ANNUAL REPORT 2008 - Polymer Bank Notes of the World

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franc funding needs of banks with no direct access to the Swiss National Bank’s operations,notably in the euro area, increased. Therefore, on 15 October the Swiss National Bank and theECB jointly announced measures to improve liquidity in short-term Swiss franc money markets,whereby the Eurosystem would provide its counterparties with Swiss franc funding received viaa swap line with the Swiss National Bank.The provision of Swiss franc liquidity by the Eurosystem took the form of EUR/CHF foreignexchange swaps at a fixed price and with a maximum allotment amount determined by the ECBin coordination with the Swiss National Bank. These swaps were initially introduced with aseven-day maturity only, but were later complemented by swaps with a three-month maturity,which were aimed at reducing tensions in this segment of the Swiss franc money markets.The maximum amount for each of these tenders was set at €20 billon in the 7-day and€5 billion in the 84-day operations. The EUR/CHF foreign exchange swaps met with fairlymoderate demand, with bidding volumes below the maximum amount in all operations. Thebid-to-cover ratio was stable at around 0.6 in the 7-day swaps and around 0.1 in the 84-dayoperations.The ECB’s euro liquidity provision to some EU central banksIn October and November 2008 the ECB signed agreements to provide euro liquidity to a numberof EU central banks outside the euro area. The ECB’s intention in establishing these agreementswas to support various measures taken by these central banks, all of which were aimed at improvingeuro liquidity in their respective domestic financial markets.This support took the form of repurchase agreements for an amount of up to €5 billion withthe Magyar Nemzeti Bank and for up to €10 billion with Narodowy Bank Polski. The ECBand Danmarks Nationalbank established a reciprocal currency swap arrangement amounting to€12 billion.5 Expansion of the list of collateralOn 15 October the Governing Council decided to expand the list of eligible collateral on atemporary basis until the end of 2009. Availability of collateral was not a constraint throughoutmuch of 2008, owing to the breadth of the Eurosystem’s collateral framework. Nevertheless, inthe light of the extension of liquidity at various maturities in euro and in US dollars and of theintroduction of fixed rate tenders with full allotment, the collateral framework was temporarilyexpanded as follows:• As of 22 October 2008 the credit threshold for marketable and non-marketable assets waslowered from “A-” to “BBB-”, with the exception of asset-backed securities, for whichthe credit quality threshold of “A-” remains in force. In addition, since 22 October 2008the Eurosystem has also accepted debt instruments issued by credit institutions, includingcertificates of deposit, which are not listed on a regulated market, but traded on certain nonregulatedmarkets deemed acceptable by the ECB. Subordinated marketable debt instruments,which are protected by an acceptable guarantee and which fulfil all other eligibility criteria,can also be used as collateral.ECBAnnual Report2008103
• Since 14 November the Eurosystem has also accepted marketable debt instruments issued inthe euro area and denominated in US dollars, pounds sterling and Japanese yen, provided thatthe issuer is established in the EEA.In order to fulfil the Eurosystem’s statutory obligation to ensure that its balance sheet remainsprotected against financial risk, risk control measures are applied to the enlarged set of eligiblecollateral. The expansion of the eligibility criteria is thus combined with vigilant monitoring ofthe use of the framework.LIQUIDITY NEEDS OF THE BANKING SYSTEMWhen supplying liquidity through openmarket operations, the Eurosystem takes intoaccount a daily assessment of the liquidityneeds of the aggregate euro area bankingsystem. These liquidity needs are determinedby the sum of minimum reserve requirements,funds held in excess of these requirements oncredit institutions’ current accounts with theEurosystem (excess reserves) and autonomousfactors. Autonomous factors are those itemson the Eurosystem’s balance sheet, such asbanknotes in circulation and governmentdeposits, which have an impact on creditinstitutions’ current account holdings but arenot under the direct control of the Eurosystem’sliquidity management.In 2008 the average daily liquidity needs ofthe euro area banking system amounted to€487.1 billion, 10.3% higher than in 2007(see Chart 41). One reason for the increase wasthe continued growth in reserve requirements,by 12.5%, to €210.8 billion. Another importantreason was an exceptional increase in thedemand for banknotes which was unrelatedto seasonal factors. Chart 42 shows thatthe amount of banknotes in circulation rosesignificantly, by more than 6% betweenSeptember and early November 2008, whichcontributed to the total increase in liquidityneeds. Overall, in 2008 autonomous factorsincreased by 8.9% to €274.5 billion. Althoughaverage excess reserves for the maintenanceperiods ending in 2008 increased comparedwith 2007, by €0.2 billion to €1.1 billion, theyremained negligible in relative terms at 0.5% ofreserve requirements.Chart 41 Liquidity factors in the euro areain 2008(EUR billions)1,0008006004002000-200-400-600autonomous factorsopen market operations (outstanding volume)minimum reserve requirementscurrent accountsJan. Mar. May July Sep. Nov.2008Source: ECB.Chart 42 Banknotes in circulation(EUR billions)8007507006506005505004502008200720062005400Jan. Mar. May July Sep. Nov.Source: ECB.1,0008006004002000-200-400-600800750700650600550500450400104 ECBAnnual Report2008
