ANNUAL REPORT 2008 - Polymer Bank Notes of the World

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Financial stability: condition in which the financial system – comprising financial intermediaries,markets and market infrastructures – is capable of withstanding shocks and the unravelling offinancial imbalances, thereby mitigating the likelihood of disruptions in the financial intermediationprocess which are severe enough to significantly impair the allocation of savings to profitableinvestment opportunities.Financing gap of non-financial corporations: the financing gap can be defined as the balancebetween the corporate savings (through retained earnings and depreciation allowances) and thenon-financial investment of non-financial corporations. The financing gap can also be defined onthe basis of the financial accounts, as the balance between the net acquisition of financial assets andthe net incurrence of liabilities by non-financial corporations. There are statistical discrepanciesbetween the two measures owing to differences in source statistics.Fine-tuning operation: an open market operation executed by the Eurosystem in order to dealwith unexpected liquidity fluctuations in the market. The frequency and maturity of fine-tuningoperations are not standardised.Foreign exchange swap: simultaneous spot and forward transactions exchanging one currencyagainst another.General Council: one of the decision-making bodies of the European Central Bank (ECB).It comprises the President and the Vice-President of the ECB and the governors of all the NCBs ofthe European System of Central Banks.General government: a sector defined in the European System of Accounts 1995 as comprisingresident entities that are engaged primarily in the production of non-market goods and servicesintended for individual and collective consumption and/or in the redistribution of national incomeand wealth. Included are central, regional and local government authorities, as well as socialsecurity funds. Excluded are government-owned entities that conduct commercial operations, suchas public enterprises.Governing Council: the supreme decision-making body of the European Central Bank (ECB).It comprises all the members of the Executive Board of the ECB and the governors of the NCBs ofthe Member States that have adopted the euro.Gross operating surplus: the surplus (or deficit) on the value of output of production activitiesafter the costs of intermediate consumption, compensation of employees and taxes less subsidieson production have been deducted, but before payments and receipts of income related to theborrowing/renting or owning of financial and non-produced assets have been taken into account.Harmonised Index of Consumer Prices (HICP): a measure of the development of consumerprices that is compiled by Eurostat and harmonised for all EU Member States.Implied volatility: the expected volatility (i.e. standard deviation) in the rates of change of theprice of an asset (e.g. a share or a bond). It can be derived from the asset’s price, maturity date andexercise price of its options, as well as from a riskless rate of return, using an option pricing modelsuch as the Black-Scholes model.ECBAnnual Report2008279
International investment position (i.i.p.): the value and composition of an economy’s outstandingnet financial claims on (or financial liabilities to) the rest of the world.Key ECB interest rates: the interest rates, set by the Governing Council, which reflect themonetary policy stance of the European Central Bank. They are the rates on the main refinancingoperations, the marginal lending facility and the deposit facility.Lisbon strategy: a comprehensive agenda of structural reforms aimed at transforming the EU into“the most dynamic and competitive knowledge-based economy in the world”, launched in 2000 bythe Lisbon European Council.Longer-term refinancing operation: a regular open market operation executed by theEurosystem in the form of reverse transactions. Such operations are carried out through a monthlystandard tender and normally have a maturity of three months.M1: a narrow monetary aggregate that comprises currency in circulation plus overnight depositsheld with MFIs and central government (e.g. at the post office or treasury).M2: an intermediate monetary aggregate that comprises M1 plus deposits redeemable at a periodof notice of up to and including three months (i.e. short-term savings deposits) and deposits with anagreed maturity of up to and including two years (i.e. short-term time deposits) held with MFIs andcentral government.M3: a broad monetary aggregate that comprises M2 plus marketable instruments, in particularrepurchase agreements, money market fund shares/units, and debt securities with a maturity ofup to and including two years issued by MFIs.Main refinancing operation: a regular open market operation executed by the Eurosystem inthe form of reverse transactions. Such operations are carried out through a weekly standard tenderand normally have a maturity of one week.Maintenance period: the period over which credit institutions’ compliance with reserverequirements is calculated. The maintenance period begins on the settlement day of the first mainrefinancing operation following the meeting of the Governing Council at which the monthlyassessment of the monetary policy stance is pre-scheduled. The European Central Bank publishesa calendar of the reserve maintenance periods at least three months before the start of the year.Marginal lending facility: a standing facility of the Eurosystem which counterparties mayuse to receive overnight credit from an NCB at a pre-specified interest rate against eligible assets(see also key ECB interest rates).Market liquidity risk: the risk that transactions on the financial market cannot be concluded or canonly be concluded at worse than expected conditions owing to inadequate market depth or marketdisruption.Market risk: the risk of losses (in both on and off-balance-sheet positions) arising from movementsin market prices.280 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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with the ample allotments in the fi
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2008. By contrast, the average shar
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and SDR holdings increased by aroun
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and the ECB). As a result of carefu
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cross-CSD settlement. T2S will thus
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ELIGIBLE LINKS BETWEEN NATIONAL SEC
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Chart 48 Number of euro banknotes i
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3.3 BANKNOTE PRODUCTION AND ISSUANC
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4 STATISTICSThe ECB, assisted by th
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iii) payments statistics and iv) de
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5 ECONOMIC RESEARCHThe main functio
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were organised to disseminate resea
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the Financial Collateral Directive,
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on the Banque centrale du Luxembour
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standards by individual Eurosystem
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CHAPTER 3ENTRY OF SLOVAKIAINTO THE
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Table 13 Main economic indicators f
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As of January 2009 Slovakia is thus
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3 OPERATIONAL ASPECTS OF THE INTEGR
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4 THE CASH CHANGEOVER IN SLOVAKIATH
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Willem F. Duisenberg accepting the
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1 FINANCIAL STABILITYThe Eurosystem
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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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Page 239: individual circumstances. Basic sal
Page 243 and 244: 5 CONSOLIDATED BALANCE SHEET OF THE
Page 246 and 247: ANNEXES
Page 248 and 249: Number Title OJ referenceECB/2008/1
Page 250 and 251: Number Title OJ referenceECB/2009/1
Page 252 and 253: Number 2 Originator SubjectCON/2008
Page 258 and 259: Number 4 Originator Subject OJ refe
Page 260 and 261: oth the marginal lending facility a
Page 262 and 263: OVERVIEW OF THE ECB’S COMMUNICATI
Page 264 and 265: y the respective NCBs will also be
Page 266 and 267: OPEN MARKET OPERATIONS BY CURRENCYE
Page 268 and 269: USD operationsType oftransaction 1)
Page 270 and 271: DOCUMENTS PUBLISHED BY THEEUROPEAN
Page 272 and 273: 95 “Financial stability challenge
Page 274 and 275: 1012 “Petrodollars and imports of
Page 276 and 277: GLOSSARYThis glossary contains sele
Page 278 and 279: Economic analysis: one pillar of th
Page 282 and 283: MFIs (monetary financial institutio
Page 284 and 285: Reserve base: the sum of the eligib
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ANNUAL REPORT 2008 - Polymer Bank Notes of the World

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