Annual accounts 2018.
Date: 2019-06-02
Institutions: European Central Bank
Subjects: European Central Bank, European System of Central Banks, activity report, euro, financial policy, monetary policy, operation of the Institutions, price stability

Annual Accounts of the ECB 

2018 

Management report 

Financial statements of the ECB 

Balance Sheet as at 31 December 2018 

Profit and Loss Account for the year ending 31 December 2018 

Accounting policies 

Notes on the Balance Sheet 

Off-balance-sheet instruments 

Notes on the Profit and Loss Account 

Post-balance sheet events 

Independent auditor’s report 

Note on profit distribution/allocation of losses 

2 

22 

22 

24 

25 

33 

50 

53 

60 

63 

66 

Annual Accounts 2018 

A 1 

 
 
 
 
Management report 

1 

Purpose of the ECB’s management report 

The management report is an integral part of the ECB’s Annual Accounts and is 
designed to provide readers with contextual information related to the financial 
statements.1 Given that the ECB’s activities and operations are undertaken in 
support of its policy objectives, its financial position and result should be viewed in 
conjunction with its policy actions. 

To this end, the management report presents the ECB’s key activities and 
operations, as well as their impact on its financial statements. Furthermore, it 
analyses the main developments in the Balance Sheet and the Profit and Loss 
Account during the year and includes information on the ECB’s financial resources. 
Finally, it describes the risk environment in which the ECB operates, providing 
information on the financial and operational risks to which the ECB is exposed, and 
the risk management policies used to mitigate risks. 

2 

Activities 

The ECB is part of the Eurosystem, which has the primary objective of maintaining 
price stability. The ECB’s main tasks, as described in the Statute of the ESCB,2 
comprise the implementation of the monetary policy of the euro area, the conduct of 
foreign exchange operations, the management of the official foreign reserves of the 
euro area countries and the promotion of the smooth operation of payment systems. 

The ECB is also responsible for the effective and consistent functioning of the Single 
Supervisory Mechanism (SSM), with a view to carrying out intrusive and effective 
banking supervision, contributing to the safety and soundness of the banking system 
and the stability of the financial system. 

The Eurosystem’s monetary policy operations are recorded in the financial 
statements of the ECB and of the euro area national central banks (NCBs), reflecting 
the principle of decentralised implementation of monetary policy in the Eurosystem. 
Figure 1 below provides an overview of the main operations and functions of the 
ECB in pursuit of its mandate, and their impact on the ECB’s financial statements. 

1   The “financial statements” comprise the Balance Sheet, the Profit and Loss Account and the related 

notes. The “Annual Accounts” comprise the financial statements, the management report, the auditor’s 
report and the note on profit distribution/allocation of losses. 

2   Protocol on the Statute of the European System of Central Banks and of the European Central Bank. 

Annual Accounts 2018 

A 2 

                                                                    
Figure 1 
The ECB’s key activities and their impact on its financial statements 

Implementation of monetary policy

Standard monetary policy operations in euro

Liquidity-providing operations in foreign currency

Monetary policy operations conducted with the standard 
set of instruments (i.e. open market operations, standing 
facilities and minimum reserve requirements for credit 
institutions) are implemented in a decentralised manner by 
the NCBs of the Eurosystem. Accordingly, these 
operations are not reflected in the ECB's financial 
statements.

The ECB acts as an intermediary between non-euro area 
central banks and the Eurosystem NCBs by means of 
swap transactions aimed at offering short-term foreign 
currency funding to Eurosystem counterparties.
These operations are recorded in the balance sheet items 
“Liabilities to non-euro area residents denominated in 
euro” and “Other claims within the Eurosystem” or
“Other liabilities within the Eurosystem” and have no 
impact on the ECB’s Profit and Loss Account.

Securities held for monetary policy purposes

Securities lending

Purchases of these securities are conducted by the ECB 
and NCBs of the Eurosystem and are recorded under the 
balance sheet item “Securities held for monetary policy 
purposes”. The securities currently held are accounted for 
at amortised cost, subject to impairment. 
Coupon accruals and amortised premiums and discounts 
are included in the Profit and Loss Account on a net basis 
under either “Other interest income” or “Other interest 
expense”, depending on whether the net amount is 
positive or negative.

Securities held for monetary policy purposes are available 
for lending by the Eurosystem.* For the ECB, these 
operations are conducted via a specialised institution. 
These operations are recorded in the balance sheet items 
“Other liabilities to euro area credit institutions 
denominated in euro” and “Liabilities to non-euro area 
residents denominated in euro” if collateral is provided in 
the form of cash and this cash is still uninvested. 
Otherwise, the related securities lending operations are 
recorded in off-balance sheet accounts.

* Further details on securities lending can be found on the ECB’s website. 

Conduct of foreign exchange operations and management of the official foreign reserves of the euro area countries

Foreign exchange operations and management of foreign reserves

The ECB’s foreign reserves are presented on-balance sheet, mainly under “Gold and gold receivables”, “Claims on non-euro 
area residents denominated in foreign currency”, “Claims on euro area residents denominated in foreign currency”, “Liabilities 
to euro area residents denominated in foreign currency” and “Liabilities to non-euro area residents denominated in foreign 
currency”. Foreign exchange transactions are reflected in off-balance-sheet accounts until the settlement date. 
Net interest income, including coupon accruals and amortised premiums and discounts, is included in the Profit and Loss 
Account under the item “Interest income on foreign reserve assets”.
Unrealised price and exchange rate losses exceeding previously recorded unrealised gains on the same items, as well as 
realised gains and losses arising from the sale of foreign reserves, are also included in the Profit and Loss Account under the 
items “Write-downs on financial assets and positions” and “Realised gains/losses arising from financial operations” 
respectively. Unrealised gains are recorded on-balance sheet under the item “Revaluation accounts”.

Annual Accounts 2018 

A 3 

 
 
 
 
Promotion of the smooth operation of payment systems

Payment systems (TARGET2)

Intra-Eurosystem balances of euro area NCBs vis-à-vis the ECB arising from TARGET2* are presented together on the 
Balance Sheet of the ECB as a single net asset or liability position. The remuneration of these balances is included in the 
Profit and Loss Account under the items “Other interest income” and “Other interest expense”.

* Further details on TARGET2 can be found on the ECB’s website. 

Contributing to the safety and soundness of the banking system and the stability of the financial system

Banking supervision – the Single Supervisory Mechanism

The annual expenses of the ECB in relation to its supervisory tasks are recovered via annual supervisory fees levied on the 
supervised entities. The supervisory fees are included in the Profit and Loss Account under the heading “Net income from 
fees and commissions”.
Furthermore, the ECB is entitled to impose administrative penalties on supervised entities for failure to comply with 
obligations under EU banking prudential regulation (including ECB supervisory decisions). The related income is recorded in 
the Profit and Loss Account under the heading “Net income from fees and commissions”.

Other

Banknotes in circulation

Own funds portfolio

The ECB has been allocated a share of 8% of the total 
value of euro banknotes in circulation. This share is 
backed by claims on the NCBs, which bear interest at the 
rate on the main refinancing operations. This interest is 
included in the Profit and Loss Account under the item 
“Interest income arising from the allocation of euro 
banknotes within the Eurosystem”.
Expenses arising from the cross-border transportation of 
euro banknotes between banknote printing works and 
NCBs, for the delivery of new banknotes, and between 
NCBs, for the compensation of shortages with surplus 
stocks, are borne centrally by the ECB. These expenses 
are presented in the Profit and Loss Account under the 
heading “Banknote production services”.

The own funds portfolio of the ECB is presented on-
balance sheet, mainly under the item “Other financial 
assets”.
Net interest income, including coupon accruals and 
amortised premiums and discounts, is included in the 
Profit and Loss Account under “Other interest income” and 
“Other interest expense”.
Unrealised price losses exceeding previously recorded 
unrealised price gains on the same items, as well as 
realised gains and losses arising from the sale of 
securities, are also included in the Profit and Loss Account 
under the items “Write-downs on financial assets and 
positions” and “Realised gains/losses arising from financial 
operations” respectively. Unrealised price gains are 
recorded on-balance sheet under the item “Revaluation 
accounts”.

Annual Accounts 2018 

A 4 

 
 
 
 
 
 
3 

Financial developments3 

3.1 

Balance Sheet 

€32.9 billion
Increase in total assets 
in 2018

The ECB’s Balance Sheet started expanding in the fourth quarter of 2014 due to the 
acquisition of securities under the third covered bond purchase programme (CBPP3) 
and the asset-backed securities purchase programme (ABSPP). This expansion has 
continued in subsequent years (see Chart 1), owing mainly to the acquisition of 
securities under the public sector purchase programme (PSPP). 

In 2018 the ECB’s total assets increased by €32.9 billion to €447.1 billion, mainly 
owing to its share of purchases of securities under the asset purchase programme 
(APP)4. The increase was smaller than in 2017 owing to the reduced pace of 
monthly APP purchases in 2018. These purchases resulted in an increase in 
“Securities held for monetary policy purposes”, while the cash settlement of these 
purchases via TARGET2 accounts led to a corresponding increase in “Intra-
Eurosystem liabilities”. 

3   Throughout this document, the numbers presented may not add up precisely to the totals and 

percentages may not precisely reflect the absolute figures owing to rounding. 

4   The APP consists of the CBPP3, the ABSPP, the PSPP and the corporate sector purchase programme 

(CSPP). Further details on the APP can be found on the ECB’s website. 

Annual Accounts 2018 

A 5 

                                                                    
 
Chart 1 
Main components of the ECB’s Balance Sheet  

(EUR billions) 

Foreign reserve assets
Securities held for monetary policy purposes
Intra-Eurosystem claims
Other assets

Banknotes in circulation
Intra-Eurosystem liabilities
Other liabilities
General risk provision, revaluation accounts, 
capital, reserves and profit for the year

+ 7.9%

Assets:

Liabilities:

500

400

300

200

100

0

100

200

300

400

500

185.3

62.2
17.8

81.3

24.0

81.3

64.1

36.2

256.6

67.4

77.8

86.7

24.8

86.7

123.9

41.3

349.0

71.4

160.8

90.1

26.6

90.1

192.0

21.7
45.2

414.2

65.7

228.4

93.7

26.4

93.7

258.5

23.4
38.6

2014

2015

2016

2017

Source: ECB. 

447.1

69.6

251.7

98.5

27.3

98.5

283.9

22.8
41.9

2018

56%
of total assets are 
securities held for 
monetary policy 
purposes 

Euro-denominated securities held for monetary policy purposes constituted 
56% of the ECB’s total assets as at the end of 2018. Under this balance sheet 
position, the ECB holds securities acquired in the context of the Securities Markets 
Programme (SMP), the three covered bond purchase programmes (CBPP1, CBPP2 
and CBPP3), the ABSPP and the PSPP.5 In 2018 purchases of securities under the 
CBPP3, ABSPP and PSPP6 continued until the end of the year, when the net 
purchases ended. The purchases were conducted on the basis of the Governing 
Council’s decisions on the overall monthly Eurosystem purchases and subject to 
predetermined eligibility criteria. The Eurosystem will continue reinvesting, in full, the 
principal payments from maturing securities purchased under the APP in line with the 
Governing Council decision of 13 December 2018. 

€23.3 billion
Increase in securities 
held for monetary  policy 
purposes

As a result of the purchases, in 2018 the portfolio of securities held for monetary 
policy purposes by the ECB increased by €23.3 billion to €251.7 billion (see Chart 2), 
with PSPP purchases accounting for the majority of this increase. The decrease in 
holdings under the CBPP1, CBPP2 and SMP was due to redemptions, which 
amounted to €1.5 billion. 

5   The ECB does not acquire securities under the CSPP. 
6   No purchases were conducted under the first two covered bond purchase programmes or the SMP in 

2018, as purchases under these programmes ended in 2010 and 2012. 

Annual Accounts 2018 

A 6 

 
                                                                    
 
 
Chart 2 
Securities held for monetary policy purposes 

(EUR billions) 

Total
CBPP1 and CBPP2
SMP

CBPP3
ABSPP
PSPP

260

240

220

200

180

160

140

120

100

80

60

40

20

0

Source: ECB. 

160.8

112.3

22.8

16.6
7.5

2016

77.8

39.4

15.3
11.5
8.9

2015

17.8

10.1

2014

+ 10.2%

251.7

196.4

27.5

21.5
5.5
2018

228.4

176.0

25.0

19.7
6.6

2017

In 2018 the total euro equivalent value of the ECB’s foreign reserve assets, which 
consist of gold, special drawing rights, US dollars, Japanese yen and Chinese 
renminbi, increased by €3.9 billion to €69.6 billion. 

The euro equivalent value of the ECB’s holdings of gold and gold receivables 
increased by €0.6 billion to €18.2 billion in 2018 (see Chart 3), owing to an increase 
in the market price of gold in euro terms, while the size of these holdings in fine 
ounces remained unchanged. This increase also led to a rise in the ECB’s 
revaluation accounts, which increased by the same amount (see Section 3.2). 

Chart 3 
Gold holdings and gold prices 

(left-hand scale: EUR billions; right-hand scale: euro per fine ounce of gold) 

Gold price (right-hand scale)
Gold revaluation accounts                                                                                                  
Cost of holdings

+ 3.6%

988

973

1,098

1,082

16.0

12.1

3.9

2014

15.8

11.9

3.9

2015

17.8

17.6

13.9

13.7

3.9

2016

3.9

2017

30

25

20

15

10

5

0

Source: ECB. 

1,121

18.2

14.3

3.9

2018

1,200

1,000

800

600

400

200

0

Annual Accounts 2018 

A 7 

 
 
The value of the ECB’s 
net foreign currency 
holdings increased 
owing to the depreciation 
of the euro

The ECB’s net foreign currency holdings7 of US dollars, Japanese yen and Chinese 
renminbi, increased in euro terms by €3.2 billion to €50.7 billion (see Chart 4), mainly 
owing to the depreciation of the euro against the US dollar and Japanese yen. This 
increase is also reflected in the higher balances in the ECB’s revaluation accounts 
(see Section 3.2). 

Chart 4 
Foreign currency holdings 

(EUR billions) 

Total                                                                                                                        
USD
JPY
CNY

60

50

40

30

20

10

0

€50.9

€40.5

$44.1

€52.9

€41.2

$43.4

€47.5

€36.2

$43.4

€50.7

€38.6

$44.1

€45.1

€35.8

$43.5

€9.3

¥1,345.6

2014

€10.4

¥1,365.4

2015

€11.7

¥1,445.7

2016

€10.8

¥1,460.9

2017

€11.7

¥1,469.0

2018

Source: ECB. 

The US dollar continued to be the main component of the ECB’s foreign currency 
holdings, accounting for approximately 76% of the total at the end of 2018. 

