Opinion of the European Central Bank of 22 November 2013 on the reserve requirements for credit institutions (CON/2013/79)
Date: 2013-11-22
Institutions: European Central Bank
Subjects: Lithuania, credit institution, credit union, foreign-exchange reserves, monetary policy, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 22 November 2013 

on the reserve requirements for credit institutions 

(CON/2013/79) 

Introduction and legal basis 

On 11 October 2013, the European Central Bank (ECB) received a request from Lietuvos bankas for an 

opinion  on  a  draft  resolution  amending  the  Rules  on  reserve  requirements  for  credit  institutions 

(hereinafter the ‘draft resolution’). 

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 resolution relates to instruments concerning monetary policy of a non-euro area 

Member  State.  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 resolution 

1.1  The draft resolution aims to: (a) extend the scope of reserve requirements by making credit unions 

subject to those requirements; (b) align the Lithuanian minimum reserves regime with Eurosystem 

standards;  (c)  change  the  procedure  of  calculating  and  approving  reserve  requirements,  and  (d) 

make  some  technical  amendments  to  the  Rules  on  reserve  requirements  in  order  to  take  into 

account the special characteristics of credit unions. 

1.2  The  draft  resolution  is  to  apply  from  1  April  2014.  As  regards  credit  unions,  the  reserve 

requirements  are  to  apply  to  credit  unions  from  the  maintenance  period  starting  after 

1 January 2015. 

2. 

General observations 

2.1  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  for  them  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 

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OJ L 189, 3.7.1998, p. 42. 

 
 
 
 
 
                                                 
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Eurosystem’s  minimum  reserve  system  consists  of:  (a) Article  19  of  the  Statute  of  the  European 

System  of  Central  Banks  and  of  the  European  Central  Bank;  (b)  Council  Regulation  (EC) 
No 2531/982; (c) Regulation ECB/2003/93; and (d) in relation to the definition and calculation of 
the reserve base, Regulation ECB/2008/324. Article 11 and Annex III to Regulation ECB/2008/32 

require  that  each  credit  institution  uses  the  statistical  information  reported  by  credit  institutions 

under this Regulation for minimum reserve purposes. 

2.2  The  ECB  welcomes  the  changes  to  Lithuanian  law  that  will  be  brought  about  under  the  draft 

resolution  as  part  of  the  preparations  for  the  introduction  of  the  euro  in  Lithuania.  Within  the 

framework  of  monetary  policy,  which  remains  a  competence  of  Lietuvos  bankas  until  the 

introduction  of  the  euro,  the  draft  resolution  will  further  harmonise  the  current  Lithuanian 

minimum reserve system with the Eurosystem standards that will apply after the introduction of the 

euro. 

3. 

Institutions subject to reserve requirements 

The ECB welcomes the initiative to include Lithuanian credit unions under the scope of the Lithuanian 

minimum  reserves  regime.  As  the  ECB  has  pointed  out  in  several  earlier  opinions,  Lithuanian  credit 
unions should also be subject to reserve requirements5. 

4.   Reserve base 

4.1  The ECB understands that the regulatory and supervisory framework for credit unions is currently 
being revised in Lithuania6. In the future, there will be a differentiation between a credit union’s 

different  share  contributions.  Primary  share  contributions  will  carry  both  voting  and  dividend 

rights, with a number of restrictions on their redemption. Supplementary share contributions will 

carry  the  right  to receive  dividends, but  no  voting  rights,  and  it  will  be  possible  to  redeem  them 
according to the rules set by the credit union itself7. 

4.2  According to Article 3(1) of Regulation ECB/2003/9, the liabilities resulting from the acceptance 

of  funds  that  comprise  an  institution’s  reserve  base,  i.e.  deposits  and  debt  securities  issued,  are 

defined within the ECB’s reporting framework for money and banking statistics. 

