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User guide on the Eurosystem consolidated weekly financial statement

The weekly financial statement (WFS) provides the public with information on the Eurosystem’s monetary policy operations, foreign exchange operations and investment activities.

Legal basis for reporting

Article 15 of the Statute of the ESCB requires that a consolidated financial statement of the Eurosystem is published each week. The WFS shows the assets and liabilities held by the Eurosystem vis-à-vis third parties as they arise in the accounts of the euro area national central banks (NCBs) and the ECB. Claims and liabilities between Eurosystem central banks (so-called intra-Eurosystem claims and liabilities such as TARGET2 balances) cancel each other out and are therefore not shown.

The format and content of the WFS are specified in the ECB Guideline on the legal framework for accounting and financial reporting in the European System of Central Banks (ECB/2010/20).

ECB/2010/20
ECB, ESCB and the Eurosystem

Publication dates

As a general rule, the WFS is published on Tuesdays at 15:00 CET and relates to the preceding Friday. Certain publication dates differ from this general rule, for example, in respect of the first WFS after quarter-end and whenever the TARGET2 system is closed during the WFS preparation period. A commentary provides information on movements in key balance sheet positions, distinguishing between items not related to monetary policy operations, items related to monetary policy operations and – whenever necessary – other issues.

List of publication dates

Both the WFS and the accompanying commentary are available in all official EU languages.

Accounting conventions

General

Guideline ECB/2010/20 sets down rules for the accounting and financial reporting of the Eurosystem. The accounting rules are mandatory for all items material to Eurosystem operations.

ECB/2010/20

Balance sheet valuation rules

The WFS reflects the valuation of the assets and liabilities of the Eurosystem in line with Guideline ECB/2010/20.

Valuation of assets and liabilities

Gold, foreign currency instruments and securities holdings are revalued at current market rates and prices at the end of each quarter, with the exception of securities classified as held-to-maturity, non-marketable securities, and securities held for monetary policy purposes that are accounted for at amortised cost. Securities valued at amortised cost are treated as separate holdings and are subject to an impairment test.

Basis of revaluation

The revaluation takes place on an item-by-item basis for securities, interest rate swaps, futures, forward rate agreements and other interest rate instruments (with the exception of options embedded in securities). Foreign exchange holdings (including special drawing rights) are revalued on a currency-by-currency basis.

Quarter-end revaluation

The net effect of the quarter-end revaluation is shown separately for each balance sheet item in the WFS after quarter-end. During the quarter, all operations conducted by the Eurosystem are recorded at transaction rates and prices. This practice enables the public during the quarter to monitor the development of the Eurosystem operations on a cash flow basis, while at quarter-end the balance sheet positions that are subject to regular revaluation are reported at market values to reflect the economic reality.

Income recognition rules

Unrealised gains arising from the quarter-end revaluation are not recognised as income, but are recorded directly in a revaluation account. Unrealised losses are taken to the profit and loss account at the year-end if they exceed previous revaluation gains registered in the corresponding revaluation account. Such recognised losses are not reversed in subsequent years against new unrealised gains. Unrealised losses resulting from the revaluation of a given security, a foreign currency, or holding of gold are not netted against unrealised gains in other securities or currencies. These principles combine transparency with the prudent recognition of income.

Composition of balance sheet items

The section on balance sheet structure provides an overview of the references to the main balance sheet items commented on in the WFS. Details on the composition of each balance sheet item can be found in Annex IV to Guideline ECB/2010/20.

Content

General

The WFS shows the assets and liabilities of Eurosystem central banks, including all NCB branches, vis-à-vis third parties. It does not contain the assets and liabilities of investments in subsidiaries or companies in which the euro area NCBs hold participating interests. Claims and liabilities between Eurosystem central banks (so-called intra-Eurosystem claims and liabilities such as TARGET2 balances) cancel each other out and are therefore not shown.

Balance sheet structure

The WFS distinguishes between euro area residents and non-euro area residents, in line with European and international statistical standards. Further distinctions are made between foreign currency-denominated and euro-denominated items. In addition, positions vis-à-vis the financial sector (e.g. liability item 3 Other liabilities to euro area credit institutions denominated in euro), are set apart from those vis-à-vis the general government and others (e.g. liability item 5 Liabilities to other euro area residents denominated in euro).

