Annual accounts of the European Central Bank (ECB) for the year ending on 31 December 2000
The Governing Council of the ECB today approved the audited annual accounts of the ECB for the year ending on 31 December 2000. They will also be included in the ECB's Annual Report to be published on 2 May 2001 and will be made available on the ECB's Website already today.
The ECB made a net profit of EUR 1,990 million in the past year, after payment of remuneration of EUR 1,375 million to the national central banks (NCBs) on their claims in respect of the EUR 39.5 billion of foreign reserve assets, including gold, transferred by them to the ECB at the beginning of 1999.
The regular income of the ECB is derived primarily from investment earnings on its holdings of foreign reserve assets and on its paid-up capital of EUR 3.9 billion. The ECB earned total net interest income of EUR 1,414 million from all sources. Sales of foreign currency due to official interventions, the disposal of foreign exchange interest income and portfolio management transactions gave rise to net realised gains amounting to EUR 3,353 million.
The ECB's administrative expenses on salaries and related costs, rental of premises, and goods and services amounted to EUR 163 million, compared with EUR 122 million in 1999. Depreciation charges on fixed assets amounted to EUR 14 million. At the end of 2000, the ECB employed 941 staff (including 72 at managerial levels), compared with 732 one year earlier.
The ECB recorded exchange rate and market price valuation gains totalling EUR 8 billion on its holdings of foreign currency assets and gold, compared with EUR 6.9 billion at the end of 1999. In accordance with the accounting principles of the Eurosystem, such unrealised gains are not recognised as profit, but are transferred directly to revaluation accounts.
Taking into account the ECB's large exposure to exchange rate and interest rate risks, the Governing Council approved the setting-up of a special provision against such risks amounting to EUR 2,600 million. The provision is intended to cover future losses, in particular valuation losses, that may arise from market developments. The Governing Council will review the continuing requirement for this provision on an annual basis, to the extent that it is not used to cover such losses.
At its meeting on 29 March 2001, the Governing Council decided that the ECB's net profit should be allocated as follows:
|Transfer to the general reserve fund||EUR 398 million|
|Transfer to national central banks||EUR 1,592 million|
Notes for editors
- Accounting policies of the ECB: Common accounting policies have been established by the Governing Council for the Eurosystem, including the ECB, in accordance with Article 26.4 of the Statute of the European System of Central Banks and of the European Central Bank (Statute of the ESCB), and have been published in the Official Journal of the European Communities. Although generally based on internationally accepted accounting practices, these policies were designed with special regard for the unique circumstances of central banks, and they pay particular attention to the issue of prudence given the large exposures that national central banks (NCBs) bear in foreign exchange. This prudent approach applies particularly to the differing treatment of unrealised gains and unrealised losses for the purposes of recognising income, and to the prohibition against netting unrealised losses on one asset against unrealised gains on another. While all NCBs are bound by these policies for the purpose of reporting their operations as part of the Eurosystem for inclusion in the weekly consolidated financial statements of the latter, they are not compelled to follow them in the preparation of their own annual accounts unless required to do so by local legislation. In practice, all NCBs voluntarily apply broadly the same policies as the ECB in preparing their own annual financial statements.
- Remuneration of foreign reserve assets transferred to the ECB: The Governing Council may decide the denomination and remuneration of the resultant claims of NCBs on the ECB. Pursuant to Article 30.3 of the Statute of the ESCB, the Governing Council decided that these claims should be denominated in euro using the valuations at the time of the transfer, and should be remunerated on a daily basis at the latest main refinancing rate of the Eurosystem (the two-week euro repo rate), adjusted to take account of the zero rate of return on the gold component. For 2000, this remuneration amounted to some EUR 1.4 billion, compared with net interest income of EUR 2.5 billion earned on the counterpart assets.
- Distribution of profits: Pursuant to Article 33.1 of the Statute of the ESCB, up to 20% of the profit in any year may be transferred to the general reserve fund, subject to a limit equal to 100% of the ECB's capital. The remaining net profit is to be distributed to the NCBs, as shareholders of the ECB, in proportion to their paid-up shares. The ECB incurs very large exchange rate and interest rate exposures on its foreign reserve assets that may not be adequately covered by revaluation reserves and the general reserve fund alone, and that cannot be hedged in the market. The special provision was therefore established in order to provide an additional buffer against this exposure. The level of this provision is subject to annual review.