PRESS RELEASE

Annual accounts of the European Central Bank (ECB) for the year ending 31 December 2001

21 March 2002

The Governing Council of the ECB today approved the audited annual accounts of the ECB for the year ending 31 December 2001. They will be put on the ECB's website today and published in the ECB's Annual Report 2001 on 23 April 2002. [See section Periodical publications.]

The ECB made a net profit of EUR 1,822 million in the past year, after payment of remuneration of EUR 1,509 million to the national central banks (NCBs) on their claims in respect of the foreign reserve assets transferred by them to the ECB.

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 4.1 billion. The ECB earned total net interest income of EUR 771 million from all sources, compared with EUR 1,414 million in 2000. The main factor contributing to this reduction was the fall in US interest rates. This was compensated for by net realised gains on portfolio management transactions as security prices generally rose.

The ECB's administrative expenses on salaries and related costs, rental of premises, and goods and services amounted to EUR 283 million, compared with EUR 163 million in 2000. The bulk of this increase was accounted for by costs incurred on the Euro 2002 Information Campaign. Depreciation charges on fixed assets amounted to EUR 20 million. At the end of 2001, the ECB employed 1,043 staff (including 75 at managerial levels) compared with 941 one year earlier.

The ECB recorded exchange rate and market price valuation gains totalling EUR 9 billion on its holdings of foreign currency assets and gold, compared with EUR 8 billion at the end of 2000. In accordance with the accounting principles of the Eurosystem, such unrealised gains are not recognised as profit, but are transferred directly to revaluation accounts.

At its meeting on 21 March 2002, the Governing Council decided that the ECB's net profit of EUR 1,822 million should be allocated as follows:

2001 2000
Transfer to general reserve fund EUR 364 million EUR 398 million
Transfer to national central banks EUR 1,458 million EUR 1,592 million

Notes for editors

1. 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 practice, these policies were designed with special regard for the unique circumstances of central banks: 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. Although all NCBs are bound by these policies for the purpose of reporting their operations as part of the Eurosystem, which are included in the Eurosystem's weekly consolidated financial statements, 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.

2. 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, 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 2001, this remuneration amounted to some EUR 1.5 billion, compared with net interest income of EUR 1.7 billion earned on the counterpart assets.

3. 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. As for the year 2000, in 2001 the Governing Council decided to transfer the full 20% of net profit to reserves.

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