ANNUAL REPORT 2008 - Polymer Bank Notes of the World

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MFIs (monetary financial institutions): financial institutions which together form the moneyissuingsector of the euro area. These include the Eurosystem, resident credit institutions (asdefined in Community law) and all other resident financial institutions whose business is to receivedeposits and/or close substitutes for deposits from entities other than MFIs and, for their ownaccount (at least in economic terms), to grant credit and/or invest in securities. The latter groupconsists predominantly of money market funds.MFI credit to euro area residents: MFI loans granted to non-MFI euro area residents (includinggeneral government and the private sector) and MFI holdings of securities (shares, other equityand debt securities) issued by non-MFI euro area residents.MFI interest rates: the interest rates that are applied by resident credit institutions and otherMFIs, excluding central banks and money market funds, to euro-denominated deposits and loansvis-à-vis households and non-financial corporations resident in the euro area.MFI longer-term financial liabilities: deposits with an agreed maturity of over two years, depositsredeemable at a period of notice of over three months, debt securities issued by euro area MFIswith an original maturity of more than two years, and the capital and reserves of the euro area MFIsector.MFI net external assets: the external assets of the euro area MFI sector (such as gold, foreigncurrency banknotes and coins, securities issued by non-euro area residents and loans granted tonon-euro area residents) minus the external liabilities of the euro area MFI sector (such as non-euroarea residents’ deposits and repurchase agreements, as well as their holdings of money marketfund shares/units and debt securities issued by MFIs with a maturity of up to and including twoyears).Minimum bid rate: the lower limit to the interest rates at which counterparties may submit bidsin the variable rate tenders.Monetary analysis: one pillar of the European Central Bank’s framework for conducting acomprehensive analysis of the risks to price stability, which forms the basis for the GoverningCouncil’s monetary policy decisions. The monetary analysis helps to assess medium to longtermtrends in inflation, in view of the close relationship between money and prices over extendedhorizons. The monetary analysis takes into account developments in a wide range of monetaryindicators including M3, its components and counterparts, notably credit, and various measures ofexcess liquidity (see also economic analysis).Monetary income: income accruing to the NCBs in the performance of the Eurosystem’smonetary policy function, derived from assets earmarked in accordance with guidelines establishedby the Governing Council and held against banknotes in circulation and deposit liabilities to creditinstitutions.Money market: the market in which short-term funds are raised, invested and traded usinginstruments which generally have an original maturity of up to and including one year.Open market operation: an operation executed on the initiative of the central bank in the financialmarket. With regard to their aims, regularity and procedures, Eurosystem open market operationscan be divided into four categories: main refinancing operations; longer-term refinancingECBAnnual Report2008281
operations; fine-tuning operations; and structural operations. As for the instruments used, reversetransactions are the main open market instrument of the Eurosystem and can be employed in allfour categories of operations. In addition, the issuance of debt certificates and outright transactionsare available for structural operations, while outright transactions, foreign exchange swaps and thecollection of fixed-term deposits are available for the conduct of fine-tuning operations.Option: a financial instrument that gives the owner the right, but not the obligation, to buy or sellspecific assets (e.g. a bond or a stock) at a predetermined price (the strike or exercise price) at or upto a certain future date (the exercise or maturity date).Other financial intermediary (OFI): a corporation or quasi-corporation (other than an insurancecorporation or pension fund) that is engaged mainly in financial intermediation by incurringliabilities in forms other than currency, deposits and/or close substitutes for deposits frominstitutional entities other than MFIs. OFIs include in particular corporations engaged primarily inlong-term financing (such as financial leasing), securitised asset holdings, other financial holdings,securities and derivatives dealing (on their own account), venture capital and development capital.Portfolio investment: euro area residents’ net transactions and/or positions in securities issuedby non-residents of the euro area (“assets”) and non-residents’ net transactions and/or positionsin securities issued by euro area residents (“liabilities”). Included are equity securities and debtsecurities (bonds and notes, and money market instruments), excluding amounts recorded indirect investment or reserve assets.Price stability: the maintenance of price stability is the primary objective of the Eurosystem. TheGoverning Council defines price stability as a year-on-year increase in the Harmonised Index ofConsumer Prices for the euro area of below 2%. The Governing Council has also made it clearthat, in the pursuit of price stability, it aims to maintain inflation rates below, but close to, 2% overthe medium term.Primary balance: government net borrowing or net lending excluding interest payments onconsolidated government liabilities.Projections: the results of exercises conducted four times a year to project possible futuremacroeconomic developments in the euro area. Eurosystem staff projections are published in Juneand December, whereas European Central Bank (ECB) staff projections are published in Marchand September. They form part of the economic analysis pillar of the monetary policy strategy ofthe ECB and are thus one of several inputs into the Governing Council’s assessment of the risks toprice stability.Real-time gross settlement (RTGS) system: a settlement system in which processing andsettlement take place on an order-by-order basis (without netting) in real time (continuously) (seealso TARGET).Reference value for M3 growth: the annual growth rate of M3 over the medium term that isconsistent with the maintenance of price stability. At present, the reference value for annual M3growth is 4½%.Repurchase agreement: a contract to sell and subsequently repurchase securities on a specifieddate and at a specified price. Also called a “repo”.282 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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(see “Banknotes in circulation”
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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 280 and 281: Financial stability: condition in w
Page 284 and 285: Reserve base: the sum of the eligib
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