The ECB manages the investment of its foreign currency reserves using a three-step 
process. First, a strategic benchmark portfolio is designed by the ECB’s risk 
managers and approved by the Governing Council. Second, the ECB’s portfolio 
managers design the tactical benchmark portfolio, which is approved by the 
Executive Board. Third, day-to-day investment operations are conducted in a 
decentralised manner by the NCBs. 

The ECB’s foreign currency reserves are mainly invested in securities and money 
market deposits or are held in current accounts (see Chart 5). Securities in this 
portfolio are valued at year-end market prices. 

7   These holdings comprise assets included under balance sheet positions “Claims on non-euro area 

residents denominated in foreign currency – Balances with banks and security investments, external 
loans and other external assets” and “Claims on euro area residents denominated in foreign currency”. 

Annual Accounts 2018 

A 8 

 
                                                                    
 
Chart 5 
Composition of foreign currency investments  

(EUR billions) 

Total
Security investments                                                    
Current accounts                                                                              
Money market deposits                                                              
Reverse repurchase agreements                                                          
Repurchase agreements (liabilities)

60

50

40

30

20

10

0

Source: ECB. 

45.1 

39.1 

2.6 
2.6 

2014

50.9 

42.1 

4.4 
3.5 

2015

52.9 

41.1 

6.8 

4.0 

2016

+ 6.8%

47.5 

50.7 

34.7 

39.4 

6.8 

4.7 

2017

7.8 

2.5 

2018

70%
Foreign currency-
denominated securities 
with a maturity of less 
than one year

The purpose of the ECB’s foreign currency reserves is to finance potential 
interventions in the foreign exchange market. For this reason, the ECB’s foreign 
currency reserves are managed in accordance with three objectives: (in order of 
priority) liquidity, safety and return. Therefore, this portfolio mainly comprises 
securities with short maturities (see Chart 6). 

Chart 6 
Maturity profile of foreign currency-denominated securities 

1.2%

7.9%

20.9%

< One year

Between one and five years

Between five and ten years

> Ten years

70.0%

Source: ECB. 

In 2018 the own funds portfolio remained virtually unchanged (see Chart 7). This 
portfolio mainly consists of euro-denominated securities which are valued at year-
end market prices. 

Annual Accounts 2018 

A 9 

 
 
 
Chart 7 
The ECB’s own funds portfolio 

(EUR billions) 

Total
Securities denominated in euro
Other financial assets (net)

+ 0.1%

25

20

15

10

5

0

Source: ECB. 

20.6 

20.4 

20.6 

20.5 

20.5 

19.1 

19.2 

19.1 

18.4 

17.9 

1.5 

2014

1.2 

2015

1.5 

2016

2.1 

2017

2.6 

2018

The ECB’s own funds portfolio is held as a direct counterpart to its paid-up capital, 
the provision for foreign exchange rate, interest rate, credit and gold price risks, and 
its general reserve fund. The purpose of this portfolio is to provide income to help 
fund the ECB’s operating expenses which are not related to the performance of its 
supervisory tasks.8 In this context, the objective of the management of the own funds 
portfolio is to maximise returns, subject to a number of risk limits. This results in a 
more diversified maturity structure (see Chart 8) than in the foreign currency 
reserves portfolio. 

Chart 8 
Maturity profile of the ECB’s own funds securities 

1.4%

22.1%

39.5%

36.9%

< One year

Between one and five years

Between five and ten years

> Ten years

Source: ECB. 

8   The expenses incurred by the ECB in the performance of its supervisory tasks are recovered via 

annual fees levied on supervised entities. 

Annual Accounts 2018 

A 10 

 
 
                                                                    
3.2 

Financial resources 

€42.0 billion
The ECB’s financial 
resources

The ECB’s financial resources consist of its capital, the general risk provision, the 
revaluation accounts and the profit for the year. These financial resources are 
(i) invested in assets that generate income, and/or (ii) used to directly offset losses 
materialising from financial risks. As at 31 December 2018, the ECB’s financial 
resources totalled €42.0 billion (see Chart 9). This amount was €3.3 billion higher 
than in 2017, mainly owing to an increase in the revaluation accounts following the 
depreciation of the euro. 

Chart 9 
The ECB’s financial resources 

(EUR billions) 

Total

Revaluation accounts                                                                           

Risk provision                                                                                   

Capital                                                                                     

Profit for the year

+ 8.5%

50

40

30

20

10

0

36.5

20.2

7.6

7.7

1.0
2014

41.4

25.0

7.6

7.7

1.1
2015

45.4

28.8

7.6

7.7

1.2
2016

38.7

22.0

7.6

7.7

1.3
2017

42.0

25.1

7.6

7.7

1.6

2018

5%
Depreciation of the euro 
against the US dollar in 
2018

Source: ECB. 
Note: “Revaluation accounts” includes total revaluation gains on the gold, foreign currency and securities holdings, but excludes the 
revaluation account for post-employment benefits. 

Unrealised gains on gold, foreign currencies and securities that are subject to price 
revaluation are not recognised as income in the Profit and Loss Account but are 
recorded directly in revaluation accounts shown on the liability side of the ECB’s 
Balance Sheet. The balances in these accounts can be used to absorb the impact of 
any future unfavourable movement in the respective prices and/or exchange rates, 
and thus strengthen the ECB’s resilience to the underlying risks. In 2018 the 
revaluation accounts for gold, foreign currencies and securities9 increased by 
€3.0 billion to €25.1 billion, mainly owing to the depreciation of the euro against the 
US dollar, Japanese yen and gold (see Chart 10). 

9 

The balance sheet item “Revaluation accounts” also includes remeasurements in respect of post-
employment benefits. 

Annual Accounts 2018 

A 11 

 
                                                                    
 
 
Chart 10 
The main foreign exchange rates and gold price over the period 2014-18 

(percentage changes vis-à-vis 2014; year-end data) 

XAU/EUR gold price                                                                                                
USD/EUR exchange rate
JPY/EUR exchange rate
CNY/EUR exchange rate

30%

20%

10%

0%

-10%

2014

Source: ECB. 

2015

2016

2017

2018

The general risk 
provision stands at its 
maximum permitted level

The profit resulting from the ECB’s assets and liabilities in a given financial year can 
be used to absorb potential losses incurred in the same year. In 2018 the ECB’s 
profit was €1.6 billion, €0.3 billion higher than in 2017. 

In view of its exposure to financial risks (see Section 4.1), the ECB maintains a 

provision for foreign exchange rate (currency), interest rate, credit and gold 
price (commodity) risks. The size of this provision is reviewed annually, taking a 
range of factors into account, including the level of holdings of risk-bearing assets, 
the projected results for the coming year and a risk assessment. The risk provision, 
together with any amount held in the ECB’s general reserve fund, may not exceed 
the value of the capital paid up by the euro area NCBs. Since 2015 this provision has 
stood at its maximum permitted level of €7.6 billion. 

The ECB’s capital paid up by euro area and non-euro area NCBs remained 
unchanged compared with its level at the end of 2017 and stood at €7.7 billion on 
31 December 2018. In 2019 the shares of the NCBs in the capital of the ECB are 
going to change, first, due to the regular five-yearly adjustment of the ECB’s capital 
key and, second, due to the expected10 departure of the United Kingdom from the 
European Union in 2019 and consequent withdrawal of the Bank of England from the 
European System of Central Banks (ESCB). 

3.3 

Profit and Loss Account 

Over the period 2014-18 the profit of the ECB has gradually increased from around 
€1.0 billion to around €1.6 billion (see Chart 11), mainly due to higher interest income 
generated on foreign reserve assets and on securities held for monetary policy 

10   Based on the expectation prevailing on the date on which the Executive Board authorised the 
submission of the ECB’s Annual Accounts 2018 to the Governing Council for approval. 

Annual Accounts 2018 

A 12 

 
                                                                    
 
purposes, which more than offset a decline in interest income on banknotes in 
circulation11 and on the own funds portfolio. 

€1,575 million
The ECB’s profit in 2018

In 2018, the ECB’s profit was €1,575 million (2017: €1,275 million). The increase of 
€301 million compared with 2017 was mainly due to the increase in net interest 
income. 

Chart 11 
Main components of the ECB’s Profit and Loss Account 

(EUR millions) 

Profit/(loss) for the year                                          
Net interest income                                             
Net result of financial operations, write-downs and risk provisions                                                       
Other income and expenses
Operating expenses

+ 23.6%

3,000

2,500

2,000

1,500

1,000

500

0

-500

-1,000

-1,500

989

1,536

96

(677)

1,082

1,475

150 
320

(864)

1,193

1,648

76 

422

(954)

1,275

1,812

56 

482

(1,075)

1,575

2,277

559

(146)

(1,114)

2014

2015

2016

2017

2018

Source: ECB. 
Note: “Other income and expenses” consists of “Net income/expense from fees and commissions”, “Income from equity shares and 
participating interests”, “Other income” and “Other expenses”. 

Increase in foreign 
reserve income and 
monetary policy income

The net interest income of the ECB increased by €465 million to €2,277 million 
(see Chart 12), mainly owing to higher interest income earned on the foreign reserve 
assets and on securities held for monetary policy purposes. 

11   The ECB's income on euro banknotes in circulation comprises the interest income accruing to the ECB 
on the remuneration of its intra-Eurosystem claims on NCBs related to its 8% share of total euro 
banknotes in circulation. 

Annual Accounts 2018 

A 13 

 
                                                                    
 
 
Chart 12 
Net interest income  

(EUR millions) 

Net interest income
Net interest income on monetary policy securities                                                                            
Net interest income on foreign reserve assets                                                                             
Interest income arising from the allocation of euro banknotes                                                                
Net other interest income                                                       
Remuneration of NCBs’ claims in respect of foreign reserves transferred                                                 

+ 25.7%

1,536

1,475

903

217

126

347

(57)

890

283

42

278

(18)

1,648

1,044

370

229

1,812

1,070

534

207

2,277

1,235

862

180

2014

2015

2016

2017

2018

2,400

2,000

1,600

1,200

800

400

0

-400

Source: ECB. 

Increase in interest 
income on foreign 
reserve assets, mainly 
owing to increased US 
dollar yields

Net interest income on foreign reserve assets increased by €327 million to 
€862 million, mainly as a result of the higher interest income earned on securities 
denominated in US dollars owing to the higher yields on such securities, in particular 
for short maturities (see Chart 13). 

Chart 13 
Key benchmark rates 

(percentages per annum; month-end data) 

Effective federal funds rate
Bank of Japan key interest rate
People's Bank of China base rate

5.00%

4.50%

4.00%

3.50%

3.00%

2.50%

2.00%

1.50%

1.00%

0.50%

0.00%

-0.50%

12/17

01/18

02/18

03/18

04/18

05/18

06/18

07/18

08/18

09/18

10/18

11/18

12/18

Sources: Federal Reserve System, Bank of Japan and People's Bank of China. 

Annual Accounts 2018 

A 14 

 
 
 
Higher APP income 
more than offset the 
reduction in income from 
ceased programmes

Net interest income generated on securities held for monetary policy purposes 
in 2018 was €1,235 million, which was €164 million higher than in 2017 (see 
Chart 14). Net interest income arising from APP securities increased by €245 million 
to €820 million. This was a result of the increased size of the holdings (see Chart 2) 
and the higher yield on securities acquired during the year compared to the historical 
yield of the portfolio. At the same time yields on euro area sovereign bond remained 
low on average in 2018 (see Chart 15). The increased net interest income from APP 
securities more than offset the reduction in net interest income on the SMP, CBPP1 
and CBPP2 portfolios, which fell by €81 million to €415 million, owing to the decline 
in the size of these portfolios as a result of the maturing of securities. In 2018 
securities held for monetary policy purposes generated around 54% of the ECB’s net 
interest income. 

Chart 14 
Net interest income on securities held for monetary policy purposes 

(EUR millions) 

Total
SMP income                                                               
CBPP1 and CBPP2 income                                                       
APP income                                                                           

+ 15.4%

1,400

1,200

1,000

800

600

400

200

0

Source: ECB. 

903

728

173

2014

1,044

1,070

520

88

435

447

48

575

1,235

384

31

820

2016

2017

2018

890

609

120

161

2015

Annual Accounts 2018 

A 15 

 
 
Chart 15 
Ten-year sovereign bond yields 

(percentages per annum; month-end data) 

Euro area
Italy
France
Spain
Germany                                                                                                                      

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

-0.5

2014

Source: ECB. 

2015

2016

2017

2018

0.0%
MRO rate in 2018

Both the interest income on the ECB’s share of total euro banknotes in 
circulation and the interest expense related to the remuneration of NCBs’ 
claims in respect of foreign reserves transferred were zero as a result of the 0% 
interest rate used by the Eurosystem in its main refinancing operations (MROs). 

The net other interest income decreased, mainly owing to the lower interest 
income earned on the own funds portfolio as a result of the low-yield environment in 
the euro area. 

Net result of financial 
operations and
write-downs was driven 
mainly by the change 
in US dollar bond yields

The net result of financial operations and write-downs on financial assets 
amounted to a loss of €146 million (see Chart 16). This result was €202 million lower 
than in 2017, mainly owing to lower realised price and exchange rate results. 

In 2018 there was a net realised price loss on securities holdings, mainly owing to 
price losses on US dollar-denominated securities, as their market value was 
negatively affected by the increase in US dollar bond yields. 

The decrease in net realised exchange rate and gold price gains was due to the one-
off sale of US dollars that took place in 2017 to fund the creation of the Chinese 
renminbi portfolio and resulted in higher than usual realised currency gains in that 
year.  

Annual Accounts 2018 

A 16 

 
 
 
Chart 16 
Realised results and write-downs 

(EUR millions) 

Total                                 
Net realised price gains/(losses)                                                
Net realised exchange rate and gold price gains                                               
Price write-downs on securities and interest rate swaps                                                                                  
Exchange rate write-downs                                                                                   

- 360.9%

250

200

150

100

50

0

-50

-100

-150

-200

Source: ECB. 

38

150

176

(64)

49

47

(8)

65

76

159

(148)

139

56

22

(79)

(27)

26

(103)

(146)

(64)

2014

2015

2016

2017

2018

€518 million
Fees levied by the 
ECB for conducting 
supervisory  tasks

The total operating expenses of the ECB, including depreciation and banknote 
production services, increased by €40 million to €1,114 million (see Chart 17). The 
increase compared to 2017 is related to administrative expenses, in particular (i) 
external consultancy support required for comprehensive assessments and 
contribution to the EBA stress testing exercise, and (ii) information technology. This 
increase is mainly attributable to banking supervision, as shown in the chart below. 
Banking supervision-related expenses are fully covered by fees levied on the 
supervised entities.12 The higher administrative expenses were partially offset by a 
decrease in staff costs, mainly due to lower expenses in relation to post-
employment, other-long term and termination benefits, which in 2017 had included a 
non-recurring charge relating to the introduction of the temporary Career Transition 
Support (CTS) scheme. 13 

12   Supervisory fees are included under “Other income and expenses” (see Chart 11). 
13   This temporary scheme was introduced to support staff members commencing alternative careers 

outside the ECB.  