According  to  Regulation  ECB/2008/32,  the  definition  of  ‘deposits’  includes  ‘shares  issued  by 

monetary  financial  institutions  (MFIs)’.  Such  shares  are  classified  as  deposits  rather  than  capital 

2  

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5  

6  
7  

Council  Regulation  (EC)  No  2531/98  of  23  November  1998  concerning  the  application  of  minimum  reserves  by  the 
European Central Bank (OJ L 318, 27.11.1998, p. 1). 
Regulation ECB/2003/9 of 12 September 2003 on the application of minimum reserves (OJ L 250, 2.10.2003, p. 10). 
Regulation ECB/2008/32 of 19 December 2008 concerning the balance sheet of the monetary financial institutions sector 
(OJ L 15, 20.1.2009, p. 14). 
See paragraph 2 of CON/2012/110 and paragraph 14 of Opinion CON/2005/8, in which the ECB stressed that Lithuanian 
credit unions fall under the definition of a credit institution within the meaning of the Consolidated Banking Directive, 
and will therefore be subject to the Eurosystem reserve requirements when Lithuania adopts the euro. All ECB opinions 
are published on the ECB’s website at www.ecb.europa.eu. 
See CON/2013/63. 
See Explanatory memorandum to the draft resolution. 

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and reserves if: (a) there is a debtor-creditor economic relationship between the issuing MFI and 

the holder (regardless of any property rights in these shares); and (b) the shares can be converted 

into  currency  or  redeemed  without  significant  restrictions  or  penalties.  A  notice  period  is  not 

considered to be a significant restriction. In addition, such shares must comply with the following 

conditions.  First,  the  issuing  MFI  has  no  unconditional  right  to  refuse  redemption  of  its  shares. 

Second, the shares are ‘value certain’, i.e. under normal circumstances they will be paid out at their 

nominal value in the event of redemption. Third, in the event of the MFI’s insolvency, the holders 

of  its shares are  not  legally  subject  to  either:  (a) the obligation to cover  outstanding  liabilities in 

addition  to  the  nominal  value  of  the  shares,  i.e.  the  shareholders’  participation  in  the  subscribed 

capital,  or  (b)  any  other  onerous  supplementary  obligations.  The  subordination  of  shares  to  any 

other instrument issued by the MFI does not qualify as an onerous supplementary obligation. 

4.3 

If, according to the future regulatory framework for credit unions in Lithuania, the supplementary 

share contributions will comply with the above-mentioned criteria, such share contributions are to 

be considered as deposits and, accordingly, included in an institution’s reserve base for the purpose 

of calculating minimum reserves. 

4.4  On the basis of the information provided in the consultation letter, the ECB also understands that, 

according  to  the  future  regulatory  framework  for  credit  unions  in  Lithuania,  primary  share 

contributions  will  not  fulfil  the  criteria  of  ‘shares  issued  by  MFIs’.  Therefore,  primary  share 

contributions  are  not  to  be  considered  as  deposits  and  should  not  be  included  in  an  institution’s 

reserve base. 

5. 

Reserve ratios 

5.1  The  ECB  notes8  that  a  reserve  ratio  of  3 %  is  applied  to  most  of  the  liabilities  included  in  the 

reserve base, while the Eurosystem applies 1 %. 

5.2  Similar to the Eurosystem standards: (a) deposits with an agreed maturity period of over two years; 

(b)  deposits  redeemable  at  a  notice  period  of  over  two  years;  (c)  debt  securities  issued  with  an 

original  maturity  of  over  two  years;  and  (d)  repurchase  agreements  continue  to  be  subject  to  a 

reserve ratio of 0 % under the Lithuanian minimum reserves regime.  

6. 

Remuneration 

The ECB notes9 that under the Lithuanian minimum  reserves regime, the holdings of required reserves 

are  remunerated  not  by  reference  to  the  ECB  rate  for  the  main  refinancing  operations,  as  stipulated  in 

Article 8 of Regulation ECB/2003/9, but rather by reference to the ECB deposit facility rate. 

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

8  
9  

Also see paragraph 1.1 of CON/2012/110,  
Also see paragraph 3 of CON/2012/110. 

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Done at Frankfurt am Main, 22 November 2013 

[signed] 

The President of the ECB 

Mario DRAGHI 

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