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EN2008EUROPEAN CENTRAL BANK ANNUAL
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© European Central Bank, 2009Addre
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CHAPTER 4FINANCIAL STABILITY AND IN
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7 Statistical accounting consequenc
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ABBREVIATIONSCOUNTRIESOTHERSBE Belg
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in the course of the year, in line
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currencies, T2S will be a major ste
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CHAPTER 1ECONOMICDEVELOPMENTS ANDMO
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Chart 1 ECB interest rates and mone
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Despite moderating, the annual grow
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substantial downward revisions in r
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in July, annual inflation in the OE
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As regards the Chinese economy, rea
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generally tighter financing conditi
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were recorded in December, but thes
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was driven mainly by developments i
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market tensions, particularly for l
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anking and financial system. At the
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cash flows to compensate for a redu
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quarter of 2008 and -0.1% in Decemb
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whereby investors’ uncertainty su
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September onwards, amid the great u
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Chart C Trading volumes for governm
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sponsored rescue plans were initiat
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The annual growth rate of consumer
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end of 2007. By December 2008 this
Page 54 and 55: calculated as the balance between g
Page 56 and 57: commodity prices (see Box 4). Conve
Page 58 and 59: Chart D Longer-term inflation expec
Page 60 and 61: apidly to 1.7% in December, mainly
Page 62 and 63: productivity slowed to 0.2% in the
Page 64 and 65: Table 3 Composition of real GDP gro
Page 66 and 67: Corporate investment, which had exp
Page 68 and 69: Box 5LABOUR MARKET DEVELOPMENTS IN
Page 70 and 71: Chart C Breakdown of employment gro
Page 72 and 73: Box 6DEVELOPMENTS IN THE ISSUANCE A
Page 74 and 75: Chart B Government bond yield sprea
Page 76 and 77: Box 7STATISTICAL ACCOUNTING CONSEQU
Page 78 and 79: warranted because of the need to co
Page 80 and 81: sharp depreciation of the euro was
Page 82 and 83: prices in the first eight months of
Page 84 and 85: focused more on the production rath
Page 86 and 87: segments and, in turn, affected eur
Page 88 and 89: and Bulgaria registered robust grow
Page 90 and 91: In the remaining non-euro area EU c
Page 92 and 93: Estonian kroon and the Lithuanian l
Page 94 and 95: Table 10 Official monetary policy s
Page 96 and 97: the Bank of England and Sveriges Ri
Page 98 and 99: CHAPTER 2CENTRAL BANKOPERATIONSAND
Page 100 and 101: Box 10MONETARY POLICY OPERATIONS DU
Page 102 and 103: Chart A Liquidity supply through op
Page 106 and 107: MINIMUM RESERVE SYSTEMCredit instit
Page 108 and 109: with the ample allotments in the fi
Page 110 and 111: 2008. By contrast, the average shar
Page 112 and 113: and SDR holdings increased by aroun
Page 114 and 115: and the ECB). As a result of carefu
Page 116 and 117: cross-CSD settlement. T2S will thus
Page 118 and 119: ELIGIBLE LINKS BETWEEN NATIONAL SEC
Page 120 and 121: Chart 48 Number of euro banknotes i
Page 122 and 123: 3.3 BANKNOTE PRODUCTION AND ISSUANC
Page 124 and 125: 4 STATISTICSThe ECB, assisted by th
Page 126 and 127: iii) payments statistics and iv) de
Page 128 and 129: 5 ECONOMIC RESEARCHThe main functio
Page 130 and 131: were organised to disseminate resea
Page 132 and 133: the Financial Collateral Directive,
Page 134 and 135: on the Banque centrale du Luxembour
Page 136 and 137: standards by individual Eurosystem
Page 138 and 139: CHAPTER 3ENTRY OF SLOVAKIAINTO THE
Page 140 and 141: Table 13 Main economic indicators f
Page 142 and 143: As of January 2009 Slovakia is thus
Page 144 and 145: 3 OPERATIONAL ASPECTS OF THE INTEGR
Page 146 and 147: 4 THE CASH CHANGEOVER IN SLOVAKIATH
Page 149 and 150: Willem F. Duisenberg accepting the
Page 151 and 152: 1 FINANCIAL STABILITYThe Eurosystem
Page 153 and 154: With regard to merger and acquisiti
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with the principles set out in Octo
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2.2 BANKINGCAPITAL REQUIREMENTS DIR