Annual Accounts 2018 

A 17 

 
                                                                    
 
Chart 17 
Operating expenses and supervisory fees 

(EUR millions) 

Staff costs (central banking)
Staff costs (banking supervision)
Administrative expenses (central banking)
Administrative expenses (banking supervision)
Depreciation of tangible and intangible fixed assets (central banking)
Depreciation of tangible and intangible fixed assets (banking supervision)
Banknote production services
Supervisory fees

600

400

200

0

-200

-400

-600

-800

-1,000

-1,200

(301)

(354)

277

(300)

(141)

(230)

(121)
(50)
(14)
(8)

(277)

382

(286)

(181)

(246)

(168)
(31)
(34)
(8)

(382)

2014

2015

2016

437

(320)

(215)

(271)

(192)

(37)
(30)
(9)

2017

(437)

518

(269)

(246)

(287)

(238)

(32)
(34)
(8)

2018

(518)

Source: ECB. 
Note: Operating expenses are split between central banking and banking supervision. The costs of shared services provided by the 
ECB’s support business areas have been allocated among these two categories. These shared services are provided by the existing 
support business areas of the ECB, including premises, human resources management, administrative services, budgeting and 
controlling, accounting, legal, communication and translation services, internal audit, statistical and information technology services.  

4 

Risk management 

Risk management is a critical part of the ECB’s activities and is conducted through a 
continuous process of (i) risk identification and assessment, (ii) review of the risk 
strategy and policies, (iii) implementation of risk mitigating actions, and (iv) risk 
monitoring and reporting, all of which are supported by effective methodologies, 
processes and systems. 

Annual Accounts 2018 

A 18 

 
Figure 2 
Risk management cycle 

Risk 
identification 
and assessment

Risk monitoring 
and reporting

Methodologies, processes

Systems

Risk strategy 
and policies

Risk mitigating 
actions

The ECB is exposed to both financial and operational risks. The following sections 
focus on these risks, their sources and the applicable risk control frameworks. 

4.1 

Financial risks 

The Executive Board 
proposes policies and 
procedures that ensure 
an appropriate level of 
protection against risks

The Executive Board proposes policies and procedures that ensure an 
appropriate level of protection against the financial risks to which the ECB is 
exposed. The Risk Management Committee (RMC), which comprises experts from 
Eurosystem central banks, contributes, inter alia, to the monitoring and measuring of 
and reporting on financial risks related to the balance sheet of the Eurosystem, and it 
defines and reviews the associated methodologies and frameworks. In this way, the 
RMC helps the decision-making bodies to ensure an appropriate level of protection 
for the Eurosystem. 

Financial risks arise from 
the ECB’s core activities 
and exposures

Financial risks arise from the ECB’s core activities and associated exposures. 
The risk control frameworks and limits that the ECB uses to manage its risk profile 
differ across types of operation, reflecting the policy or investment objectives of the 
different portfolios and the risk characteristics of the underlying assets. 

The ECB relies on a 
number of risk 
estimation techniques 
developed in-house

To monitor and assess the risks, the ECB relies on a number of risk estimation 
techniques developed in-house. These techniques are based on a joint market 
and credit risk simulation framework. The core modelling concepts, techniques and 
assumptions underlying the risk measures draw on industry standards and available 
market data. The risks are typically quantified by the expected shortfall (ES),14 
estimated at the 99% confidence level over a one-year horizon. Two approaches are 

14   The ES is defined as a probability-weighted average loss that occurs in the worst (1-p)% of  scenarios,  

where p denotes  the confidence level.  

Annual Accounts 2018 

A 19 

 
 
                                                                    
 
 
 
€9.2 billion
Total risk in 2018
(ES 99% accounting 
approach)

Credit risk

used to calculate risks: (i) the accounting approach, under which the ECB’s 
revaluation accounts are considered as a buffer in the calculation of risk estimates in 
line with all applicable accounting rules; and (ii) the financial approach, under which 
the revaluation accounts are not considered as a buffer in the risk calculation. The 
ECB also calculates other risk measures at different confidence levels, performs 
sensitivity and stress scenario analyses, and assesses longer-term projections of 
exposures and income to maintain a comprehensive picture of the risks.15 

The total risks of the ECB decreased during the year. As at 31 December 2018 
the total financial risks for all the ECB’s portfolios combined, as measured by the ES 
at the 99% confidence level over a one-year horizon following the accounting 
approach, stood at €9.2 billion, which was €1.4 billion lower than the risks estimated 
as at 31 December 2017. The decrease reflects improvements in the credit quality of 
securities held in the ECB’s portfolios. 

Credit risk arises from the ECB’s monetary policy portfolios, its euro-
denominated own funds portfolio and its foreign reserve holdings. While 
securities held for monetary policy purposes are valued at amortised cost subject to 
impairment and are therefore, in the absence of sales, not subject to price changes 
associated with credit migrations, they are still subject to credit default risk. Euro-
denominated own funds and foreign reserves are valued at market prices and, as 
such, are subject to credit migration and default risk. Credit risk has decreased since 
last year owing to improvements in the credit quality of several European sovereigns. 

Credit risk is mitigated mainly through the application of eligibility criteria, due 
diligence procedures and limits that differ across portfolios. 

Currency and commodity 
risks 

Currency and commodity risks arise from the ECB’s foreign currency and gold 
holdings. The currency and commodity risks remained broadly stable compared to 
last year. 

Interest rate risk

In view of the policy role of these assets, the ECB does not hedge the related 
currency and commodity risks. Instead, these risks are mitigated through the 
existence of revaluation accounts and the diversification of the holdings across 
different currencies and gold. 

The ECB’s foreign reserves and euro-denominated own funds are mainly 
invested in fixed income securities and are subject to mark-to-market interest 
rate risk, given that they are valued at market prices. The ECB’s foreign reserves 
holdings are mainly invested in assets with relatively short maturities (see Chart 6 in 
Section 3.1), while the assets in the own funds portfolio generally have longer 
maturities (see Chart 8 in Section 3.1). This risk component, as measured under the 
accounting approach, remained unchanged compared with 2017. 

The mark-to-market interest rate risk of the ECB is mitigated through asset allocation 
policies and the revaluation accounts. 

15   Further details on the risk modelling approach can be found in “The financial risk management of the 

Eurosystem’s monetary policy operations”, ECB, July 2015. 

Annual Accounts 2018 

A 20 

                                                                    
 
 
 
 
The ECB is also subject to interest rate risk arising from mismatches between 
the interest rate earned on its assets and the interest rate paid on its liabilities, 
which has an impact on its net interest income. This risk is not directly linked to any 
particular portfolio but rather to the structure of the ECB’s Balance Sheet as a whole 
and, in particular, the existence of maturity and yield mismatches between assets 
and liabilities. It is monitored by means of a forward-looking analysis of the ECB’s 
profitability, which indicates that the ECB is expected to continue to earn net interest 
income in the coming years, despite the increasing share of monetary policy assets 
with low yields and long maturities on its Balance Sheet. 

This type of risk is managed through asset allocation policies and is further mitigated 
by the existence of unremunerated liabilities on the ECB’s Balance Sheet. 

4.2 

Operational risk 

The ECB’s operational risk16 management (ORM) covers all non-financial risks. 

Operational risk 
management is an 
integral part of the 
governance and 
management
processes

The Executive Board is responsible for and approves the ECB’s ORM policy and 
framework. The Operational Risk Committee (ORC) supports the Executive Board in 
the performance of its role in overseeing the management of operational risks. ORM 
is an integral part of the ECB’s governance structure 17 and management 
processes. 

The main objective of the ECB’s ORM framework is to contribute to ensuring that 
the ECB achieves its mission and objectives, while protecting its reputation 
and assets against loss, misuse and damage. Under the ORM framework, each 
business area is responsible for identifying, assessing, responding to, reporting on 
and monitoring its operational risks, incidents and controls. In this context, the ECB’s 
risk tolerance policy provides guidance with regard to risk response strategies and 
risk acceptance procedures. It is linked to a five-by-five risk matrix based on impact 
and likelihood grading scales applying quantitative and qualitative criteria. 

The environment in which the ECB operates is exposed to increasingly 
complex threats and there are a wide range of operational risks associated with the 
ECB’s day-to-day activities. The main areas of concern for the ECB include a wide 
spectrum of non-financial risks resulting from people, information, systems, 
processes and external third party providers. Consequently, the ECB has put in 
place processes to facilitate ongoing and effective management of its operational 
risks and to integrate risk information into the decision-making process. Moreover, 
the ECB focuses on enhancing its resilience. As such, response structures and 
contingency plans have been established to ensure the continuity of critical business 
functions in the event of any disruption. 

16   Operational risk is defined as the risk of a negative financial, business or reputational impact resulting 
from people, the inadequate implementation or failure of internal governance and business processes, 
the failure of systems on which processes rely, or external events (e.g. natural disasters or external 
attacks). 

17   Further information about the ECB’s governance structure can be found on the ECB’s website. 

Annual Accounts 2018 

A 21 

                                                                    
 
Financial statements of the ECB18 

Balance Sheet as at 31 December 2018 

ASSETS 

Note  
number 

2018  
€ millions 

2017  
€ millions 

Gold and gold receivables 

1 

18,193 

17,558 

Claims on non-euro area residents denominated in foreign currency 

Receivables from the IMF 

Balances with banks and security investments, external loans and other 
external assets 

Claims on euro area residents denominated in foreign currency 

Other claims on euro area credit institutions denominated in euro 

Securities of euro area residents denominated in euro 

Securities held for monetary policy purposes 

Intra-Eurosystem claims 

Claims related to the allocation of euro banknotes within the Eurosystem 

Other assets 

Tangible and intangible fixed assets 

Other financial assets 

Off-balance-sheet instruments revaluation differences 

Accruals and prepaid expenses 

Sundry 

Total assets 

2 

2.1 

2.2 

2.2 

3 

4 

4.1 

5 

5.1 

6 

6.1 

6.2 

6.3 

6.4 

6.5 

692 

670 

49,723 

50,415 

43,761 

44,431 

997 

3,712 

300 

143 

251,656 

228,386 

98,490 

93,657 

1,148 

20,529 

579 

2,738 

2,039 

1,196 

20,503 

451 

2,597 

1,528 

27,033 

26,275 

447,083 

414,162 

18   Totals in the financial statements and in the tables included in the notes may not add up due to 

rounding. The figures 0 and (0) indicate positive or negative amounts rounded to zero, while a dash (-) 
indicates zero. 

Annual Accounts 2018 

A 22 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                                    
LIABILITIES 

Note  
number 

2018  
€ millions 

2017  
€ millions 

Banknotes in circulation 

Other liabilities to euro area credit institutions denominated in euro 

Liabilities to other euro area residents denominated in euro 

Other liabilities 

Liabilities to non-euro area residents denominated in euro 

Intra-Eurosystem liabilities 

Liabilities equivalent to the transfer of foreign reserves 

Other liabilities within the Eurosystem (net) 

Other liabilities 

Off-balance-sheet instruments revaluation differences 

Accruals and income collected in advance 

Sundry 

Provisions 

Revaluation accounts 

Capital and reserves 

Capital 

Profit for the year 

Total liabilities 

7 

8 

9 

9.1 

10 

11 

11.1 

11.2 

12 

12.1 

12.2 

12.3 

13 

14 

15 

15.1 

98,490 

93,657 

1,399 

1,061 

9,152 

1,150 

10,361 

19,549 

40,793 

243,115 

283,907 

40,793 

217,752 

258,544 

641 

54 

1,178 

1,873 

431 

76 

1,063 

1,571 

7,663 

7,670 

24,922 

21,945 

7,740 

7,740 

1,575 

1,275 

447,083 

414,162 

Annual Accounts 2018 

A 23 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Profit and Loss Account for the year ending 
31 December 2018 

Note  
number 

2018  
€ millions 

2017  
€ millions 

22.1 

22.2 

22.4 

22.3 

22.4 

22 

23 

24 

25 

26 

27 

28 

29 

30 

31 

Interest income on foreign reserve assets 

Interest income arising from the allocation of euro banknotes within the 
Eurosystem 

Other interest income 

Interest income 

Remuneration of NCBs’ claims in respect of foreign reserves transferred 

Other interest expense 

Interest expense 

Net interest income 

Realised gains/losses arising from financial operations 

Write-downs on financial assets and positions 

Transfer to/from provisions for foreign exchange rate, interest rate, credit 
and gold price risks 

Net result of financial operations, write-downs and risk provisions 

Net income/expense from fees and commissions 

Income from equity shares and participating interests 

Other income 

Total net income 

Staff costs 

Administrative expenses 

Depreciation of tangible and intangible fixed assets 

Banknote production services 

Other expenses 

Profit for the year 

Frankfurt am Main, 12 February 2019 

European Central Bank 

862 

534 

- 

1,642 

2,503 

- 

(226) 

(226) 

- 

1,527 

2,061 

- 

(250) 

(250) 

2,277 

1,812 

(77) 

(69) 

- 

(146) 

161 

(105) 

- 

56 

511 

440 

1 

47 

1 

52 

2,690 

2,361 

(515) 

(525) 

(66) 

(8) 

- 

1,575 

(535) 

(463) 

(67) 

(9) 

(11) 

1,275 

Mario Draghi 
President 

Annual Accounts 2018 

A 24 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounting policies19 

Form and presentation of the financial statements 

The financial statements of the ECB have been drawn up in accordance with the 
following accounting policies,20 which the Governing Council of the ECB considers to 
achieve a fair presentation of the financial statements, reflecting at the same time the 
nature of central bank activities. 

Accounting principles 

The following accounting principles have been applied: economic reality and 
transparency, prudence, recognition of post-balance-sheet events, materiality, going 
concern, the accruals principle, consistency and comparability. 

Recognition of assets and liabilities 

An asset or liability is only recognised in the Balance Sheet when it is probable that 
any associated future economic benefit will flow to or from the ECB, substantially all 
of the associated risks and rewards have been transferred to the ECB, and the cost 
or value of the asset or the amount of the obligation can be measured reliably. 

Basis of accounting 

The accounts have been prepared on a historical cost basis, modified to include the 
market valuation of marketable securities (other than securities held for monetary 
policy purposes), gold and all other on-balance-sheet and off-balance-sheet assets 
and liabilities denominated in foreign currency. 

