Af­ter 17 years, ECB re­veals $547b in as­sets

The Pak Banker - - FRONT PAGE -

The euro area's 19 na­tional cen­tral banks hold in­vest­ment as­sets worth al­most half a tril­lion euros, ac­cord­ing to pre­vi­ously se­cret in­for­ma­tion pub­lished by the Euro­pean Cen­tral Bank in Frank­furt.

The ECB set out de­tails of the so-called Agree­ment on Net Fi­nan­cial As­sets, a doc­u­ment signed be­fore the in­tro­duc­tion of the euro a decade and a half ago that reg­u­lated how the pre­vi­ously in­de­pen­dent na­tional cen­tral banks would man­age their hold­ings of for­eign cur­ren­cies and bonds. While some of those na­tional au­thor­i­ties have still to pub­lish their in­di­vid­ual ac­counts, the ECB said the out­stand­ing amount stood at 490 bil­lion euros ($547 bil­lion) at the end of 2015.

Even though the as­sets are sep­a­rate from those built up by the ECB for mon­e­tary pol­icy pur­poses -- such as the cur­rent quan­ti­ta­tive eas­ing pro­gram -the in­crease in the to­tal level of hold­ings dur­ing the sov­er­eign debt cri­sis has led to ac­cu­sa­tions that na­tional au­thor­i­ties were print­ing money to serve their own gov­ern­ments, a prac­tice that would be il­le­gal un­der Euro­pean law. ANFA sets quo­tas for each coun­try and aims to pre­vent na­tional cen­tral banks' in­vest­ment ac­tiv­ity from in­ter­fer­ing with mon­e­tary pol­icy.

"Al­though ANFA was pre­vi­ously a con­fi­den­tial doc­u­ment, the ECB and the na­tional cen­tral banks of the Eurosys­tem took the unan­i­mous de­ci­sion that pub­lish­ing the text along with an ex­plana­tory doc­u­ment would bet­ter serve their com­mit­ment to greater trans­parency," the ECB said in the state­ment on its web­site, made af­ter 9 p.m. Frank­furt time on Fri­day.

Na­tional as­sets have grown at an av­er­age rate of 5 per­cent per year since the in­tro­duc­tion of euro ban­knotes in 2002, the ECB said, adding that the in­crease was slower than that for cash in cir­cu­la­tion. Na­tional cen­tral banks will re­lease more de­tails about their ANFA ac­tiv­i­ties in their re­spec­tive an­nual re­ports.

The doc­u­ment also in­cludes an an­nex on the cal­cu­la­tion of the quota sys­tem, which reg­u­lates how much each na­tional cen­tral bank can hold. Be­fore the in­tro­duc­tion of the euro, some na­tional in­sti­tu­tions had con­sid­er­able as­sets, of­ten re­lated to the man­age­ment of their cur­ren­cies. The as­sets now are fre­quently re­lated to the man­age­ment of pen­sion funds and other tasks not re­lated to mon­e­tary pol­icy. The quota sys­tem be­came briefly con­tro­ver­sial in 2013 when the Ir­ish cen­tral bank was al­lowed to ex­ceed its own limit in or­der to process a debt swap with the govern­ment re­lated to the coun­try's bank­ing col­lapse.

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