ANNUAL REPORT 2008 - Polymer Bank Notes of the World

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Commission identified key areas of divergencebetween the IFRS and US-GAAP and urgedthe accounting standard-setters to address theseas a matter of priority. Following the positiveopinions of the ECOFIN Council, the EuropeanParliament and the European SecuritiesCommittee, the European Commission decidedon 12 December 2008 that the generallyaccepted accounting principles of the UnitedStates, Japan, China, Canada, South Korea andIndia would be considered equivalent to theIFRS as of January 2009. The Commission alsoannounced that it would keep the situation underreview and would report on its findings by 2011at the latest for the last four countries. The ECBis closely monitoring these developments.2.3 SECURITIESSince the outbreak of the financial marketturmoil, credit rating agencies have been widelycriticised for their initial ratings of structuredfinance securities, owing to the perception thattheir ratings did not fully reflect the risksinherent in those securities. The FSF report onenhancing market and institutional resilience of7 April 2008 9 highlighted some weaknesses inrating models and methodologies and made anumber of recommendations for furthermeasures to enhance the quality of the ratingprocess. In order to address such issues, on31 July 2008 the European Commissionpublished for consultation a draft regulation oncredit rating agencies. This draft regulationaddresses the conditions for the authorisation,operation and supervision of credit ratingagencies and aims to ensure that such agenciesmeet high standards of independence, integrityand quality in the performance of their tasks.The Eurosystem responded to the publicconsultation on 25 September 2008, 10 broadlywelcoming the draft proposal. It emphasisedthat an EU regulation on credit rating agenciesshould aim to increase the level of transparencyrelated to the issuance of ratings and the ongoingsurveillance of those ratings, ensure that theregulatory framework does not interfere withthe content of ratings, and safeguard the integrityand independence of agencies by dealing withconflicts of interest. The Eurosystem suggestedan EU regulatory and supervisory structureaccording to which credit rating agencies wouldstill be formally authorised and supervised bythe national supervisors, but this authorisationand supervision would follow a joint assessmentprocess and be accompanied by a jointsupervisory process. CESR could play a role inthe coordination of the competent nationalauthorities as regards both the authorisation andthe implementation of enforcement action.Finally, the Eurosystem stressed that anycoordination arrangements for the regulationand supervision of credit rating agencies shouldallow for an appropriate level of involvementby the Eurosystem, given that it has alreadyestablished a Eurosystem credit assessmentframework which monitors the performanceand activities of agencies in the context of theimplementation of monetary policy operations.Following a public consultation, the Commissionpublished a proposal for a regulation on creditrating agencies in November 2008.9 http://www.fsforum.org/publications/r_0804.pdf10 http://www.ecb.europa.eu/pub/pdf/other/regulationcreditratingagencies2008en.pdfECBAnnual Report2008157
3 FINANCIAL INTEGRATIONThe Eurosystem has a keen interest in financialintegration in Europe, as a well-integratedfinancial system enhances the smooth andeffective transmission of monetary policyimpulses in the euro area and has implicationsfor the Eurosystem’s task of safeguardingfinancial stability. Financial integration alsosupports the smooth functioning of paymentand securities settlement systems. Furthermore,financial integration, a priority objective of theEU, can help to promote the development of thefinancial system, thereby raising the potentialfor economic growth.The Eurosystem distinguishes between fourtypes of activity through which it contributesto enhancing European financial integration:i) raising awareness of and monitoring financialintegration, ii) acting as a catalyst for privatesector activities by facilitating collectiveaction, iii) giving advice on the legislative andregulatory framework for the financial systemand direct rule-making, and iv) providingcentral banking services that also foster financialintegration. The ECB continued its activities inall four areas throughout 2008.RAISING AWARENESS OF AND MONITORINGFINANCIAL INTEGRATIONIn April 2008 the ECB published its secondannual report on “Financial integration inEurope”. 11 The main purpose of this report isto contribute to the advancement of Europeanfinancial integration and to raise publicawareness of the Eurosystem’s role in supportingthe financial integration process. The reportfirst sets out the ECB’s assessment of the stateof financial integration in the euro area, basedon a set of quantitative indicators that are alsopublished semi-annually on the ECB’s website.In 2008 the range of indicators was extended tocover the European market infrastructure. Thereport also contains in-depth analyses of selectedissues, chosen on the basis of their importanceto the EU’s financial integration agenda andtheir relevance to the ECB’s tasks. These specialanalyses covered four topics in 2008: conceptsand measures of financial development, theShort-Term European Paper (STEP) initiative,the integration and development of mortgagemarkets in Europe, and the integration of largevaluepayment and securities transactions.Finally, the report provides an overview of theEurosystem’s contribution over the past calendaryear towards achieving more integrated anddeveloped financial markets in Europe.Given