Transactions in financial assets and liabilities are reflected in the accounts on the 
basis of the date on which they were settled. 

With the exception of spot transactions in securities, transactions in financial 
instruments denominated in foreign currency are recorded in off-balance-sheet 
accounts on the trade date. At the settlement date the off-balance-sheet entries are 

19   The detailed accounting policies of the ECB are laid down in Decision (EU) 2016/2247 of the ECB of 

3 November 2016 on the annual accounts of the ECB (ECB/2016/35) (OJ L 347, 20.12.2016, p. 1), as 
amended. In order to ensure the harmonised accounting and financial reporting of Eurosystem 
operations, the Decision is based on Guideline (EU) 2016/2249 of the ECB of 3 November 2016 on the 
legal framework for accounting and financial reporting in the European System of Central Banks 
(ECB/2016/34) (OJ L 347, 20.12.2016, p. 37). 

20   These policies, which are reviewed and updated regularly as deemed appropriate, are consistent with 
the provisions of Article 26.4 of the Statute of the ESCB, which require a harmonised approach to the 
rules governing the accounting and financial reporting of Eurosystem operations. 

Annual Accounts 2018 

A 25 

                                                                    
reversed and transactions are booked on-balance-sheet. Purchases and sales of 
foreign currency affect the net foreign currency position on the trade date, and 
realised results arising from sales are also calculated on that date. Accrued interest, 
premiums and discounts related to financial instruments denominated in foreign 
currency are calculated and recorded daily, and the foreign currency position is also 
affected daily by these accruals. 

Gold and foreign currency assets and liabilities 

Assets and liabilities denominated in foreign currency are converted into euro at the 
exchange rate prevailing on the balance sheet date. Income and expenses are 
converted at the exchange rate prevailing on the recording date. The revaluation of 
foreign exchange assets and liabilities, including on-balance-sheet and off-balance-
sheet instruments, is performed on a currency-by-currency basis. 

Revaluation to the market price for assets and liabilities denominated in foreign 
currency is treated separately from the exchange rate revaluation. 

Gold is valued at the market price prevailing at the balance sheet date. No distinction 
is made between the price and currency revaluation differences for gold. Instead, a 
single gold valuation is accounted for on the basis of the price in euro per fine ounce 
of gold, which, for the year ending 31 December 2018, was derived from the 
exchange rate of the euro against the US dollar on 31 December 2018. 

The special drawing right (SDR) is defined in terms of a basket of currencies and its 
value is determined by the weighted sum of the exchange rates of five major 
currencies (the US dollar, euro, Chinese renminbi, Japanese yen and pound 
sterling). The ECB’s holdings of SDRs were converted into euro using the exchange 
rate of euro per SDR as at 31 December 2018. 

Securities 

Securities held for monetary policy purposes 

Securities currently held for monetary policy purposes are accounted for at 
amortised cost subject to impairment. 

Other securities 

Marketable securities (other than securities held for monetary policy purposes) and 
similar assets are valued either at the mid-market prices or on the basis of the 
relevant yield curve prevailing on the balance sheet date, on a security-by-security 
basis. Options embedded in securities are not separated for valuation purposes. For 
the year ending 31 December 2018, mid-market prices on 28 December 2018 were 

Annual Accounts 2018 

A 26 

used. Illiquid equity shares and any other equity instruments held as permanent 
investments are valued at cost subject to impairment. 

Income recognition 

Income and expenses are recognised in the period in which they are earned or 
incurred.21 Realised gains and losses arising from the sale of foreign currency, gold 
and securities are taken to the Profit and Loss Account. Such realised gains and 
losses are calculated by reference to the average cost of the respective asset. 

Unrealised gains are not recognised as income and are transferred directly to a 
revaluation account. 

Unrealised losses are taken to the Profit and Loss Account if, at the year-end, they 
exceed previous revaluation gains registered in the corresponding revaluation 
account. Such unrealised losses on any one security or currency or on gold are not 
netted against unrealised gains on other securities or currencies or gold. In the event 
of such unrealised losses on any item taken to the Profit and Loss Account, the 
average cost of that item is reduced to the year-end exchange rate or market price. 
Unrealised losses on interest rate swaps that are taken to the Profit and Loss 
Account at the year-end are amortised in subsequent years. 

Impairment losses are taken to the Profit and Loss Account and are not reversed in 
subsequent years unless the impairment decreases and the decrease can be related 
to an observable event that occurred after the impairment was first recorded. 

Premiums or discounts arising on securities are amortised over the securities’ 
remaining contractual life. 

Reverse transactions 

Reverse transactions are operations whereby the ECB buys or sells assets under a 
repurchase agreement or conducts credit operations against collateral. 

Under a repurchase agreement, securities are sold for cash with a simultaneous 
agreement to repurchase them from the counterparty at an agreed price on a set 
future date. Repurchase agreements are recorded as collateralised deposits on the 
liability side of the Balance Sheet. Securities sold under such an agreement remain 
on the Balance Sheet of the ECB. 

Under a reverse repurchase agreement, securities are bought for cash with a 
simultaneous agreement to sell them back to the counterparty at an agreed price on 
a set future date. Reverse repurchase agreements are recorded as collateralised 

21   A minimum threshold of €100,000 applies for administrative accruals and provisions. 

Annual Accounts 2018 

A 27 

                                                                    
loans on the asset side of the Balance Sheet, but are not included in the ECB’s 
security holdings. 

Reverse transactions (including securities lending transactions) conducted under a 
programme offered by a specialised institution are recorded on the Balance Sheet 
only where collateral has been provided in the form of cash and this cash remains 
uninvested. 

Off-balance-sheet instruments 

Currency instruments, namely foreign exchange forward transactions, forward legs 
of foreign exchange swaps and other currency instruments involving an exchange of 
one currency for another at a future date, are included in the net foreign currency 
position for the purpose of calculating foreign exchange gains and losses. 

Interest rate instruments are revalued on an item-by-item basis. Daily changes in the 
variation margin of open interest rate futures contracts, as well as interest rate swaps 
that are cleared via a central counterparty, are recorded in the Profit and Loss 
Account. The valuation of forward transactions in securities and of interest rate 
swaps that are not cleared via a central counterparty is carried out by the ECB based 
on generally accepted valuation methods using observable market prices and rates, 
as well as discount factors from the settlement dates to the valuation date. 

Post-balance-sheet events 

The values of assets and liabilities are adjusted for events that occur between the 
annual balance sheet date and the date on which the Executive Board authorises the 
submission of the ECB’s Annual Accounts to the Governing Council for approval, if 
such events materially affect the condition of assets and liabilities at the balance 
sheet date. 

Important post-balance-sheet events that do not affect the condition of assets and 
liabilities at the balance sheet date are disclosed in the notes. 

Intra-ESCB balances/intra-Eurosystem balances 

Intra-ESCB balances result primarily from cross-border payments in the EU that are 
settled in central bank money in euro. These transactions are for the most part 
initiated by private entities (i.e. credit institutions, corporations and individuals). They 
are settled in TARGET2 – the Trans-European Automated Real-time Gross 
settlement Express Transfer system – and give rise to bilateral balances in the 
TARGET2 accounts of EU central banks. These bilateral balances are netted and 
then assigned to the ECB on a daily basis, leaving each national central bank (NCB) 
with a single net bilateral position vis-à-vis the ECB only. Payments conducted by the 
ECB and settled in TARGET2 also affect the single net bilateral positions. These 

Annual Accounts 2018 

A 28 

positions in the books of the ECB represent the net claim or liability of each NCB 
against the rest of the European System of Central Banks (ESCB). Intra-Eurosystem 
balances of euro area NCBs vis-à-vis the ECB arising from TARGET2, as well as 
other intra-Eurosystem balances denominated in euro (e.g. interim profit distributions 
to NCBs), are presented on the Balance Sheet of the ECB as a single net asset or 
liability position and disclosed under “Other claims within the Eurosystem (net)” or 
“Other liabilities within the Eurosystem (net)”. Intra-ESCB balances of non-euro area 
NCBs vis-à-vis the ECB, arising from their participation in TARGET2, 22 are disclosed 
under “Liabilities to non-euro area residents denominated in euro”. 

Intra-Eurosystem balances arising from the allocation of euro banknotes within the 
Eurosystem are included as a single net asset under “Claims related to the allocation 
of euro banknotes within the Eurosystem” (see “Banknotes in circulation” in the notes 
on accounting policies). 

Intra-Eurosystem balances arising from the transfer of foreign reserve assets to the 
ECB by NCBs joining the Eurosystem are denominated in euro and reported under 
“Liabilities equivalent to the transfer of foreign reserves”. 

Treatment of fixed assets 

Fixed assets, including intangible assets, but with the exception of land and works of 
art, are valued at cost less depreciation. Land and works of art are valued at cost. 
The ECB’s main building is valued at cost less depreciation subject to impairment. 
For the depreciation of the ECB’s main building, costs are assigned to the 
appropriate asset components which are depreciated in accordance with their 
estimated useful lives. Depreciation is calculated on a straight-line basis over the 
expected useful life of the assets, beginning in the quarter after the asset is available 
for use. The useful lives applied for the main asset classes are as follows: 

Buildings 

Plant in building 

Technical equipment 

Computers, related hardware and software, and motor vehicles 

Furniture 

20, 25 or 50 years 

10 or 15 years 

4, 10 or 15 years 

4 years 

10 years 

The depreciation period for capitalised refurbishment expenditure relating to the 
ECB’s existing rented premises is adjusted to take account of any events that have 
an impact on the expected useful life of the affected asset. 

The ECB performs an annual impairment test of its main building based on 
International Accounting Standard (IAS) 36 “Impairment of assets”. If an impairment 
indicator is identified signalling that the main building may be impaired, the 

22   As at 31 December 2018 the non-euro area NCBs participating in TARGET2 were Българска народна 
банка (Bulgarian National Bank), Danmarks Nationalbank, Hrvatska narodna banka, Narodowy Bank 
Polski and Banca Naţională a României. 

Annual Accounts 2018 

A 29 

                                                                    
recoverable amount is estimated. An impairment loss is recorded in the Profit and 
Loss Account if the recoverable amount is less than the net book value. 

Fixed assets costing less than €10,000 are written off in the year of acquisition. 

Fixed assets that comply with the capitalisation criteria, but are still under 
construction or development, are recorded under the heading “Assets under 
construction”. The related costs are transferred to the relevant fixed asset headings 
once the assets are available for use. 

The ECB’s post-employment benefits, other long-term 
benefits and termination benefits 

The ECB operates defined benefit plans for its staff and the members of the 
Executive Board, as well as for the members of the Supervisory Board employed by 
the ECB. 

The staff pension plan is funded by assets held in a long-term employee benefit 
fund. The compulsory contributions made by the ECB and the staff are reflected in 
the defined benefit pillar of the plan. Staff can make additional contributions on a 
voluntary basis in a defined contribution pillar that can be used to provide additional 
benefits.23 These additional benefits are determined by the amount of voluntary 
contributions together with the investment returns arising from those contributions. 

Unfunded arrangements are in place for the post-employment and other long-term 
benefits of members of the Executive Board and members of the Supervisory Board 
employed by the ECB. For staff, unfunded arrangements are in place for post-
employment benefits other than pensions and for other long-term benefits and 
termination benefits. 

Net defined benefit liability 

The liability recognised in the Balance Sheet under “Other liabilities” in respect of the 
defined benefit plans, including other long-term benefits and termination benefits, is 
the present value of the defined benefit obligation at the balance sheet date, less the 
fair value of plan assets used to fund the related obligation. 

The defined benefit obligation is calculated annually by independent actuaries using 
the projected unit credit method. The present value of the defined benefit obligation 
is calculated by discounting the estimated future cash flows using a rate which is 
determined by reference to market yields at the balance sheet date on high-quality 
euro-denominated corporate bonds that have similar terms to maturity to the related 
obligation. 

23   The funds accumulated by a staff member through voluntary contributions can be used at retirement to 
purchase an additional pension. This pension is included in the defined benefit obligation from that 
point on. 

Annual Accounts 2018 

A 30 

                                                                    
Actuarial gains and losses can arise from experience adjustments (where actual 
outcomes are different from the actuarial assumptions previously made) and 
changes in actuarial assumptions. 

Net defined benefit cost 

The net defined benefit cost is split into components reported in the Profit and Loss 
Account and remeasurements in respect of post-employment benefits shown in the 
Balance Sheet under “Revaluation accounts”. 

The net amount charged to the Profit and Loss Account comprises: 

(a) 

the current service cost of the defined benefits accruing for the year; 

(b) 

the past service cost of the defined benefits resulting from a plan 
amendment; 

(c)  net interest at the discount rate on the net defined benefit liability; 

(d) 

remeasurements in respect of other long-term benefits and termination 
benefits of a long-term nature, if any, in their entirety. 

The net amount shown under “Revaluation accounts” comprises the following items: 

(a)  actuarial gains and losses on the defined benefit obligation; 

(b) 

the actual return on plan assets, excluding amounts included in the net 
interest on the net defined benefit liability; 

(c)  any change in the effect of the asset ceiling, excluding amounts included in 

the net interest on the net defined benefit liability. 

These amounts are valued annually by independent actuaries to establish the 
appropriate liability in the financial statements. 

Banknotes in circulation 

The ECB and the euro area NCBs, which together comprise the Eurosystem, issue 
euro banknotes.24 The total value of euro banknotes in circulation is allocated to the 
Eurosystem central banks on the last working day of each month in accordance with 
the banknote allocation key.25 

The ECB has been allocated a share of 8% of the total value of euro banknotes in 
circulation, which is disclosed in the Balance Sheet under the liability item 

24   Decision of the ECB of 13 December 2010 on the issue of euro banknotes (recast) (ECB/2010/29) 

(2011/67/EU) (OJ L 35, 9.2.2011, p. 26), as amended. 

25   “Banknote allocation key” means the percentages that result from taking into account the ECB’s share 

in the total euro banknote issue and applying the subscribed capital key to the NCBs’ share in that total. 

Annual Accounts 2018 

A 31 

                                                                    
“Banknotes in circulation”. The ECB’s share of the total euro banknote issue is 
backed by claims on the NCBs. These claims, which bear interest,26 are disclosed 
under the sub-item “Intra-Eurosystem claims: claims related to the allocation of euro 
banknotes within the Eurosystem” (see “Intra-ESCB balances/intra-Eurosystem 
balances” in the notes on accounting policies). Interest income on these claims is 
included in the Profit and Loss Account under the item “Interest income arising from 
the allocation of euro banknotes within the Eurosystem”. 