The WFS shows balances as at close of business of the reporting day and changes (due to transactions or quarter-end revaluation effects, as applicable) compared with the previous week. All items in the balance sheet are expressed in millions of euro; whereas items in the commentary are presented in billions of euro, except in the case of gold and gold receivables, which are expressed in millions of euro. Most of the data included in the WFS are also available as long time series.

Commentary to the weekly financial statement

The commentary refers mainly to changes that have arisen owing to developments in the implementation of monetary policy and foreign exchange operations since the previous week. This section provides an overview of the references to the main balance sheet items commented on in the WFS.

Items not related to monetary policy operations

Gold and gold receivables (asset item 1) shows the gold holdings (both physical and non-physical gold) of the Eurosystem central banks at previous quarter-end market value and the value of any transactions (purchases and sales) settled since the previous quarter-end. While Gold and gold receivables is not included in the Net position of the Eurosystem in foreign currency, it is part of the Eurosystem's official reserves.

The Net position of the Eurosystem in foreign currency (asset items 2 and 3 minus liability items 7, 8 and 9[1]) includes all customer and portfolio transactions in foreign currency (including special drawing rights (SDRs)) with both euro area and non-euro area residents, and foreign exchange liquidity-providing operations conducted for the benefit of euro-area residents. The Net position of the Eurosystem in foreign currency contains the foreign currency part of the Eurosystem's official reserves which are primarily needed to support possible interventions in the foreign exchange market.

  • Asset item 2.1 Receivables from the International Monetary Fund (IMF) shows the Member States' claims resulting from their IMF subscription, their holdings of SDRs and their participation in IMF programmes. A related balance sheet item is liability item 9 Counterpart of special drawing rights allocated by the IMF, which represents the amount of SDRs that were originally allocated to the respective Member States.
  • Asset item 2.2 Balances with banks and security investments, external loans and other external assets represents the bulk of the official foreign currency assets of the Eurosystem and consists mainly of deposits and security investments with counterparties outside the euro area. Foreign currency assets located in the euro area are presented under asset item 3 Claims on euro area residents denominated in foreign currency.
  • Foreign exchange liquidity-providing operations are reported separately in the commentary accompanying the WFS. These foreign exchange liquidity-providing operations were first introduced in December 2007 to address tensions in the euro area money market, whereby non-euro area central banks provide foreign currency to the ECB by means of a temporary reciprocal currency arrangement (swap line). Swap lines with the Federal Reserve System, People's Bank of China, Bank of Canada, Swiss National Bank, Bank of Japan and the Bank of England are available to provide liquidity in the respective foreign currencies. Subsequently the Eurosystem provides the foreign currency received from the non-euro area central banks to domestic counterparties, in exchange for euros.

Asset item 7.2 Other securities reflects the holdings by the Eurosystem of marketable securities (other than those held for monetary policy purposes and those disclosed under asset item 9 Other assets), i.e. securities denominated in euro which are held outright by euro area central banks for investment purposes at their own risk. Those investment portfolios that are earmarked as a counterpart of an identifiable liability item of the balance sheet are disclosed under asset item 9 Other assets.

Liability item 1 Banknotes in circulation represents the nominal value of euro banknotes put into circulation by the Eurosystem central banks.

Euro area government deposits held with the Eurosystem central banks are presented under sub-item 5.1 General government within liability item 5 Liabilities to other euro area residents denominated in euro.

Items related to monetary policy operations

The Eurosystem's Net lending to credit institutions (asset item 5 minus liability items 2.2, 2.3, 2.4, 2.5 and 4[2] shows the use of the Eurosystem's liquidity-providing operations by counterparties net of liquidity-absorbing instruments.

Lending to euro area credit institutions related to monetary policy operations denominated in euro (asset item 5) is broken down into six sub-items and reflects the liquidity-providing monetary policy credit operations used by the Eurosystem.