that financial integration is expected tohave implications for the development of thefinancial system and for economic growth, theECB’s work on financial integration is closelylinked to its wider analysis of factors supportingthe functioning of financial systems. Work inthis area continued in 2008, 12 with the aim ofsetting out a conceptual framework formonitoring and assessing potential frictions inthe financial systems on a regular basis.In 2008 the ECB also continued its involvementin the Research Network on Capital Marketsand Financial Integration in Europe, run incooperation with the Center for FinancialStudies at the University of Frankfurt am Main.The network continued its series of conferenceswith academics, market participants andpolicy-makers, with the active participationof NCBs. The network completed its secondphase in 2008, culminating in its secondsymposium on “Capital markets and financialintegration in Europe” held in Frankfurt on13-14 February. The third phase startedwith the network’s 11th conference, hostedby Česká národní banka in Prague on20-21 October 2008, which focused on “Themarket for retail financial services: development,integration, and economic effects”. As inprevious years, in 2008 the ECB awarded five“Lamfalussy Fellowships” to young researchersin the context of the network. The network’scurrent priorities are: i) financial systems as riskmanagers, risk distributors and risk creators,ii) the integration and development of retailfinancial services and the promotion of11 http://www.ecb.europa.eu/pub/pdf/other/financialintegrationineurope200804en.pdf12 For more details, see the section entitled “Financial development:concepts and measures” in Chapter 2 of “Financial integration inEurope”, April 2008.158 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
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Chart D Longer-term inflation expec
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apidly to 1.7% in December, mainly
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productivity slowed to 0.2% in the
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Table 3 Composition of real GDP gro
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Corporate investment, which had exp
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Box 5LABOUR MARKET DEVELOPMENTS IN
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Chart C Breakdown of employment gro
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Box 6DEVELOPMENTS IN THE ISSUANCE A
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Chart B Government bond yield sprea
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Box 7STATISTICAL ACCOUNTING CONSEQU
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warranted because of the need to co
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sharp depreciation of the euro was
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prices in the first eight months of
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focused more on the production rath
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segments and, in turn, affected eur
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and Bulgaria registered robust grow
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In the remaining non-euro area EU c
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Estonian kroon and the Lithuanian l
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Table 10 Official monetary policy s
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the Bank of England and Sveriges Ri
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CHAPTER 2CENTRAL BANKOPERATIONSAND
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Box 10MONETARY POLICY OPERATIONS DU
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Chart A Liquidity supply through op
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franc funding needs of banks with n
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MINIMUM RESERVE SYSTEMCredit instit
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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
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Page 128 and 129: 5 ECONOMIC RESEARCHThe main functio
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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
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Page 151 and 152: 1 FINANCIAL STABILITYThe Eurosystem
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Page 161 and 162: The market for short-term paper in
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Page 167 and 168: 4.2 RETAIL PAYMENT SYSTEMS ANDINSTR
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Page 173 and 174: 1 EUROPEAN ISSUESIn 2008 the ECB co
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Page 177 and 178: 1.3 DEVELOPMENTS IN AND RELATIONS W
Page 179 and 180: On a number of occasions in 2008, t
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Page 183 and 184: Former Italian President Carlo Azeg
Page 185 and 186: 1 ACCOUNTABILITY VIS-À-VIS THE GEN
Page 187: implementation of the steps foresee
Page 190 and 191: CHAPTER 7EXTERNALCOMMUNICATION
Page 192 and 193: 2 COMMUNICATION ACTIVITIESThe ECB a
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Page 197 and 198: 1 DECISION-MAKING BODIES AND CORPOR
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Page 201 and 202: 1.3 THE EXECUTIVE BOARDThe Executiv
Page 203 and 204: 1.4 THE GENERAL COUNCILThe General
Page 205 and 206: The Eurosystem/ESCB committees have
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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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