Interim profit distribution 

An amount that is equal to the sum of the ECB’s income on euro banknotes in 
circulation and income arising from the securities held for monetary policy purposes 
purchased under (a) the Securities Markets Programme; (b) the third covered bond 
purchase programme; (c) the asset-backed securities purchase programme; and 
(d) the public sector purchase programme is distributed in January of the following 
year by means of an interim profit distribution, unless otherwise decided by the 
Governing Council.27 It is distributed in full unless it is higher than the ECB’s net 
profit for the year and subject to any decisions by the Governing Council to make 
transfers to the provision for foreign exchange rate, interest rate, credit and gold 
price risks. The Governing Council may also decide to reduce the amount of the 
income on euro banknotes in circulation to be distributed in January by the amount 
of the costs incurred by the ECB in connection with the issue and handling of euro 
banknotes. 

Changes to accounting policies 

In 2018 there were no changes to the accounting policies applied by the ECB. 

Other issues 

In accordance with Article 27 of the Statute of the ESCB, and on the basis of a 
recommendation of the Governing Council, the EU Council has approved the 
appointment of Baker Tilly GmbH & Co. KG Wirtschaftsprüfungsgesellschaft, 
Düsseldorf (Federal Republic of Germany) as the external auditors of the ECB for a 
five-year period up to the end of the financial year 2022. This five-year period can be 
extended for up to two additional financial years. 

26   Decision (EU) 2016/2248 of the ECB of 3 November 2016 on the allocation of monetary income of the 
national central banks of Member States whose currency is the euro (ECB/2016/36) (OJ L 347, 
20.12.2016, p. 26). 

27   Decision (EU) 2015/298 of the ECB of 15 December 2014 on the interim distribution of the income of 

the ECB (recast) (ECB/2014/57) (OJ L 53, 25.2.2015, p. 24), as amended. 

Annual Accounts 2018 

A 32 

                                                                    
Notes on the Balance Sheet 

1 

Gold and gold receivables 

As at 31 December 2018 the ECB held 16,229,522 ounces28 of fine gold, the market 
value of which amounted to €18,193 million (2017: €17,558 million). No transactions 
in gold took place in 2018 and the ECB’s holdings therefore remained unchanged 
compared with their level as at 31 December 2017. The increase in the euro 
equivalent value of these holdings was due to the rise in the market price of gold in 
euro terms (see “Gold and foreign currency assets and liabilities” in the notes on 
accounting policies and note 14, “Revaluation accounts”). 

2 

Claims on non-euro area and euro area residents 
denominated in foreign currency 

2.1 

Receivables from the IMF 

This asset represents the ECB’s holdings of SDRs and amounted to €692 million as 
at 31 December 2018 (2017: €670 million). It arises as the result of a two-way SDR 
buying and selling arrangement with the International Monetary Fund (IMF), whereby 
the IMF is authorised to arrange sales or purchases of SDRs against euro, on behalf 
of the ECB, within minimum and maximum holding levels. For accounting purposes, 
SDRs are treated as a foreign currency (see “Gold and foreign currency assets and 
liabilities” in the notes on accounting policies). The increase in the euro equivalent 
value of the ECB’s holdings of SDRs was mainly due to the appreciation of the SDR 
against the euro during 2018. 

2.2 

Balances with banks and security investments, external loans and 
other external assets; and claims on euro area residents 
denominated in foreign currency 

These two items consist of balances with banks and loans denominated in foreign 
currency, and investments in securities denominated in US dollars, Japanese yen 
and Chinese renminbi. 

28   This corresponds to 504.8 tonnes. 

Annual Accounts 2018 

A 33 

                                                                    
Claims on non-euro area residents 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

Current accounts 

Money market deposits 

Reverse repurchase agreements 

Security investments 

Total 

7,755 

1,942 

611 

39,415 

49,723 

6,794 

2,317 

(0) 

34,650 

43,761 

961 

(375) 

611 

4,764 

5,962 

Claims on euro area residents 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

Current accounts 

Money market deposits 

Reverse repurchase agreements 

Total 

1 

602 

393 

997 

1 

2,422 

1,288 

3,712 

0 

(1,820) 

(895) 

(2,715) 

The total value of these items increased in 2018, mainly owing to the appreciation of 
both the US dollar and the Japanese yen against the euro. Income received during 
the year, primarily on the US dollar portfolio, also contributed to the increase in the 
total value of these items. 

The ECB’s net foreign currency holdings29 as at 31 December 2018 were as follows: 

US dollars 

Japanese yen 

Chinese renminbi 

2018  
Currency in millions 

2017  
Currency in millions 

47,551 

46,761 

1,093,460 

1,093,563 

3,886 

3,755 

3 

Other claims on euro area credit institutions denominated 
in euro 

As at 31 December 2018 this item consisted of current account balances with euro 
area residents amounting to €300 million (2017: €143 million). 

29   These holdings comprise assets minus liabilities denominated in the given foreign currency that are 
subject to foreign currency revaluation. They are included under the headings “Claims on non-euro 
area residents denominated in foreign currency”, “Claims on euro area residents denominated in 
foreign currency”, “Accruals and prepaid expenses”, “Off-balance-sheet instruments revaluation 
differences” (liabilities side) and “Accruals and income collected in advance” and take into account 
foreign exchange forward and swap transactions included in off-balance-sheet items. Price gains on 
financial instruments denominated in foreign currency arising as a result of revaluations are not 
included. 

Annual Accounts 2018 

A 34 

 
 
                                                                    
4 

Securities of euro area residents denominated in euro 

4.1 

Securities held for monetary policy purposes 

As at 31 December 2018 this item consisted of securities acquired by the ECB within 
the scope of the three covered bond purchase programmes (CBPPs), the Securities 
Markets Programme (SMP), the asset-backed securities purchase programme 
(ABSPP) and the public sector purchase programme (PSPP).30 

Purchases under the first CBPP were completed on 30 June 2010, while the second 
CBPP ended on 31 October 2012. The Governing Council decided to cease further 
SMP purchases on 6 September 2012. 

In 2018 the Eurosystem continued its securities purchases under the asset purchase 
programme (APP), which consists of the third CBPP, the ABSPP, the PSPP and the 
corporate sector purchase programme (CSPP). 31 The monthly pace of combined net 
APP purchases by the NCBs and the ECB was €30 billion on average until 
September 2018, and €15 billion from October 2018 until the end of the year, when 
the net purchases ended. The Governing Council intends to continue reinvesting, in 
full, the principal payments from maturing securities purchased under the APP for an 
extended period of time past the date when it starts raising the key ECB interest 
rates, and in any case for as long as necessary to maintain favourable liquidity 
conditions and an ample degree of monetary accommodation. 

The securities purchased under all of these programmes are valued on an amortised 
cost basis subject to impairment (see “Securities” in the notes on accounting 
policies). 

The amortised cost of the securities held by the ECB and their market value 32 (which 
is not recorded on the Balance Sheet or in the Profit and Loss Account and is 
provided for comparison purposes only) are as follows: 

30   The ECB does not acquire securities under the corporate sector purchase programme (CSPP). 
31   Further details on the APP can be found on the ECB’s website. 
32   Market values are indicative and are derived on the basis of market quotes. When market quotes are 

not available, market prices are estimated using internal Eurosystem models. 

Annual Accounts 2018 

A 35 

                                                                    
2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

Amortised  
cost 

Market  
value 

Amortised  
cost 

Market  
value 

Amortised  
cost 

Market  
value 

First covered bond purchase programme (CBPP1) 

Second covered bond purchase programme (CBPP2) 

Third covered bond purchase programme (CBPP3) 

Securities Markets Programme (SMP) 

Asset-backed securities purchase programme 
(ABSPP) 

348 

341 

21,545 

5,484 

363 

365 

21,706 

6,051 

619 

386 

19,733 

6,644 

655 

422 

19,959 

7,555 

27,511 

27,262 

25,015 

25,045 

Public sector purchase programme (PSPP) 

196,428 

198,401 

175,990 

177,088 

Total 

251,656 

254,148 

228,386 

230,722 

(271) 

(45) 

1,812 

(292) 

(57) 

1,747 

(1,160) 

(1,504) 

2,496 

20,438 

23,270 

2,218 

21,313 

23,426 

The decrease in the amortised cost of the portfolios held under the first and second 
CBPPs and the SMP was due to redemptions. 

The Governing Council assesses on a regular basis the financial risks associated 
with the securities held under all these programmes. 

Impairment tests are conducted on an annual basis, using data as at the year-end, 
and are approved by the Governing Council. In these tests, impairment indicators 
are assessed separately for each programme. In cases where impairment indicators 
were observed, further analysis has been performed to confirm that the cash flows of 
the underlying securities have not been affected by an impairment event. Based on 
the results of this year’s impairment tests, no losses have been recorded by the ECB 
for the securities held in its monetary policy portfolios in 2018. 

5 

Intra-Eurosystem claims 

5.1 

Claims related to the allocation of euro banknotes within the 
Eurosystem 

This item consists of the claims of the ECB vis-à-vis the euro area NCBs relating to 
the allocation of euro banknotes within the Eurosystem (see “Banknotes in 
circulation” in the notes on accounting policies) and as at 31 December 2018 
amounted to €98,490 million (2017: €93,657 million). The remuneration of these 
claims is calculated daily at the latest available marginal interest rate used by the 
Eurosystem in its tenders for main refinancing operations33 (see note 22.2, “Interest 
income arising from the allocation of euro banknotes within the Eurosystem”). 

33   Since 16 March 2016 the interest rate used by the Eurosystem in its tenders for main refinancing 

operations has been 0.00%. 

Annual Accounts 2018 

A 36 

 
                                                                    
6 

Other assets 

6.1 

Tangible and intangible fixed assets 

These assets comprised the following items on 31 December 2018: 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

Cost 

Land and buildings 

Plant in building 

Computer hardware and software 

Equipment, furniture and motor vehicles 

Assets under construction 

Other fixed assets 

Total cost 

Accumulated depreciation 

Land and buildings 

Plant in building 

Computer hardware and software 

Equipment, furniture and motor vehicles 

Other fixed assets 

Total accumulated depreciation 

1,012 

1,006 

221 

124 

93 

1 

11 

222 

110 

95 

3 

10 

1,463 

1,447 

(118) 

(64) 

(89) 

(43) 

(2) 

(315) 

(96) 

(48) 

(74) 

(32) 

(1) 

(251) 

Net book value 

1,148 

1,196 

5 

(1) 

14 

(2) 

(2) 

1 

16 

(22) 

(16) 

(15) 

(11) 

(0) 

(64) 

(48) 

In respect of the ECB’s main building, an impairment test was conducted at the end 
of the year and no impairment loss has been recorded. 

6.2 

Other financial assets 

This item consists mainly of the investment of the ECB’s own funds held as a direct 
counterpart to the capital and reserves and the provision for foreign exchange rate, 
interest rate, credit and gold price risks. It also includes 3,211 shares in the Bank for 
International Settlements (BIS) at the acquisition cost of €42 million. 

The components of this item are as follows: 

Annual Accounts 2018 

A 37 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current accounts in euro 

Securities denominated in euro 

Reverse repurchase agreements in euro 

Other financial assets 

Total 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

0 

17,913 

2,575 

42 

20,529 

0 

18,417 

2,044 

42 

20,503 

0 

(504) 

531 

(0) 

27 

The small net increase in this item in 2018 was due to the reinvestment of interest 
income generated on this portfolio, which more than offset the reduction in the 
market value of the euro-denominated securities held in the ECB’s own funds 
portfolio. 

6.3 

Off-balance-sheet instruments revaluation differences 

This item is composed primarily of valuation changes in swap and forward 
transactions in foreign currency that were outstanding on 31 December 2018 (see 
note 19, “Foreign exchange swap and forward transactions”). These valuation 
changes amount to €578 million (2017: €450 million) and are the result of the 
conversion of such transactions into their euro equivalents at the exchange rates 
prevailing on the balance sheet date, compared with the euro values resulting from 
the conversion of the transactions at the average cost of the respective foreign 
currency on that date (see “Off-balance-sheet instruments” and “Gold and foreign 
currency assets and liabilities” in the notes on accounting policies). 

Valuation gains on outstanding interest rate swap transactions are also included in 
this item (see note 18, “Interest rate swaps”). 

6.4 

Accruals and prepaid expenses 

On 31 December 2018 this item stood at €2,738 million (2017: €2,597 million). It 
comprised mainly accrued coupon interest on securities, including outstanding 
interest paid at acquisition, amounting to €2,589 million (2017: €2,476 million) (see 
note 2.2, “Balances with banks and security investments, external loans and other 
external assets; and claims on euro area residents denominated in foreign currency”, 
note 4, “Securities of euro area residents denominated in euro”, and note 6.2, “Other 
financial assets”). 

Moreover, this item includes (a) accrued income from common Eurosystem projects 
(see note 27, “Other income”); (b) miscellaneous prepayments; (c) accrued interest 
income on other financial assets and liabilities; and (d) accrued income in connection 
with the Single Supervisory Mechanism (SSM) (see note 25, “Net income/expense 
from fees and commissions”). 

Annual Accounts 2018 

A 38 

 
6.5 

Sundry 

On 31 December 2018 this item amounted to €2,039 million (2017: €1,528 million) 
and it mainly included the accrued amount of the ECB’s interim profit distribution of 
€1,191 million (2017: €988 million) (see “Interim profit distribution” in the notes on 
accounting policies and note 11.2, “Other liabilities within the Eurosystem (net)”). 

It also comprised balances with a value of €567 million (2017: €492 million) related 
to swap and forward transactions in foreign currency outstanding on 
31 December 2018 that arose from the conversion of such transactions into their 
euro equivalents at the respective currency’s average cost on the balance sheet 
date, compared with the euro values at which the transactions were initially recorded 
(see “Off-balance-sheet instruments” in the notes on accounting policies). 

This item also included an amount of €244 million (2017: €1 million) which 
corresponds to the annual supervisory fees receivable from the supervised entities 
as at 31 December 2018. In order to recover the expenditure incurred for performing 
its supervisory tasks, the ECB invoiced the annual fees to the supervised entities in 
December 2018 with a payment date in January 2019 (see note 25, “Net 
income/expense from fees and commissions”). In 2017 the annual supervisory fees 
were invoiced in October and therefore only €1 million remained to be collected at 
the end of that year. 

7 

Banknotes in circulation 

This item consists of the ECB’s share (8%) of total euro banknotes in circulation (see 
“Banknotes in circulation” in the notes on accounting policies) and as at 
31 December 2018 amounted to €98,490 million (2017: €93,657 million). 

8 

Other liabilities to euro area credit institutions 
denominated in euro 

The Eurosystem central banks have the possibility of accepting cash as collateral in 
their PSPP securities lending facilities without having to reinvest it. In the case of the 
ECB, these operations are conducted via a specialised institution. 

