Foreign reserves and own funds
The ECB’s foreign reserves ensure that the ECB has sufficient liquidity to conduct foreign exchange operations if needed. Those foreign reserves were originally established by means of the transfer of foreign reserve assets from the NCBs of the euro area when Stage Three of Economic and Monetary Union began on 1 January 1999.
The objectives for the management of the ECB’s foreign reserves are, in order of importance: liquidity, security and returns.
The ECB’s foreign reserves portfolio consists of US dollars, Japanese yen, gold and special drawing rights. The composition of the reserves changes over time, reflecting changes in the market values of invested assets, as well as the ECB’s foreign exchange and gold operations.
The US dollar and Japanese yen reserves are actively managed by the ECB and selected euro area NCBs (acting as agents of the ECB) that wish to be involved in this operational activity. NCBs can opt to pool their operational activities for the management of the ECB’s foreign reserves with other NCBs. Each NCB or pool of NCBs usually manages a single US dollar or Japanese yen portfolio as an agent of the ECB.
The ECB carries out sales of gold in full conformity with the Central Bank Gold Agreement and the "Joint Statement on Gold" (see link to press releases below). The ECB is a signatory to these agreements.
|Figures as at end-November 2010 (EUR million equivalents)|
- "Portfolio management at the ECB", Monthly Bulletin, ECB, April 2006,
- "Foreign exchange reserves and operations of the Eurosystem", Monthly Bulletin, ECB, January 2000,
Related legal acts
ECB legal acts on foreign reserves, as published in the Official Journal of the European Union, are available on the "Legal framework" pages of the ECB’s website.
Related press releases
Press releases on the ECB’s gold sales and the Joint Statement on Gold are available in the "Media" section of the ECB’s website.
The ECB's own funds provide it with income to help cover its operating expenses.
This portfolio is invested in euro-denominated assets with the objective of maximising returns, subject to the limits imposed in terms of risk.
The ECB’s own funds consist of:
- the invested counterpart of the ECB’s paid-up capital;
- funds held from time to time in its general reserve fund;
- provisions for foreign exchange, interest rate and gold price risks.
|Figures as at end-2010 (EUR millions)|
|ECB’s own funds (market values)||14,145|
The efficient allocation and management of foreign reserves will promote the liquidity needed to fulfil policy mandates, while at the same time minimising the cost of holding reserves. Risk management can contribute to these objectives by managing and controlling exposure to financial risk.
The ECB is directly responsible for managing the risks entailed by its portfolios, including its foreign reserves and own funds portfolios. The management and monitoring of the financial risks incurred by the ECB – whether incurred directly by the ECB or as a result of Eurosystem NCBs acting on behalf of the ECB – covers the areas of market, credit and liquidity risks and involves four key areas of responsibility:
- the setting of limits for credit and market risks;
- the measurement and reporting of risk exposures and performance;
- strategic asset allocation.
The independent reporting of risk and performance is a key feature of the ECB’s investment framework. To avoid potential conflicts of interest, the management of financial risks incurred in portfolio management activities is entrusted to the Directorate Risk Management, which reports directly to the Executive Board.