  Financial 
independence also implies that an NCB should always be sufficiently capitalised5. In particular, the 

ECB  is  of  the  view  that  the  higher  the  level  of  capital,  reserves  and  provisions  against  financial 
risks  is,  the  higher  the  safeguards  against  future  losses  are6.  As  mentioned  in  the  ECB’s 
Convergence Report 20107, any situation should be avoided whereby for a prolonged period of time 

an NCB’s net equity is below the level of its statutory capital or is even negative, including where 

losses  beyond  the  level  of  capital  and  the  reserves  are  carried  over.  Any  such  situation  may 

negatively impact on the NCB’s ability to perform not only its ESCB or Eurosystem-related tasks 

but also its national tasks. Moreover, such a situation may affect the credibility of the Eurosystem’s 

monetary  policy.  Therefore,  the  event  of  an  NCB’s  net  equity  becoming  less  than  its  statutory 

capital or even negative would require that the respective Member State provides the NCB with an 

appropriate  amount  of  capital  at  least  up  to  the  level  of  the  statutory  capital  within  a  reasonable 

period of time so as to comply with the principle of financial independence. 

2.2  The ECB understands that the existing statutory reserve will be fully incorporated into the capital in 
order to finance its increase. As provided for by the draft decree8, such reserve will in subsequent 

years be gradually built up again up to a higher amount, equal to double the new capital amount, i.e. 

EUR 2 billion. The ECB welcomes the increase of the ceiling of the statutory reserve. This should 

contribute to ensuring that the financial protection deemed necessary to safeguard the real value of 

an NCB’s capital and assets is strengthened before remaining profits may be distributed to the State 

in  accordance  with 

budget, 
the  principle  of  financial 
the  requirements  resulting  from 
independence9.  The  ECB  notes  that  the  draft  decree  does  not  propose  modifying  the  level  of  the 

deduction of the net result for the financial year to be allocated to the regulatory reserve, which is 

set to 5% of the net result. In order to safeguard the real value of its capital and assets, it is essential 

that  Banque  de  France  rebuilds  its  reserves  in  a  period  of  time  it  considers  appropriate  and  that 

Banque de France independently builds up any financial provisions deemed necessary. 

4 
5 
6 
7  
8 

9 

See the ECB’s Convergence Report 2010, p. 23. 
See the ECB’s Convergence Report 2010, p. 21. 
See also, in this regard, Opinion CON/2008/34, paragraph 4.2, available on the ECB’s website at www.ecb.europa.eu. 
See the ECB’s Convergence Report 2010, pp. 21-22. 
Pursuant to Article R.144-4, paragraph 2, of the French Monetary and Financial Code, as modified by the draft decree, a 
deduction  of  5%  of  the  net  result  for  the  financial  year  shall  be  allocated  to  a  specific  reserve  that  will  no  longer  be 
funded when it reaches an amount equal to the double of Banque de France's capital. 
See the ECB’s Convergence Report 2010, p. 23. 

2 

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

Done at Frankfurt am Main, 9 December 2010. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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