As at 31 December 2018 the outstanding value of such PSPP securities lending 
transactions conducted with euro area credit institutions was €1,399 million 
(2017: €1,061 million). Cash received as collateral was transferred to TARGET2 
accounts. As the cash remained uninvested at the year-end, these transactions were 
recorded on the Balance Sheet (see “Reverse transactions” in the notes on 
accounting policies).34 

34   Securities lending transactions that do not result in uninvested cash collateral at the year-end are 

recorded in off-balance-sheet accounts (see note 16, “Securities lending programmes”). 

Annual Accounts 2018 

A 39 

                                                                    
9 

Liabilities to other euro area residents denominated in 
euro 

9.1 

Other liabilities 

As at 31 December 2018 this position amounted to €9,152 million (2017: 
€1,150 million). This item includes deposits or payments of funds accepted by the 
ECB and made by or on behalf of the participants in EURO1 and RT1 35 which are 
used as a guarantee fund for EURO1 or to support settlement in RT1. It also 
includes deposits made in 2018 by the European Financial Stability Facility (EFSF) 
and the European Stability Mechanism (ESM). In accordance with Article 21 of the 
Statute of the ESCB, the ECB may act as fiscal agent for Union institutions, bodies, 
offices or agencies, central governments, regional, local or other public authorities, 
other bodies governed by public law, or public undertakings of Member States. 

10 

Liabilities to non-euro area residents denominated in 
euro 

As at 31 December 2018 this position amounted to €10,361 million 
(2017: €19,549 million). The largest component was an amount of €4,619 million 
(2017: €6,062 million), consisting of balances held with the ECB by non-euro area 
central banks that arise from, or are the counterpart of, transactions processed via 
the TARGET2 system. The decrease in these balances in 2018 was due to 
payments from non-euro area residents to euro area residents. 

This item also included an amount of €3,682 million (2017: €10,056 million) arising 
from the standing reciprocal currency arrangement with the Federal Reserve Bank of 
New York. Under this arrangement, US dollars are provided by the Federal Reserve 
System to the ECB by means of swap transactions, with the aim of offering short-
term US dollar funding to Eurosystem counterparties. The ECB simultaneously 
enters into back-to-back swap transactions with euro area NCBs, which use the 
resulting funds to conduct US dollar liquidity-providing operations with Eurosystem 
counterparties in the form of reverse transactions. The back-to-back swap 
transactions result in intra-Eurosystem balances between the ECB and the NCBs 
(see note 11.2, “Other liabilities within the Eurosystem (net)”). Furthermore, the swap 
transactions conducted with the Federal Reserve System and the euro area NCBs 
result in forward claims and liabilities that are recorded in off-balance-sheet accounts 
(see note 19, “Foreign exchange swap and forward transactions”). 

The remainder of this item consists of an amount of €2,059 million (2017: 
€3,432 million) arising from outstanding PSPP securities lending transactions 
conducted with non-euro area residents in which cash was received as collateral and 

35   EURO1 and RT1 are payment systems operated by ABE CLEARING S.A.S à capital variable (EBA 

Clearing). 

Annual Accounts 2018 

A 40 

                                                                    
transferred to TARGET2 accounts (see note 8, “Other liabilities to euro area credit 
institutions denominated in euro”). 

11 

Intra-Eurosystem liabilities 

11.1 

Liabilities equivalent to the transfer of foreign reserves 

These represent the liabilities to euro area NCBs that arose from the transfer of 
foreign reserve assets to the ECB when they joined the Eurosystem. No changes 
occurred in 2018. 

Nationale Bank van België/Banque Nationale de Belgique 

Deutsche Bundesbank 

Eesti Pank 

Central Bank of Ireland 

Bank of Greece 

Banco de España 

Banque de France 

Banca d’Italia 

Central Bank of Cyprus 

Latvijas Banka 

Lietuvos bankas 

Banque centrale du Luxembourg 

Central Bank of Malta 

De Nederlandsche Bank 

Oesterreichische Nationalbank 

Banco de Portugal 

Banka Slovenije 

Národná banka Slovenska 

Suomen Pankki – Finlands Bank 

Total 

Since  
1 January 2015  
€ millions 

1,436 

10,430 

112 

673 

1,178 

5,123 

8,217 

7,134 

88 

163 

239 

118 

38 

2,320 

1,138 

1,010 

200 

448 

728 

40,793 

The remuneration of these liabilities is calculated daily at the latest available 
marginal interest rate used by the Eurosystem in its tenders for main refinancing 
operations, adjusted to reflect a zero return on the gold component (see note 22.3, 
“Remuneration of NCBs’ claims in respect of foreign reserves transferred”). 

11.2 

Other liabilities within the Eurosystem (net) 

In 2018 this item consisted mainly of the TARGET2 balances of euro area NCBs vis-
à-vis the ECB (see “Intra-ESCB balances/intra-Eurosystem balances” in the notes on 
accounting policies). The increase in this position resulted mainly from net purchases 

Annual Accounts 2018 

A 41 

 
of securities under the APP (see note 4, “Securities of euro area residents 
denominated in euro”), which were settled via TARGET2 accounts. The decrease in 
the amounts related to the back-to-back swap transactions conducted with NCBs in 
connection with US dollar liquidity-providing operations also contributed to the 
increase in the liability in 2018 (see note 10, “Liabilities to non-euro area residents 
denominated in euro”). The impact of these two factors was partially offset by 
deposits received from the EFSF and the ESM via TARGET2 (see note 9, “Liabilities 
to other euro area residents denominated in euro”). 

The remuneration of TARGET2 positions, with the exception of balances arising from 
back-to-back swap transactions in connection with US dollar liquidity-providing 
operations, is calculated daily at the latest available marginal interest rate used by 
the Eurosystem in its tenders for main refinancing operations. 

This item also includes the amount due to euro area NCBs in respect of the ECB’s 
interim profit distribution (see “Interim profit distribution” in the notes on accounting 
policies). 

2018  
€ millions 

2017  
€ millions 

Due to euro area NCBs in respect of TARGET2 

1,349,908 

1,263,961 

Due from euro area NCBs in respect of TARGET2 

(1,107,984) 

(1,047,197) 

Due to euro area NCBs in respect of the ECB’s interim profit distribution 

Other liabilities within the Eurosystem (net) 

1,191 

243,115 

988 

217,752 

12 

Other liabilities 

12.1 

Off-balance-sheet instruments revaluation differences 

This item is composed mainly of valuation changes in swap and forward transactions 
in foreign currency that were outstanding on 31 December 2018 (see note 19, 
“Foreign exchange swap and forward transactions”). These valuation changes 
amounted to €641 million (2017: €431 million) and are the result of the conversion of 
such transactions into their euro equivalents at the exchange rates prevailing on the 
balance sheet date, compared with the euro values resulting from the conversion of 
the transactions at the average cost of the respective foreign currency on that date 
(see “Off-balance-sheet instruments” and “Gold and foreign currency assets and 
liabilities” in the notes on accounting policies). 

Valuation losses on outstanding interest rate swaps are also included in this item 
(see note 18, “Interest rate swaps”). 

12.2 

Accruals and income collected in advance 

This item comprised the following components on 31 December 2018: 

Annual Accounts 2018 

A 42 

 
Administrative accruals 

Financial instruments 

Income collected in advance 

Total 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

48 

5 

1 

54 

41 

7 

28 

76 

7 

(2) 

(27) 

(22) 

12.3 

Sundry 

On 31 December 2018 this item stood at €1,178 million (2017: €1,063 million). It 
included balances amounting to €580 million (2017: €498 million) related to swap 
and forward transactions in foreign currency that were outstanding on 
31 December 2018 (see note 19, “Foreign exchange swap and forward 
transactions”). These balances arose from the conversion of such transactions into 
their euro equivalents at the respective currency’s average cost on the balance sheet 
date, compared with the euro values at which the transactions were initially recorded 
(see “Off-balance-sheet instruments” in the notes on accounting policies). 

In addition, this item includes the ECB’s net defined benefit liability in respect of the 
post-employment and other long-term benefits of its staff and the members of the 
Executive Board, as well as the members of the Supervisory Board employed by the 
ECB. The termination benefits of ECB staff are also included. 

The ECB’s post-employment benefits, other long-term benefits and 
termination benefits36 

Balance Sheet 

The amounts recognised in the Balance Sheet in respect of post-employment, other 
long-term and staff termination benefits were as follows: 

2018  
Staff  
€ millions 

2018  
Boards  
€ millions 

2018  
Total  
€ millions 

2017  
Staff  
€ millions 

2017  
Boards  
€ millions 

2017  
Total  
€ millions 

Present value of obligation 

Fair value of plan assets 

Net defined benefit liability recognised 
in the Balance Sheet 

1,608 

(1,080) 

528 

29 

- 

29 

1,637 

1,510 

(1,080) 

(1,017) 

558 

493 

29 

- 

29 

1,539 

(1,017) 

522 

In 2018 the present value of the obligation vis-à-vis staff of €1,608 million 
(2017: €1,510 million) included unfunded benefits amounting to €226 million 
(2017: €225 million) relating to post-employment benefits other than pensions, to 
other long-term benefits and to staff termination benefits. The present value of the 

36   The columns labelled “Boards” report the amounts in respect of both the Executive Board and the 

Supervisory Board. 

Annual Accounts 2018 

A 43 

 
 
                                                                    
obligation vis-à-vis the members of the Executive Board and the members of the 
Supervisory Board of €29 million (2017: €29 million) relates solely to unfunded 
arrangements in place for post-employment and other long-term benefits. 

Profit and Loss Account 

The amounts recognised in the Profit and Loss Account in 2018 were as follows: 

2018  
Staff  
€ millions 

2018  
Boards  
€ millions 

2018  
Total  
€ millions 

2017  
Staff  
€ millions 

2017  
Boards  
€ millions 

2017  
Total  
€ millions 

Current service cost 

Past service cost 

Net interest on the net defined benefit 
liability  

of which: 

Interest cost on the obligation 

Interest income on plan assets 

Remeasurement (gains)/losses on other 
long-term benefits 

Total related to actuarial valuation 

Release of CTS provision 

Total included in “Staff costs” after the 
release of provision 

96 

- 

10 

32 

(22) 

2 

- 

1 

1 

- 

98 

- 

11 

33 

(22) 

(11) 

(0) 

(11) 

96 

- 

96 

3 

- 

3 

98 

- 

98 

153 

4 

10 

28 

(18) 

(1) 

167 

(9) 

158 

2 

- 

1 

1 

- 

0 

3 

- 

3 

155 

4 

11 

29 

(18) 

(1) 

169 

(9) 

160 

The current service cost declined in 2018 to €98 million (2017: €155 million), mainly 
owing to a non-recurring charge included in 2017 related to the introduction of the 
temporary Career Transition Support (CTS) scheme addressed to long-serving staff 
members to facilitate their voluntary transition to a career outside the ECB under 
specified conditions. Furthermore, an increase in the discount rate from 2.0% in 
2016 to 2.1% in 2017 contributed to the overall decrease.37 

Changes in the defined benefit obligation, plan assets and 
remeasurement results 

Changes in the present value of the defined benefit obligation were as follows: 

37   The current service cost is estimated using the discount rate that applied in the previous year. 

Annual Accounts 2018 

A 44 

 
 
 
 
 
 
 
                                                                    
2018  
Staff  
€ millions 

2018  
Boards  
€ millions 

2018  
Total  
€ millions 

2017  
Staff  
€ millions 

2017  
Boards  
€ millions 

2017  
Total  
€ millions 

Opening defined benefit obligation 

1,510 

29 

1,539 

1,361 

28 

1,389 

Current service cost 

Past service cost 

Interest cost on the obligation 

Contributions paid by plan participants38 

Benefits paid 

Remeasurement (gains)/losses 

Closing defined benefit obligation 

96 

- 

32 

33 

(43) 

(19) 

1,608 

2 

- 

1 

0 

(3) 

1 

29 

98 

- 

33 

33 

(46) 

(19) 

153 

4 

28 

23 

(12) 

(48) 

1,637 

1,510 

2 

- 

1 

0 

(1) 

(1) 

29 

155 

4 

29 

23 

(13) 

(49) 

1,539 

The benefits paid increased in 2018 to €46 million (2017: €13 million), mainly due to 
one-off termination payments to staff members accepted for the CTS scheme. 

The total remeasurement gains of €19 million on the defined benefit obligation in 
2018 arose as a result of the increase in the discount rate from 2.1% in 2017 to 2.3% 
in 2018 that was partially offset by experience adjustments reflecting the difference 
between the actuarial assumptions made in the previous year’s report and actual 
experience. 

Changes in 2018 in the fair value of plan assets in the defined benefit pillar relating 
to staff were as follows: 

Opening fair value of plan assets 

Interest income on plan assets 

Remeasurement gains/(losses) 

Contributions paid by employer 

Contributions paid by plan participants 

Benefits paid 

Closing fair value of plan assets 

2018  
€ millions 

2017  
€ millions 

1,017 

22 

(34) 

56 

33 

(13) 

1,080 

878 

18 

55 

52 

23 

(9) 

1,017 

The remeasurement loss on plan assets in 2018 reflected the fact that the actual 
return on the fund units was lower than the estimated interest income on plan assets. 

Changes in 2018 in the remeasurement results (see note 14, “Revaluation 
accounts”) were as follows: 

38   The compulsory contributions paid by the staff are 7.4%, whilst those paid by the ECB are 20.7% of the 

basic salary. 

Annual Accounts 2018 

A 45 

 
 
                                                                    
Opening remeasurement losses 

Gains/(losses) on plan assets 

Gains on obligation 

Losses recognised in the Profit and Loss Account 

Closing remeasurement losses included under “Revaluation accounts” 

2018  
€ millions  

2017  
€ millions 

(103) 

(34) 

19 

(11) 

(129) 

(205) 

55 

49 

(1) 

(103) 

Key assumptions 

In preparing the valuations referred to in this note, the actuaries have used 
assumptions which the Executive Board has accepted for the purposes of 
accounting and disclosure. The principal assumptions used for the purposes of 
calculating the liability for post-employment benefits and other long-term benefits are 
as follows: 

Discount rate 

Expected return on plan assets 39 

General future salary increases40 

Future pension increases 41 

2018  
% 

2017  
% 

2.30 

3.30 

2.00 

1.30 

2.10 

3.10 

2.00 

1.30 

Furthermore, voluntary contributions made by staff in a defined contribution pillar 
in 2018 amounted to €140 million (2017: €150 million). These contributions are 
invested in the plan assets and give rise to a corresponding obligation of equal 
value. 

13 

Provisions 

This item consists mainly of a provision for foreign exchange rate, interest rate, credit 
and gold price risks. 

