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Document 31998R2531

Minimum reserves

Date of last review:
08/11/2024
Initial creation date:
29/05/2009
Summarised document(s):
Author:
Publications Office of the European Union
Responsible entity(ies):
European Central Bank

Minimum reserves

SUMMARY OF:

Regulation (EC) No 2531/98 concerning the application of minimum reserves by the European Central Bank

Regulation (EU) 2021/378 on the application of minimum reserve requirements (ECB/2021/1)

Decision (EU) 2021/1815 on the methodology applied for the calculation of sanctions for non-compliance with the requirement to hold minimum reserves and related minimum reserve requirements (ECB/2021/45)

WHAT IS THE AIM OF THE REGULATIONS AND OF THE DECISION?

Regulations (EC) No 2531/98 and (EU) 2021/378 establish the Eurosystem’s minimum reserve1 framework and lay down rules for the holding of minimum reserves by credit institutions2 and their branches in the euro area.

They regulate all relevant aspects, from determining the actual reserve ratio, to the maintenance and remuneration of minimum reserves and the relevant reporting and verification of data. They also provide for exemptions from minimum reserve requirements and the power to impose sanctions.

Decision (EU) 2021/1815 sets out the methodology applied by the ECB for the calculation of sanctions3 for non-compliance with the minimum reserve requirements.

KEY POINTS

Council Regulation (EC) No 2531/98 determines the basis and ratios for minimum reserves and establishes the right of the European Central Bank (ECB) to collect and verify information necessary for the application of minimum reserves. It also enables the ECB to impose sanctions on an institution for not complying with statistical reporting requirements or failing to hold sufficient minimum reserves.

Regulation (EU) 2021/378 (ECB/2021/1) regulates the minimum reserve holdings and provides the formulas to be used by euro-area credit institutions to calculate the minimum reserves which are to be held in euro reserve accounts with their EU Member States’ national central banks (NCBs).

The ECB publishes on its website the list of institutions subject to the Eurosystem’s minimum reserve requirements. The institutions whose authorisation has been withdrawn or renounced and those subject to winding-up proceedings are exempted from the minimum reserve requirements. Further exemptions may be granted to institutions:

  • which are subject to a reorganisation measure;
  • on which a freezing order or another measure restricting the institution’s ability to use funds is imposed;
  • whose access to the Eurosystem’s open market operations or standing facilities has been suspended or excluded;
  • for which it is not appropriate to require minimum reserves.

The euro-area credit institutions subject to the minimum reserve requirements calculate their own reserve base4 (if this is not done by the NCBs) using their statistical information on deposits and debt securities issued. They may hold their minimum reserves indirectly through an intermediary which is resident in the same Member State, is subject to minimum reserve requirements and normally carries out certain administrative tasks.

The NCBs notify the credit institutions on the minimum reserves they should hold (if the NCB does the calculation) or acknowledge the minimum reserves calculated by the institutions themselves.

They also remunerate holdings of minimum reserves according to Regulation (EU) 2021/378 and have the right to verify the accuracy and quality of the information on the reserve base provided by the institutions.

Specific rules come into play when:

  • the reserve base is reported on an aggregated basis;
  • a merger between two institutions takes place during the maintenance period5;
  • a Member State adopts the euro.

If banks do not meet their minimum reserve requirements, the ECB has the power to impose a sanction that is proportionate to the breach and that is calculated based on established formula and method.

FROM WHEN DO THE REGULATIONS AND THE DECISION APPLY?

  • Regulation (EU) 2021/378 (ECB/2021/1) has applied from , apart from Article 3 (calculation of reserve holdings), which took effect on (the first day of the fifth maintenance period).
  • Regulation (EC) No 2531/98 has applied since .
  • Decision (EU) 2021/1815 (ECB/2021/45) has applied since .

BACKGROUND

  • On the basis of the Statute of the European System of Central Banks and of the European Central Bank, the ECB may require euro-area credit institutions to hold minimum reserves for monetary policy purposes.
  • Minimum reserves help to stabilise money market interest rates and enable credit institutions to handle daily liquidity fluctuations.
  • Reserves held with national central banks increase demand for central bank credit, making it easier for the ECB to steer money market rates through regular liquidity-providing operations.
  • For further information, see:

KEY TERMS

  1. Minimum reserves. Amount of funds an institution must hold in its reserve accounts with the relevant national central bank.
  2. Credit institution. An undertaking receiving deposits or other repayable funds from the public and granting credits.
  3. Sanctions. Fines, periodic penalty payments, penalty interest and non-interest-bearing deposits.
  4. Reserve base. The sum of eligible liabilities used to calculate an institution’s minimum reserves.
  5. Maintenance period. The period over which compliance with minimum reserve requirements is assessed.

MAIN DOCUMENTS

Council Regulation (EC) No 2531/98 of concerning the application of minimum reserves by the European Central Bank (OJ L 318, , pp. 1–3).

Successive amendments to Regulation (EC) No 2531/98 have been incorporated into the original text. This consolidated version is of documentary value only.

Regulation (EU) 2021/378 of the European Central Bank of on the application of minimum reserve requirements (ECB/2021/1) (OJ L 73, , pp. 1–15).

See consolidated version.

Decision (EU) 2021/1815 of the European Central Bank of on the methodology applied for the calculation of sanctions for non-compliance with the requirement to hold minimum reserves and related minimum reserve requirements (ECB/2021/45).

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