At its meeting last Tuesday the Governing Council of the European Central Bank (ECB) adopted the "Regulation of the European Central Bank on the application of minimum reserves".
This Regulation lays down in a legally binding text the features of the minimum reserve system of the European System of Central Banks (ESCB) presented in the ECB Report entitled "The single monetary policy in Stage Three: General documentation on ESCB monetary policy instruments and procedures" (September 1998) and in the subsequent ECB press release entitled "The use of a minimum reserve system by the European System of Central Banks in Stage Three: Final specification" (13 October 1998).
The legal basis for the ECB Regulation on the application of minimum reserves is set out in Article 19 of the Statute of the ESCB and in the Council Regulation (EC) No. 2531/98 concerning the application of minimum reserves by the ECB, which was adopted by the ECOFIN on 23 November 1998 and published in the Official Journal of the European Communities on 27 November 1998.
Article 19 of the Statute of the ESCB entitles the ECB to require credit institutions established in euro area Member States to hold minimum reserves in pursuance of monetary policy objectives. In addition, the aforementioned Council Regulation specifies three aspects of the ESCB's minimum reserve system, namely the reserve base, the maximum permissible reserve ratios and the sanctions to be imposed in cases of non-compliance. All other features of this system may be decided upon by the ECB within the limits set by the Statute of the ESCB and the Council Regulation.
Against this background, the ECB Regulation on the application of minimum reserves adopted last Tuesday defines, inter alia, the applicable reserve ratios, the institutions subject to reserve requirements, the calculation of reserve requirements, and the remuneration of holdings of required reserves.
The ECB Regulation on the application of minimum reserves ensures that the terms and conditions of the ESCB's minimum reserve system are uniform throughout the euro area and completes the required legislation on this subject.
This Regulation will be available in all community languages from the national central banks and the ECB in the coming days and will shortly thereafter be published in the Official Journal of the European Communities.
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