The provision for foreign exchange rate, interest rate, credit and gold price risks will 
be used to the extent deemed necessary by the Governing Council to offset future 
realised and unrealised losses. The size of and continuing requirement for this 
provision is reviewed annually, based on the ECB’s assessment of its exposure to 
these risks and taking a range of factors into account. Its size, together with any 

39   These assumptions were used for calculating the part of the ECB’s defined benefit obligation which is 

funded by assets with an underlying capital guarantee. 

40  

41  

In addition, allowance is made for prospective individual salary increases of up to 1.8% per annum, 
depending on the age of the plan participants. 

In accordance with the ECB’s pension plan rules, pensions will be increased annually. If general salary 
adjustments for ECB employees are below price inflation, any increase in pensions will be in line with the 
general salary adjustments. If the general salary adjustments exceed price inflation, they will be applied 
to determine the increase in pensions, provided that the financial position of the ECB’s pension plans 
permits such an increase. 

Annual Accounts 2018 

A 46 

 
 
                                                                    
amount held in the general reserve fund, may not exceed the value of the ECB’s 
capital paid up by the euro area NCBs. 

As at 31 December 2018 the provision for foreign exchange rate, interest rate, credit 
and gold risks amounted to €7,620 million, unchanged from 2017. This amount 
corresponds to the value of the ECB’s capital paid up by the euro area NCBs as at 
that date. 

14 

Revaluation accounts   

This item consists mainly of revaluation balances arising from unrealised gains on 
assets, liabilities and off-balance-sheet instruments (see “Income recognition”, “Gold 
and foreign currency assets and liabilities”, “Securities” and “Off-balance-sheet 
instruments” in the notes on accounting policies). It also includes the 
remeasurements of the ECB’s net defined benefit liability in respect of post-
employment benefits (see “The ECB’s post-employment benefits, other long-term 
benefits and termination benefits” in the notes on accounting policies and note 12.3, 
“Sundry”). 

Gold 

Foreign currency 

Securities and other instruments 

Net defined benefit liability in respect of post-
employment benefits 

Total 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

14,298 

10,300 

453 

(129) 

24,922 

13,664 

7,851 

533 

(103) 

21,945 

634 

2,449 

(80) 

(26) 

2,977 

The increase in the size of the revaluation accounts is due to the depreciation of the 
euro against the US dollar, Japanese yen and gold in 2018. 

The foreign exchange rates used for the year-end revaluation were as follows: 

Exchange rates 

2018 

2017 

US dollars per euro 

Japanese yen per euro 

Chinese renminbi per euro 

Euro per SDR 

Euro per fine ounce of gold 

1.1450 

125.85 

7.8751 

1.2154 

1.1993 

135.01 

7.8044 

1.1876 

1,120.961 

1,081.881 

15 

Capital and reserves 

15.1 

Capital 

The subscribed capital of the ECB is €10,825 million. The capital paid up by euro 
area and non-euro area NCBs amounts to €7,740 million. 

Annual Accounts 2018 

A 47 

 
The euro area NCBs have fully paid up their share of subscribed capital, which since 
1 January 2015 has amounted to €7,620 million, as shown in the table. 

Capital key  
since  
1 January 2015 42  
% 

Paid-up  
capital since  
1 January 2015  
€ millions 

Nationale Bank van België/Banque Nationale de Belgique 

Deutsche Bundesbank 

Eesti Pank 

Central Bank of Ireland 

Bank of Greece 

Banco de España 

Banque de France 

Banca d’Italia 

Central Bank of Cyprus 

Latvijas Banka 

Lietuvos bankas 

Banque centrale du Luxembourg 

Central Bank of Malta 

De Nederlandsche Bank 

Oesterreichische Nationalbank 

Banco de Portugal 

Banka Slovenije 

Národná banka Slovenska 

Suomen Pankki – Finlands Bank 

Total 

2.4778 

17.9973 

0.1928 

1.1607 

2.0332 

8.8409 

14.1792 

12.3108 

0.1513 

0.2821 

0.4132 

0.2030 

0.0648 

4.0035 

1.9631 

1.7434 

0.3455 

0.7725 

1.2564 

268 

1,948 

21 

126 

220 

957 

1,535 

1,333 

16 

31 

45 

22 

7 

433 

213 

189 

37 

84 

136 

70.3915 

7,620 

The non-euro area NCBs are required to pay up 3.75% of their subscribed capital as 
a contribution to the operational costs of the ECB. Since 1 January 2015 this 
contribution has amounted to a total of €120 million. Non-euro area NCBs are not 
entitled to receive any share of the distributable profits of the ECB, nor are they liable 
to cover any loss of the ECB. 

The non-euro area NCBs have paid up the following amounts: 

42   The shares of the individual NCBs in the key for subscription to the ECB’s capital were last changed on 
1 January 2014. However, on 1 January 2015, owing to the entry of Lithuania into the euro area, the 
total capital key weight of euro area NCBs in the ECB’s overall capital increased, whereas the total 
capital key weight of non-euro area NCBs decreased. No changes have taken place since then. 

Annual Accounts 2018 

A 48 

 
                                                                    
Българска народна банка (Bulgarian National Bank) 

Česká národní banka 

Danmarks Nationalbank 

Hrvatska narodna banka 

Magyar Nemzeti Bank 

Narodowy Bank Polski 

Banca Naţională a României 

Sveriges Riksbank 

Bank of England 

Total 

Capital key  
since  
1 January 2015  
% 

Paid-up  
capital since  
1 January 2015  
€ millions 

0.8590 

1.6075 

1.4873 

0.6023 

1.3798 

5.1230 

2.6024 

2.2729 

13.6743 

29.6085 

3 

7 

6 

2 

6 

21 

11 

9 

56 

120 

Annual Accounts 2018 

A 49 

 
Off-balance-sheet instruments 

16 

Securities lending programmes 

As part of the management of the ECB’s own funds, the ECB has a securities 
lending programme agreement in place under which a specialised institution enters 
into securities lending transactions on behalf of the ECB. 

In addition, in accordance with the Governing Council’s decisions, the ECB has 
made available for lending its holdings of securities purchased under the first, 
second and third CBPPs, as well as its holdings of securities purchased under the 
PSPP and those purchased under the SMP that are also eligible for purchase under 
the PSPP.43 

Unless these securities lending operations are conducted against cash collateral that 
remains uninvested at the end of the year, they are recorded in off-balance-sheet 
accounts.44 Such securities lending operations with a value of €9,646 million (2017: 
€13,365 million) were outstanding as at 31 December 2018. Of this amount, 
€4,440 million (2017: €7,173 million) related to the lending of securities held for 
monetary policy purposes. 

17 

Interest rate futures 

As at 31 December 2018 the following foreign currency transactions, presented at 
year-end market rates, were outstanding: 

Foreign currency interest rate futures 

2018  
Contract value  
€ millions 

2017  
Contract value  
€ millions 

Change  
€ millions 

Purchases 

Sales 

13,780 

22,731 

6,518 

6,585 

7,262 

16,147 

These transactions were conducted in the context of the management of the ECB’s 
foreign reserves. 

18 

Interest rate swaps 

Interest rate swap transactions with a notional value of €519 million (2017: 
€416 million), presented at year-end market rates, were outstanding as at 

43   The ECB does not purchase securities under the CSPP and consequently has no related holdings 

available for lending. 

44  

If cash collateral remains uninvested at the year-end, these transactions are recorded in on-balance-
sheet accounts (see note 8, “Other liabilities to euro area credit institutions denominated in euro”, and 
note 10, “Liabilities to non-euro area residents denominated in euro”). 

Annual Accounts 2018 

A 50 

                                                                    
31 December 2018. These transactions were conducted in the context of the 
management of the ECB’s foreign reserves. 

19 

Foreign exchange swap and forward transactions 

Management of foreign reserves 

Foreign exchange swap and forward transactions were conducted in 2018 in the 
context of the management of the ECB’s foreign reserves. Claims and liabilities 
resulting from these transactions that were outstanding as at 31 December 2018 are 
presented at year-end market rates as follows: 

Foreign exchange swap and forward 
transactions 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

Claims 

Liabilities 

2,905 

2,981 

2,732 

2,719 

174 

262 

Liquidity-providing operations 

US dollar-denominated claims and liabilities with a settlement date in 2018 arose in 
connection with the provision of US dollar liquidity to Eurosystem counterparties (see 
note 10, “Liabilities to non-euro area residents denominated in euro”). 

20 

Administration of borrowing and lending operations 

In 2018 the ECB continued to be responsible for the administration of the borrowing 
and lending operations of the EU under the medium-term financial assistance facility, 
the European Financial Stabilisation Mechanism, the European Financial Stability 
Facility and the European Stability Mechanism (ESM), as well as under the loan 
facility agreement for Greece. In 2018 the ECB processed payments related to these 
operations, as well as payments in the form of member subscriptions to the ESM’s 
authorised capital stock. 

21 

Contingent liabilities from pending lawsuits 

Several lawsuits have been filed against the ECB and other EU institutions by a 
number of depositors, shareholders and bondholders of Cypriot credit institutions. 
The applicants allege that they have suffered financial losses as a result of acts that 
they deem to have led to the restructuring of these credit institutions in the context of 
the financial assistance programme for Cyprus. Two of these cases were dismissed 
on substance by the General Court of the European Union in 2018 and an appeal 
against these judgments is currently pending before the Court of Justice of the 

Annual Accounts 2018 

A 51 

European Union. This follows orders of the General Court in 2014 which found 
twelve similar cases inadmissible in their entirety and, following appeals, judgments 
of the Court of Justice in 2016 which either confirmed the inadmissibility or ruled in 
favour of the ECB. The ECB’s involvement in the process leading up to the 
conclusion of the financial assistance programme was limited to the provision of 
technical advice, pursuant to the ESM Treaty, acting in liaison with the European 
Commission, as well as the issuance of a non-binding opinion on the Cypriot draft 
resolution law. It is therefore considered that no losses will be incurred by the ECB 
as a result of these cases. 

Annual Accounts 2018 

A 52 

Notes on the Profit and Loss Account 

22 

Net interest income 

22.1 

Interest income on foreign reserve assets 

This item includes interest income, net of interest expense, in respect of the ECB’s 
net foreign reserve assets, as follows: 

Interest income on current accounts 

Interest income on money market deposits  

Interest expense on repurchase agreements 

Interest income on reverse repurchase agreements 

Interest income on securities 

Interest income/(expense) on interest rate swaps 

Interest income on forward and swap transactions 
in foreign currencies 

Interest income on foreign reserve assets (net) 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

8 

74 

(6) 

44 

673 

0 

68 

862 

5 

55 

(1) 

37 

390 

(0) 

49 

534 

3 

19 

(4) 

7 

283 

0 

20 

327 

The overall increase in net interest income in 2018 was mainly due to higher interest 
income generated on the US dollar portfolio. 

22.2 

Interest income arising from the allocation of euro banknotes within 
the Eurosystem 

This item consists of the interest income relating to the ECB’s 8% share of the total 
euro banknote issue (see “Banknotes in circulation” in the notes on accounting 
policies and note 5.1, “Claims related to the allocation of euro banknotes within the 
Eurosystem”). For 2018 this interest income was zero, owing to the fact that the rate 
on the main refinancing operations remained at 0% during the entire year. 

22.3 

Remuneration of NCBs’ claims in respect of foreign reserves 
transferred 

Remuneration paid to euro area NCBs on their claims in respect of the foreign 
reserve assets transferred to the ECB (see note 11.1, “Liabilities equivalent to the 
transfer of foreign reserves”) is disclosed under this heading. The remuneration in 
2018 was zero, reflecting the fact that the rate on the main refinancing operations 
was 0% during the entire year. 

Annual Accounts 2018 

A 53 

 
22.4 

Other interest income; and other interest expense 

Other interest income and other interest expense in 2018 were as follows: 

Net interest income on monetary policy securities 

1,235 

1,070 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

CBPP1 and CBPP2 

SMP 

APP 

Net interest income on monetary policy security 
lending 

Net interest income on own funds 

Net interest income on other assets/liabilities 

31 

384 

820 

33 

109 

39 

48 

447 

575 

45 

143 

19 

Net other interest income 

1,415 

1,277 

The ECB’s net interest income on SMP holdings of Greek government bonds 
amounted to €127 million (2017: €154 million). 

164 

(18) 

(63) 

245 

(13) 

(34) 

20 

138 

23 

Realised gains/losses arising from financial operations 

Net realised gains/losses arising from financial operations in 2018 were as follows: 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

Net realised price gains/(losses)  

Net realised exchange rate and gold price gains 

Net realised gains/(losses) arising from financial 
operations 

(103) 

26 

(77) 

22 

139 

161 

(126) 

(113) 

(238) 

Net realised price gains/losses include realised gains and losses on securities, 
interest rate futures and interest rate swaps. The net realised price losses in 2018 
were mainly due to realised price losses generated in the US dollar portfolio as a 
result of the higher US dollar interest rate environment. 

The sale of a small portion of US dollar holdings to fund the creation of the Chinese 
renminbi portfolio in 2017 generated a non-recurring realised exchange rate gain in 
that year. In 2018 no such sale took place, so the net realised exchange rate and 
gold price gains were lower. 

24 

Write-downs on financial assets and positions 

Write-downs on financial assets and positions in 2018 were as follows: 

Annual Accounts 2018 

A 54 

 
 
Unrealised price losses on securities 

Unrealised exchange rate losses 

Total write-downs 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

(64) 

(4) 

(69) 

(79) 

(27) 

(105) 

14 

22 

36 

The market value of a number of securities held in the US dollar portfolio further 
declined in 2018, alongside an increase in the corresponding yields. This resulted in 
unrealised price losses during the year. 

The unrealised exchange rate losses are mainly due to the write-down of the 
average acquisition cost of the ECB’s holding of Chinese renminbi to its 2018 year-
end exchange rate owing to the depreciation of this currency against the euro since 
the end of last year. 

25 

Net income/expense from fees and commissions 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

Income from fees and commissions 

Expenses relating to fees and commissions 

Net income from fees and commissions 

524 

(13) 

511 

452 

(12) 

440 

72 

(1) 

71 

In 2018 income under this heading consisted mainly of supervisory fees and 
administrative penalties imposed on supervised entities for non-compliance with the 
EU banking regulations on prudential requirements (including ECB supervisory 
decisions). Expenses consisted mainly of custody fees. 