  • Item 5.1 Main refinancing operations[3] are a regular liquidity-providing open market credit operation executed by the Eurosystem in the form of reverse transactions. Main refinancing credit operations are conducted through weekly standard tenders and normally have a maturity of one week.
  • Item 5.2 Longer-term refinancing operations[4] are liquidity-providing reverse transactions with a monthly frequency and normally have a maturity of three months.
  • Item 5.3 Fine-tuning reverse operations are executed on an ad-hoc basis with the aim of managing the liquidity situation in the market and steering interest rates, in particular to smooth the effects on interest rates caused by unexpected liquidity fluctuations in the market.
  • Item 5.4 Structural reverse operations are liquidity-providing open market reverse operations executed by the Eurosystem mainly to adjust the structural liquidity position of the financial sector vis-à-vis the Eurosystem.
  • Item 5.5 Marginal lending facility is a standing facility of the Eurosystem used by counterparties to obtain overnight liquidity from an NCB at a pre-specified interest rate against eligible assets.
  • Item 5.6 Credits related to margin calls may arise from value increases in underlying collateral regarding other credit to counterparties. In such cases, central banks may return excess cash to the counterparty.

Liabilities to euro area credit institutions related to monetary policy operations denominated in euro (liabilities item 2) shows the amounts of liquidity-absorbing monetary policy instruments. It is broken down into five sub-items.

  • Item 2.1 Current accounts (covering the minimum reserve system) consists of holdings related to the requirement on credit institutions to hold deposits on accounts with their NCBs. The Eurosystem's minimum reserve system includes averaging provisions, meaning that credit institutions have to comply with the reserve requirement on average over a specific maintenance period.
  • Item 2.2 Deposit facility is a standing facility of the Eurosystem which counterparties can use to make overnight deposits remunerated at a pre-specified interest rate (While the deposit facility can be used for the short-term placement of excess liquidity, the marginal lending facility (asset sub-item 5.5) serves to cover short-term liquidity shortages.)
  • Item 2.3 relates to fixed-term deposits. The collection of fixed-term deposits is a monetary policy instrument used for fine-tuning purposes in order to absorb liquidity in the market or to counter liquidity imbalances on the last day of a reserve maintenance period.
  • Item 2.4 Fine-tuning reverse operations reflects irregular open market operations executed by the Eurosystem mainly to absorb unexpected liquidity inflows to the market. The equivalent on the assets side is Fine-tuning reverse operations (asset item 5.3).
  • Item 2.5 Deposits related to margin calls may arise from value decreases in underlying collateral provided against credit to counterparties. The Eurosystem may in this case require counterparties to supply additional cash (or collateral). The equivalent on the assets side is Credits related to margin calls (asset item 5.6).

Securities of euro area residents denominated in euro (asset item 7) is divided into two sub-items to distinguish securities held for monetary policy purposes (asset item 7.1) and securities held for other purposes (asset item 7.2). Asset item 7.1 Securities held for monetary policy purposes reflects the Eurosystem's holdings of securities purchased within the scope of the asset purchase programmes:

  • The covered bond purchase programme (CBPP) began in July 2009, and purchases under this scheme were fully implemented by June 2010.
  • The second covered bond purchase programme (CBPP2) was announced in October 2011 and ended, as planned, in October 2012.
  • The Securities Markets Programme (SMP) comprising holdings of euro-area public debt securities began in May 2010 and ended in September 2012. In relation to the SMP, the Eurosystem re-absorbed the liquidity provided through the SMP, with a view to leaving liquidity conditions unaffected by the programme, by means of weekly liquidity-absorbing operations until June 2014.
  • Item 7.1 also reflects the Eurosystem holdings of securities purchased by the Eurosystem under the expanded asset purchase programme (APP) which consists of a third covered bond purchase programme (CBPP3), the asset-backed securities purchase programme (ABSPP), the public sector purchase programme (PSPP) and the corporate sector purchase programme (CSPP). These programmes are intended to be carried out until the end of March 2017 and, in any case, until the Governing Council sees a sustained adjustment in the path of inflation that is consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term.

All the securities included under asset item 7.1 are valued at amortised cost, regardless of the underlying holding intention. An impairment test is conducted annually.

Other issues

The Other issues section of the commentary contains information on significant changes in any WFS balance sheet items which are not addressed in the commentary under Items related to monetary policy operations or Items not related to monetary policy operations.

For example, this was used to explain an accounting reclassification which took place to harmonise the disclosure of Emergency Liquidity Assistance (ELA) provided by Eurosystem NCBs to domestic credit institutions. When such operations take the form of collateralised loans, they are included in the WFS under Other claims on euro area credit institutions denominated in euro (asset item 6). This item also shows current accounts, fixed-term deposits, day-to-day money and reverse repo transactions carried out in connection with the management of the securities portfolios held under asset item 7.