ANNUAL REPORT 2008 - Polymer Bank Notes of the World

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with the ample allotments in the fixed rate openmarket operations, led to a significant increasein the use of the deposit facility (see Chart A inBox 10). Until 8 October the average daily useof the deposit facility was €2.5 billion (comparedwith €0.5 billion in 2007). In the period from9 October until the end of the year, this figureincreased dramatically to €208.5 billion. Duringthis period, recourse to the deposit facilityfollowed a broadly similar pattern during eachreserve maintenance period: the amounts wererelatively low at the beginning of each period, butincreased subsequently as more counterpartiesfulfilled their reserve requirements.The daily average recourse to the marginallending facility was €0.9 billion until 8 October2008 (compared with €0.2 billion in 2007), andincreased to €6.7 billion thereafter. This risereflects the lower interest rate on this facility,in relative terms, as a result of the reducedcorridor, but to some extent may also be linkedto heightened uncertainty about individual bankliquidity needs.ELIGIBLE ASSETS FOR MONETARY POLICYOPERATIONSIn line with central bank practice worldwide,all credit operations of the Eurosystem arebased on adequate collateral. The concept ofadequacy implies, first, that the Eurosystemis to a large extent protected from incurringlosses in its credit operations and, second, thatsufficient collateral should be available to a wideset of counterparties, so that the Eurosystemcan provide the amount of liquidity it deemsnecessary through its monetary policy andpayment systems operations. To facilitate this,the Eurosystem accepts a broad range of assets ascollateral in all its credit operations. This featureof the Eurosystem’s collateral framework,together with the fact that access to Eurosystemopen market operations is granted to a large poolof counterparties, has been key to supporting theimplementation of monetary policy in times ofstress. The inbuilt flexibility of its operationalframework allowed the Eurosystem to providethe necessary liquidity to address the impairedfunctioning of the money market withoutencountering widespread collateral constraintsthroughout much of 2008. It was only towards theend of the year that, in the light of the extensionof refinancing for terms longer than overnight ineuro and in US dollars as well as the recourseto fixed rate full allotment tender procedures, theGoverning Council decided to expand the list ofeligible collateral on a temporary basis until theend of 2009 (see Box 10).In 2008 the average amount of eligiblecollateral increased by 17.2%, compared with2007, to a total of €11.1 trillion (see Chart 43).General government debt, at €4.9 trillion,accounted for 44% of the total, while theremainder of marketable collateral was in theform of uncovered bank bonds (€2.2 trillion,or 20%), covered bank bonds (€1.2 trillion, or11%), asset-backed securities (€1.1 trillion,or 9%), corporate bonds (€0.9 trillion, or8%), and other bonds, such as those issued bysupranational organisations, (€0.6 trillion, or5%). The overall volume of marketable assetseligible as a result of the temporary measures toChart 43 Eligible collateral by asset type(EUR billions; annual averages)12,00010,0008,0006,0004,0002,0000Source: ECB.non-marketable assetsother marketable assetsasset-backed securitiescorporate bondscovered bank bondsuncovered bank bondsregional government securitiescentral government securities2004 2005 2006 2007 200812,00010,0008,0006,0004,0002,0000ECBAnnual Report2008107
expand the list of eligible collateral amountedto around €870 billion at the end of 2008.The list of eligible collateral also includesnon-marketable assets, mostly credit claims(also referred to as bank loans). In contrastto marketable assets, non-marketable assetsare assessed for eligibility only at the time oftheir acceptance. For this reason, the volumeof potentially eligible non-marketable assetscannot easily be measured. The amount of nonmarketableassets put forward by counterpartiesas collateral in Eurosystem credit operationsreached €0.2 trillion in 2008, representing 2% oftotal eligible collateral in the Eurosystem. Thelower credit threshold temporarily introduced toexpand the list of eligible collateral (see Box 10)was also applied to non-marketable assets.The average value of marketable and nonmarketableassets put forward by counterpartiesas collateral in Eurosystem credit operationsrose significantly, from €1,148 billion in2007 (revised upwards from €1,101 billion)to €1,579 billion in 2008. This increase wasmainly due to the fact that counterparties putforward large additional amounts of collateralwith the Eurosystem in response to thefinancial market turbulence (see Chart 44). Asthe comparison of collateral with outstandingcredit to the Eurosystem’s counterpartiesindicates, the share of deposited collateralthat is not used to cover credit from monetarypolicy operations increased marginally on anaggregate basis. This suggests that sufficiencyof collateral has not been a systemic constrainton the Eurosystem’s counterparties despite theincreasing volume of liquidity received in therefinancing operations.As regards the composition of collateral putforward, the average share of asset-backedsecurities increased from 16% in 2007 to 28%in 2008, overtaking uncovered bank bondsas the largest class of assets put forward ascollateral with the Eurosystem. Uncoveredbank bonds accounted on average for slightlyless than 28% of the collateral put forward in2008. The average share of non-marketableassets increased from 10% in 2007 to 12% inChart 44 Collateral put forward in Eurosystemcredit operations versus outstanding credit inmonetary policy operations(EUR billions)1,8001,6001,4001,2001,0008006004002000total collateral put forwardof which: outstanding creditpeak outstanding credit2004 2005 2006 2007 20081,8001,6001,4001,2001,000800600400200Source: ECB.Note: “Collateral put forward” refers to assets deposited ascollateral in countries operating a pooling system and assets usedas collateral in countries operating an earmarking system.Chart 45 Breakdown of assets (includingcredit claims) put forward as collateral byasset type(percentages; annual averages)10090807060504030201002004Source: ECB.non-marketable assetsother marketable assetsasset-backed securitiescorporate bondscovered bank bondsuncovered bank bondsregional government securitiescentral government securities200520062007200801009080706050403020100108 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
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calculated as the balance between g
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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 104 and 105: franc funding needs of banks with n
Page 106 and 107: MINIMUM RESERVE SYSTEMCredit instit
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
Page 155 and 156: with the principles set out in Octo
Page 157 and 158: 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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