Income and expenses related to supervisory tasks 

The ECB levies annual fees on supervised entities in order to recover expenditure 
incurred in the performance of its supervisory tasks. The ECB announced in 
April 2018 that the annual supervisory fees in 2018 would amount to €475 million. 
This figure was based on estimated annual expenses for supervisory tasks of 
€502 million in 2018, adjusted for (i) surplus supervisory fees of €28 million charged 
in 2017 and (ii) amounts reimbursed to individual banks for previous fee periods.45 

Based on the actual expenses incurred by the ECB in the performance of its banking 
supervisory tasks, the supervisory fee income for 2018 stood at €518 million. The 
resulting deficit of €15 million arising from the difference between the estimated 
expenses (€502 million) and the actual expenses (€518 million) for 2018 is shown 
under the heading “Accruals and prepaid expenses” (see note 6.4, “Accruals and 
prepaid expenses”). It will be collected in the total amount to be levied in 2019. 

45   Based on Article 5(3) of Regulation (EU) No 1163/2014 of the ECB of 22 October 2014 on supervisory 

fees (ECB/2014/41) (OJ L 311, 31.10.2014, p. 23). 

Annual Accounts 2018 

A 55 

 
 
                                                                    
The ECB is also entitled to impose administrative penalties on supervised entities for 
failure to comply with the EU banking regulations on prudential requirements 
(including ECB supervisory decisions). The related income is not considered in the 
calculation of the annual supervisory fees. Instead, it is recorded as income in the 
ECB’s Profit and Loss Account and is distributed to euro area NCBs as part of the 
ECB’s profit distribution regime. In 2018 the income arising from penalties on 
supervised entities amounted to €6 million. 

Thus, the related income of the ECB for supervisory tasks in 2018 was as follows:  

Supervisory fees 

of which: 

Fees relating to significant entities or significant groups 

Fees relating to less significant entities or less significant 
groups 

Imposed administrative penalties 

Total income related to banking supervision tasks 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

518 

473 

45 

6 

524 

437 

397 

39 

15 

452 

81 

76 

5 

(9) 

72 

Banking supervision-related expenses result from the direct supervision of significant 
entities, the oversight of the supervision of less significant entities and the 
performance of horizontal tasks and specialised services. They also include 
expenses arising from support areas, including premises, human resources 
management, administrative services, budgeting and controlling, accounting, legal, 
communication and translation services, internal audit, statistical and information 
technology services needed to fulfil the ECB’s supervisory responsibilities. 

In 2017, the collection of an amount of €11 million related to administrative penalties 
imposed by the ECB on a supervised entity was considered uncertain and an 
allowance for the full amount of this claim was created at the year-end (see note 31, 
“Other expenses”). The related expense is not considered in the calculation of the 
annual supervisory fees, but it is recorded in the Profit and Loss Account of the ECB 
and reduces its net result. All administrative penalties charged to the supervised 
entities in 2018 were either received during the year or are expected to be collected. 

For 2018 the total actual expenses related to the ECB’s supervisory tasks are broken 
down under the following headings: 

Salaries and benefits 

Rent and building maintenance 

Other operating expenditure 

Expenses related to banking supervision tasks relevant for 
supervisory fees 

Allowance for doubtful administrative penalties 

Total expenses related to banking supervision tasks 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

246 

59 

213 

518 

- 

518 

215 

53 

169 

437 

11 

448 

31 

6 

44 

81 

(11) 

70 

Annual Accounts 2018 

A 56 

 
 
 
 
 
 
The higher average number of staff working for ECB Banking Supervision led to an 
increase in salaries and benefits. The increase in other operating expenditure was 
mainly due to external consultancy support required for comprehensive assessments 
and contribution to the EBA stress testing exercise. Information technology related 
expenses also contributed to the increase due to the higher number and increased 
complexity of IT systems. 

26 

Income from equity shares and participating interests 

Dividends received on shares which the ECB holds in the BIS (see note 6.2, “Other 
financial assets”) are shown under this heading. 

27 

Other income 

Other miscellaneous income during 2018 mainly arose from the accrued 
contributions of the euro area NCBs to the costs incurred by the ECB in connection 
with joint Eurosystem projects. 

28 

Staff costs 

Staff costs were in 2018 as follows: 

Salaries and allowances 46 

Staff insurance 

Post-employment, other long-term and termination benefits 

Other staff costs 

Total 

2018  
€ millions 

2017  
€ millions 

Change  
€ millions 

398 

19 

98 

1 

515 

350 

15 

169 

1 

535 

47 

4 

(71) 

(0) 

(20) 

The average number of employees, expressed as full-time equivalents (FTEs)47, 
amounted to 3,546 (2017: 3,254), of which 337 were managerial staff (2017: 330). 

Staff costs decreased in 2018 due to a lower expense in relation to post-
employment, other long-term and termination benefits resulting from (i) a non-
recurring charge included in 2017 related to the introduction of the temporary CTS 
scheme, and (ii) the use of a higher discount rate for the calculation of the current 
service cost for 2018 (see note 12.3, “Sundry”). The resulting decrease was partially 

46   Salaries and allowances are modelled in essence on, and are comparable with, the remuneration 

scheme of the European Union. 

47   Full-time equivalent (FTE) is a unit obtained by comparing an employee's number of hours worked to 
the number of hours of a full-time employee. This number includes staff with permanent, fixed or short-
term contracts and participants in the ECB’s Graduate Programme. Staff on maternity or long-term 
leave are also included, while staff on unpaid leave are excluded. 

Annual Accounts 2018 

A 57 

                                                                    
 
offset by the impact of a higher average number of staff employed by the ECB in 
2018. 

Remuneration of the Executive and Supervisory Boards 

Members of the Executive Board and the members of the Supervisory Board 
employed by the ECB receive a basic salary and allowances for residence and 
representation. In the case of the President, an official residence owned by the ECB 
is provided in lieu of a residence allowance. Subject to the Conditions of 
Employment for Staff of the European Central Bank, members of both boards may 
be entitled to household, child and education allowances, depending on their 
individual circumstances. Salaries are subject to a tax for the benefit of the European 
Union, as well as to deductions in respect of contributions to the pension, medical 
and accident insurance schemes. Allowances are non-taxable and non-pensionable. 

In 2018 the basic salaries of the members of the Executive Board and members of 
the Supervisory Board employed by the ECB (i.e. excluding representatives of 
national supervisors) were as follows:48 

Mario Draghi (President) 

Vítor Constâncio (Vice-President until May 2018) 

Luis de Guindos Jurado (Vice-President since June 2018) 

Peter Praet (Board Member) 

Benoît Cœuré (Board Member) 

Yves Mersch (Board Member) 

Sabine Lautenschläger (Board Member) 

2018  
€ 

2017  
€ 

401,400 

143,360 

200,704 

286,704 

286,704 

286,704 

286,704 

396,900 

340,200 

- 

283,488 

283,488 

283,488 

283,488 

Total Executive Board 

1,892,280 

1,871,052 

Total Supervisory Board (members employed by the ECB) 49 

793,064 

793,817 

of which: 

Danièle Nouy (Chair of the Supervisory Board) 

286,704 

283,488 

Total 

2,685,344 

2,664,869 

The total allowances paid to members of both boards and the ECB’s contributions to 
medical and accident insurance schemes on their behalf amounted to €835,371 
(2017: €852,998). 

Pension payments, including post-employment allowances, and contributions to the 
medical and accident insurance schemes for former board members and their 
dependants, amounted to €3,216,410 (2017: €857,476). 50 In 2018 this total included 

48   Amounts are presented gross, i.e. before any tax deductions for the benefit of the European Union. 
49   This total excludes the salary of Sabine Lautenschläger – the Vice-Chair of the Supervisory Board – 

which is reported with those of the other members of the Executive Board. 

50   For the net amount charged to the Profit and Loss Account in relation to the pension arrangements for 
the current members of the Executive Board and members of the Supervisory Board see note 12.3, 
“Sundry”. 

Annual Accounts 2018 

A 58 

 
 
 
                                                                    
a lump sum payment on retirement to a former board member in lieu of future 
pension payments. 

29 

Administrative expenses 

This item amounting to €525 million (2017: €463 million) covers all other current 
expenses relating to consultancy, information technology, the renting and 
maintenance of premises, goods and equipment of a non-capital nature and other 
services and supplies, together with staff-related expenses, including training, 
recruitment, relocation and accommodation expenses. 

The increase in 2018 was mainly due to external consultancy support and 
information technology.  

30 

Banknote production services 

This expense arises predominantly from the cross-border transportation of euro 
banknotes between banknote printing works and NCBs, for the delivery of new 
banknotes, and between NCBs, for the compensation of shortages with surplus 
stocks. These costs are borne centrally by the ECB. 

31 

Other expenses 

In 2017 this item comprised an allowance for administrative penalties imposed by the 
ECB on a supervised entity where collection was assessed as uncertain. No 
expenses were recorded under this item in 2018. 

Annual Accounts 2018 

A 59 

Post-balance sheet events 

32 

Five-yearly adjustment of the ECB’s capital key 

Pursuant to Article 29 of the Statute of the ESCB, the weightings assigned to NCBs 
in the key for subscription to the ECB’s capital are adjusted every five years. 51 The 
fourth such adjustment following the establishment of the ECB was made on 
1 January 2019, as follows:  

51   These weights are also adjusted whenever there is a change in the number of NCBs that contribute to 

the ECB’s capital. These are the NCBs of EU Member States. 

Annual Accounts 2018 

A 60 

                                                                    
Nationale Bank van België/Banque Nationale de Belgique 

Deutsche Bundesbank 

Eesti Pank 

Central Bank of Ireland 

Bank of Greece 

Banco de España 

Banque de France 

Banca d’Italia 

Central Bank of Cyprus 

Latvijas Banka 

Lietuvos bankas 

Banque centrale du Luxembourg 

Central Bank of Malta 

De Nederlandsche Bank 

Oesterreichische Nationalbank 

Banco de Portugal 

Banka Slovenije 

Národná banka Slovenska 

Suomen Pankki – Finlands Bank 

Subtotal for euro area NCBs 

Българска народна банка (Bulgarian National Bank) 

Česká národní banka 

Danmarks Nationalbank 

Hrvatska narodna banka 

Magyar Nemzeti Bank 

Narodowy Bank Polski 

Banca Naţională a României 

Sveriges Riksbank 

Bank of England 

Subtotal for non-euro area NCBs 

Total 

Capital key  
since  
1 January 2019  
% 

Capital key  
as at 
31 December 2018  
% 

2.5280 

18.3670 

0.1968 

1.1754 

1.7292 

8.3391 

14.2061 

11.8023 

0.1503 

0.2731 

0.4059 

0.2270 

0.0732 

4.0677 

2.0325 

1.6367 

0.3361 

0.8004 

1.2708 

2.4778 

17.9973 

0.1928 

1.1607 

2.0332 

8.8409 

14.1792 

12.3108 

0.1513 

0.2821 

0.4132 

0.2030 

0.0648 

4.0035 

1.9631 

1.7434 

0.3455 

0.7725 

1.2564 

69.6176 

70.3915 

0.8511 

1.6172 

1.4986 

0.5673 

1.3348 

5.2068 

2.4470 

2.5222 

14.3374 

30.3824 

100.0000 

0.8590 

1.6075 

1.4873 

0.6023 

1.3798 

5.1230 

2.6024 

2.2729 

13.6743 

29.6085 

100.0000 

Impact on the ECB’s paid-up capital 

Due to the overall reduction of 0.7739 percentage points in the weighting of the euro 
area NCBs (with fully paid-up subscriptions) in the ECB’s subscribed capital, and the 
equivalent increase in that of the non-euro area NCBs (which have only paid up 
3.75% of their subscriptions), the ECB’s paid-up capital decreased by a total of 
€81 million on 1 January 2019. 

Annual Accounts 2018 

A 61 

 
Impact on NCBs’ claims equivalent to the foreign reserve assets 
transferred to the ECB 

Pursuant to Article 30.2 of the Statute of the ESCB, the contributions of the NCBs to 
the transfer of foreign reserve assets to the ECB are fixed in proportion to their share 
in the ECB’s subscribed capital. Given the decrease in the weighting of the euro area 
NCBs (which have transferred foreign reserve assets to the ECB) in the ECB’s 
subscribed capital, the claim equivalent to this transfer was also adjusted 
accordingly. This resulted in a reduction of €448 million on 1 January 2019, which 
was repaid to the euro area NCBs. 

33 

Additional change to the ECB’s capital key 

As a result of the expected52 departure of the United Kingdom from the European 
Union in 2019 and consequent withdrawal of the Bank of England from the ESCB, 
the weightings assigned to the remaining NCBs in the key for subscription to the 
ECB’s capital are expected to change again during 2019. 

52   Based on the expectation prevailing on the date on which the Executive Board authorised the 
submission of the ECB’s Annual Accounts 2018 to the Governing Council for approval. 

Annual Accounts 2018 

A 62 

 
 
                                                                    
Note on profit distribution/allocation of 
losses 

This note is not part of the financial statements of the ECB for the year 2018. 

Pursuant to Article 33 of the Statute of the ESCB, the net profit of the ECB shall be 
transferred in the following order: 

(a)  an amount to be determined by the Governing Council, which may not 

exceed 20% of the net profit, shall be transferred to the general reserve 
fund, subject to a limit equal to 100% of the capital; and 

(b) 

the remaining net profit shall be distributed to the shareholders of the ECB 
in proportion to their paid-up shares.53 

In the event of a loss incurred by the ECB, the shortfall may be offset against the 
general reserve fund of the ECB and, if necessary, following a decision by the 
Governing Council, against the monetary income of the relevant financial year in 
proportion and up to the amounts allocated to the NCBs in accordance with 
Article 32.5 of the Statute of the ESCB.54 

The ECB’s net profit for 2018 was €1,575 million. Following a decision by the 
Governing Council, an interim profit distribution, amounting to €1,191 million, was 
paid out to the euro area NCBs on 31 January 2019. Furthermore, the Governing 
Council decided to distribute the remaining profit of €384 million to the euro area 
NCBs. 

Profit for the year 

Interim profit distribution 

Profit after the interim profit distribution 

Distribution of the remaining profit 

Total 

2018 
€ millions 

2017 
€ millions 

1,575 

(1,191) 

384 

(384) 

0 

1,275 

(988) 

287 

(287) 

0 

53   Non-euro area NCBs are not entitled to receive any share of the ECB’s distributable profits, nor are 

they liable to cover any loss of the ECB. 

54   Under Article 32.5 of the Statute of the ESCB, the sum of the NCBs’ monetary income shall be 

allocated to the NCBs in proportion to their paid-up shares in the capital of the ECB. 

Annual Accounts 2018 

A 66 

 
 
 
 
                                                                    
© European Central Bank, 2019 

Postal address 
Telephone 
Website 

60640 Frankfurt am Main, Germany 
+49 69 1344 0
www.ecb.europa.eu

All rights reserved. Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged. 

For specific terminology please refer to the ECB glossary (available in English only). 

PDF 

ISBN 978-92-899-3616-3, ISSN 2443-4760, doi:10.2866/75141, QB-BS-19-001-EN-N