Opinion of the European Central Bank of 28 October 2015 on reserve ratios (CON/2015/39)
Date: 2015-10-28
Institutions: European Central Bank
Subjects: Hungary, credit institution, foreign-exchange reserves, monetary policy, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 28 October 2015 

on reserve ratios 

(CON/2015/39) 

Introduction and legal basis 

On 6 October 2015 the European Central Bank (ECB) received a request from the Magyar Nemzeti Bank 

(MNB) for an opinion on the MNB’s draft decree on the reserve ratio (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 Article 2(2) of Council Decision 98/415/EC1, as the draft decree 

relates  to  instruments  of  monetary  policy  of  a  Member  State  whose  currency  is  not  the  euro.  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.  Background and purpose of the draft decree 

1.1 

In  2010  the  Governor  of  the  MNB  adopted  Decree  13/20102  on  the  reserve  ratio,  in  relation  to 
which  the  ECB  adopted  Opinion  CON/2010/683.  In  respect  of  certain  liability  categories,  MNB 

Decree 13/2010 introduced a variable reserve ratio requirement, allowing credit institutions subject 

to  reserve  requirements  to  choose  from  multiple  reserve  ratios,  in  order  to  enable  them  to  cope 

with larger fluctuations in their liquidity needs. The draft decree ends this practice by defining that a 

reserve ratio of 0% will apply to: (a) deposits and loans received with a remaining maturity of over 

two  years  at  the  time  they  are  entered  into  the  balance  sheet  of  the  credit  institution;  (b)  debt 

securities issued with an agreed maturity over two years; and (c) repos. A generic reserve ratio of 

2%  will  apply  to  all  other  liabilities  included  in  the  reserve  base  of  a  credit  institution  subject  to 

reserve requirements. 

1.2  According  to  the  MNB’s  calculations,  up  to  October  2015  the  effective  weighted  average  reserve 

ratio  amounts  to  2.98%  for  the  affected  credit  institutions.  Based  on  the  background  information 

provided  by  the  MNB,  the  measure  introduced  by  the  draft  decree  is  expected  to  release 

HUF 160 billion  (0.5%  of  Hungary’s  GDP;  EUR  520  million)  of  additional  liquidity  that  would 

become available to the banking sector.  

1.3 

In the explanatory memorandum  attached to the  draft decree, the MNB  notes that the suggested 

legislative  change  has  been  brought  forward  due  to  a  contradiction  between  the  currently 

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Council  Decision  98/415/EC  of  29  June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
MNB Decree 13/2010 (IX.6.) on the reserve ratio, published in Magyar Közlöny 2010/141. 

All ECB opinions are available on the ECB’s website at www.ecb.europa.eu. 

 
 
 
 
                                                 
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applicable reserve requirements and the MNB’s so-called ‘self-financing programme’. According to 

the explanatory memorandum, ‘with the development of the programme, the MNB aims to further 

stimulate  credit  institutions’  purchases  of  government  securities  by  channelling  their  surplus 

liquidity to the government securities market’, thereby strengthening financial stability by reducing 

the  external  vulnerability  of  the  Hungarian  economy.  The  MNB considers  the  currently  applicable 

reserve ratios to be in contradiction with these objectives. The explanatory memorandum notes that 

the  provisions  of  the  draft  decree  aim  to  introduce  reserve  ratio  requirements  similar  to  those 

applied by the ECB. The MNB also mentioned that the draft decree reflects the fact that by 2015, 

Hungarian  credit  institutions’  liquidity  environment  had  improved  significantly  in  comparison  to 

2010, when the variable reserve ratios were introduced as a means of crisis management. 

2. 

General observations 

2.1 

In Opinion CON/2010/68, the ECB noted that Member States whose currency is not the euro retain 

their powers in the field of monetary policy, which gives them greater flexibility to address liquidity 

shocks and market inefficiencies that hinder the implementation of national monetary policy. In that 

opinion, the ECB noted that once the euro is introduced, Hungary’s monetary policy will need to be 

consistent  with  the  Eurosystem’s  operational  framework,  and  that  credit  institutions  should 

therefore be familiar with the requirements that will apply to them once the single monetary policy is 

implemented in Hungary. Against the above backdrop, the ECB takes note of that the draft decree 

repeals  the  previously  applicable  variable  reserve  requirements  by  defining  reserve  ratio 

requirements  comparable  to  those  set  out  in  Regulation  (ECB)  No  1745/2003  of  the  European 
Central Bank4 and its amendments introduced by Article 1(3) of Regulation (EC) No 1052/2008 of 
the European Central Bank (ECB/2008/10)5 and Article 1 of Regulation (EU) No 1358/2011 of the 
European Central Bank (ECB/2011/26)6. 

2.2  Credit  institutions  that  previously  chose  a  reserve  ratio  above  2%  will,  as  a  result  of  the  draft 

decree,  be  required  to  reduce  their  minimum  reserves,  which  will  create  a  liquidity  surplus.  The 

ECB takes note that the draft decree does not define any requirements regarding investment of the 

surplus  liquidity  in  particular  assets,  nor  does  it  contain  any  legally  binding  provisions  requiring 

credit institutions to invest in government securities. 

The declared aim of the draft decree referred to under point 1.3, read in conjunction with the recent 

changes in the MNB’s monetary policy framework, could raise questions regarding its compatibility 

with the principles underlying the prohibition of privileged access, as enshrined in Article 124 of the 

Treaty,  in  terms  of  the  MNB’s  communication  and  in  terms  of  its  possible  effects.  Although  the 

prohibition  on  privileged  access  is  addressed  to  the  Member  States,  it  also  concerns  national 

central  banks  since  they  are  also  bound  by  Union  law  and  cannot  take  measures  granting 

privileged  access  by  the  public  sector  to  financial  institutions  if  such  measures  are  not  based  on 

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Regulation (EC) No 1745/2003 of the European Central Bank of 12 September 2003 on the application of minimum 
reserves (ECB/2003/9) (OJ L 250, 2.10.2003, p. 10). 

(EC)  No  1052/2008  of 

Regulation 
(OJ L 282, 25.10.2008, p. 14). 
Regulation  (EU)  No  1358/2011  of 
(OJ L 338, 21.12.2011, p. 51). 

the  European  Central  Bank  of  22  October  2008 

(ECB/2008/10) 

the  European  Central  Bank  of  14  December  2011  (ECB/2011/26) 

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prudential considerations7. Recital 4 of Council Regulation (EC) No 3604/93 clearly indicates that 

Article  124  of  the  Treaty  forms  an  essential  element  of  the  submission  of  the  public  sector  in  its 

financing operations to the discipline of the market mechanism and so makes a contribution to the 

strengthening of budgetary discipline.  

In the light of the above, the MNB is invited to give due consideration to the principles underlying 

the prohibition of privileged access when communicating the reasons for adopting the draft decree. 

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

Done at Frankfurt am Main, 28 October 2015. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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See  also  recital  10  and  Article  3(2)  of  Council  Regulation  (EC)  No  3604/93  No  3604/93  of  13  December  1993 
specifying definitions for the application of the prohibition of privileged access referred to in Article 104a of the Treaty 
(OJ L 332, 31.12.1993, p. 4). 

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