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3 FINANCIAL INTEGRATIONThe Eurosyst
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The market for short-term paper in
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de France and the Banca d’Italia.
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and the Eurosystem’s business con
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4.2 RETAIL PAYMENT SYSTEMS ANDINSTR
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for Clearing and Settlement, and th
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Willem F. Duisenberg at his farewel
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1 EUROPEAN ISSUESIn 2008 the ECB co
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for financial institutions, to faci
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1.3 DEVELOPMENTS IN AND RELATIONS W
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On a number of occasions in 2008, t
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countries have voiced support for t
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Former Italian President Carlo Azeg
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1 ACCOUNTABILITY VIS-À-VIS THE GEN
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implementation of the steps foresee
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CHAPTER 7EXTERNALCOMMUNICATION
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2 COMMUNICATION ACTIVITIESThe ECB a
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Panel at the Fifth ECB Central Bank
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1 DECISION-MAKING BODIES AND CORPOR
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Council decided on the main aspects
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1.3 THE EXECUTIVE BOARDThe Executiv
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1.4 THE GENERAL COUNCILThe General
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The Eurosystem/ESCB committees have
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members of the Executive Board. 13
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for their current position. On the
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statistical office (Statistisches B
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4 ANNUAL ACCOUNTS OF THE ECB212 ECB
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function, and by the Governing Coun
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BALANCE SHEET AS AT 31 DECEMBER 200
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PROFIT AND LOSS ACCOUNT FOR THE YEA
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mid-market prices on 30 December 20
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The defined benefit obligation is c
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NOTES ON THE BALANCE SHEET1 GOLD AN
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Eurosystem (see “Banknotes in cir
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(see “Banknotes in circulation”
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values at which the transactions we
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15 CAPITAL AND RESERVESCAPITALPursu
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epresenting the remainder of its ca
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NOTES ON THE PROFIT AND LOSS ACCOUN
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individual circumstances. Basic sal
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5 CONSOLIDATED BALANCE SHEET OF THE
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ANNEXES
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Number Title OJ referenceECB/2008/1
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Number Title OJ referenceECB/2009/1
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Number 2 Originator SubjectCON/2008
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Number 4 Originator Subject OJ refe
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oth the marginal lending facility a
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OVERVIEW OF THE ECB’S COMMUNICATI
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y the respective NCBs will also be
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OPEN MARKET OPERATIONS BY CURRENCYE
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USD operationsType oftransaction 1)
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DOCUMENTS PUBLISHED BY THEEUROPEAN
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95 “Financial stability challenge
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1012 “Petrodollars and imports of
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GLOSSARYThis glossary contains sele
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Economic analysis: one pillar of th
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Financial stability: condition in w
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MFIs (monetary financial institutio
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Reserve base: the sum of the eligib
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ANNUAL REPORT 2008 - Polymer Bank Notes of the World

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