Opinion of the European Central Bank of 29 February 2012 on minimum reserve requirements (CON/2012/16)
Date: 2012-02-29
Institutions: European Central Bank
Subjects: Eurosystem, Latvia, credit institution, credit union, foreign-exchange reserves, monetary policy, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 29 February 2012  

on minimum reserve requirements 

(CON/2012/16) 

Introduction and legal basis 

On  6  February  2012  the  European  Central  Bank  (ECB)  received  a  request  from  Latvijas  Banka  for  an 

opinion on a draft regulation on the minimum reserve requirements for credit institutions (hereinafter the 

‘draft regulation’). 

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 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 draft regulation relates to instruments of monetary policy. 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 regulation 

The  draft  regulation  replaces  the  current  regulation  with  the  aim  of  further  harmonising  the  Latvian 

minimum reserve requirements with those of Eurosystem. It clarifies the application of minimum reserve 

requirements,  in  particular,  the  reporting  procedures  and  calculations  following  mergers  or  divisions  of 

credit  institutions.  It  also  amends  the  criteria  for  granting  exemptions  from  reserve  requirements  and 

aligns terminology with other legal acts. 

2. 

General observations 

Member  States  that  have  not  adopted  the  euro  retain  their  monetary  policy  powers,  including  in 

connection with their minimum reserves frameworks. Nevertheless, it is beneficial to achieve consistency 

with  the  Eurosystem  minimum  reserves  framework  so  that  their  credit  institutions  become  acquainted 

with the reserve requirements that will apply to them following the adoption of the euro by the Member 

State  where  they  are  established.  The  legal  framework  for  the  Eurosystem’s  minimum  reserve  system 

consists  of:  (i) Article  19  of  the  Statute  of  the  European  System  of  Central  Banks  and of  the  European 

Central Bank; (ii) Council Regulation (EC) No 2531/98 of 23 November 1998 concerning the application 

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OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
 
                                                 
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of minimum reserves by the European Central Bank2; (iii) Regulation ECB/2003/9 of 12 September 2003 
on  the  application  of  minimum  reserves3;  and  (iv)  in  relation  to  the  definition  and  calculation  of  the 

reserve  base,  Regulation  ECB/2008/32  of  19  December  2008  concerning  the  balance  sheet  of  the 
monetary financial institutions sector4. Article 11 and Annex III to Regulation ECB/2008/32 require the 

use  of  statistical  information  by  credit  institutions  reported  under  this  Regulation  for  minimum  reserve 

purposes. 

3. 

Credit unions 

Previous  ECB  opinions  on  Latvijas  Banka’s  minimum  reserve  requirements  and  other  monetary  policy 
instruments5 emphasised the need to further align the Latvian minimum reserves regime with Eurosystem 

standards.  In  particular,  Latvian  credit  unions  will  be  subject  to  the  Eurosystem’s  minimum  reserve 

requirements when Latvia adopts the euro. 

4. 

Reserve ratios 

ECB  has  also  previously  commented  on  the  provision6  entitling  Latvijas  Banka  to  establish  different 

reserve ratios for deposits with an agreed maturity over two years, deposits redeemable at notice over two 

years, debt securities issued with an agreed maturity over two years, repos and other liabilities. Under this 

provision, reserve ratios applied by Latvijas Banka could differ from the fixed reserve ratios in Article 4 

of  Regulation  ECB/2003/9.  These  differences  between  the  Eurosystem  and  Latvia  will  need  to  be 

eliminated on Latvia’s accession to the euro area. 

5. 

Reporting procedures 

The  ECB  welcomes  the  introduction  of  a  time  limit  for  revising  calculations  of  credit  institutions’ 
minimum reserves7 that further aligns Latvian reporting requirements with those of the Eurosystem. The 

ECB  also  welcomes  the  modifications  to  the  procedures  following  mergers  or  divisions  of  credit 
institutions8. 

6. 

Exemptions and lists 

The ECB welcomes the introduction of separate lists for institutions subject to reserve requirements and 

institutions exempt from reserve requirements which brings the Latvian minimum reserves regime more 

in  line  with  the  procedures  in  Article  2(3)  of  Regulation  ECB/2003/9.  The  ECB  notes  that  the  Latvian 

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OJ L 318, 27.11.1998, p. 1. 
OJ L 250, 2.10.2003, p. 10. 
OJ L 15, 20.1.2009, p. 14. 
See ECB Opinions CON/2006/11, CON/2008/89, CON/2010/18 and CON/2010/77. All ECB opinions are available on 
the ECB’s website at www.ecb.europa.eu. 
See Section III of the draft regulation. 
See Section V of the draft regulation. 
See Section VI of the draft regulation. 

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minimum reserve regime, as provided in the draft regulation, does not provide for exempting institutions 

from reserve requirements because they are subject to freezing of funds and/or other measures imposed 

by  the  European  Union  or  a  Member  State  under  Article  75  of  the  Treaty  or  a  decision  by  the  ECB’s 

Governing Council. The ECB welcomes amendments to the criteria for granting exemptions. However, 

the grounds for exempting credit institutions from reserve requirements provided for in Article 27 of the 

draft  regulation  are  narrower  than  those  provided  for  in  Article  2(2)  of  Regulation  ECB/2003/9. 

Therefore, the ECB recommends further alignment with Regulation ECB/2003/9. 

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

Done at Frankfurt am Main, 29 February 2012. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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