Main drivers of the ECB financial accounts and ECB financial strength over the first 11 years
AbstractThis paper analyses the main drivers of the ECB’s balance sheet and profit and loss account over the first 11 years of the ECB’s existence. Furthermore, the paper assesses the financial strength of the ECB. As monetary policy operations are normally conducted by national central banks under the impulse and instructions from the ECB, the Eurosystem balance sheet is the primary reference for the analysis of Eurosystem monetary policy operations. Three main drivers of the balance sheet and profit and loss account are identified. Firstly, financial market developments and portfolio management decisions imply changes in the value of the foreign reserve and own funds portfolios, which represent a substantial part of the balance sheet (with the share of own funds becoming increasingly larger over the period under review). At the same time, the profit and loss account depends to an important degree on interest income and expenses, realised gains and losses, and write-downs on these portfolios. Secondly, strong banknote demand has gradually increased the size of the balance sheet since the euro changeover in 2002. Banknotes in circulation also provide a strong base for seigniorage income, which is an important item of the profit and loss account. Thirdly, the liquidity-providing operations in foreign currency, which the Eurosystem has undertaken since 2007 in response to the financial crisis, increased significantly the size of the ECB’s (and the Eurosystem’s) balance sheet. In terms of income and expenses, these operations were rather immaterial at the level of the ECB, although the income generated was substantial at the Eurosystem level. The ECB has remained financially strong over the 11-year period. Factors that support the financial position are strong legislative provisions on e.g. independence and income, the use of financial buffers, seigniorage as a reliable income source and an effective loss-coverage mechanism. The main risk stems from adverse financial market developments, in particular low interest rates and depreciating foreign reserve currencies, implying security price and currency write-downs. JEL Classification: E58, E42, M41
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by European Central Bank in its series Occasional Paper Series with number 111.
Length: 44 pages
Date of creation: May 2010
Date of revision:
Contact details of provider:
Postal: Postfach 16 03 19, Frankfurt am Main, Germany
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/home/html/index.en.html
More information through EDIRC
Postal: Press and Information Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany
Find related papers by JEL classification:
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-05-22 (Accounting & Auditing)
- NEP-ALL-2010-05-22 (All new papers)
- NEP-CBA-2010-05-22 (Central Banking)
- NEP-EEC-2010-05-22 (European Economics)
- NEP-MON-2010-05-22 (Monetary Economics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Stolz, Stéphanie Marie & Wedow, Michael, 2010.
"Extraordinary measures in extraordinary times: Public measures in support of the financial sector in the EU and the United States,"
Discussion Paper Series 1: Economic Studies
2010,13, Deutsche Bundesbank, Research Centre.
- Stéphanie Marie Stolz & Michael Wedow, 2010. "Extraordinary measures in extraordinary times – Public measures in support of the financial sector in the EU and the United States," Occasional Paper Series 117, European Central Bank.
- Patrick Hess, 2010. "Securities clearing and settlement in China - markets, infrastructures and policy-making," Occasional Paper Series 116, European Central Bank.
- Rolf Strauch & Aidan Meyler & Roland Beck & Agostino Consolo & Riccardo Costantini & Michael Fidora & Luca Gattini & Bettina Landau & Ana Lima & David Lodge & Marco Lombardi & Ricardo Mestre & Matthia, 2010. "Energy markets and the euro area macroeconomy," Occasional Paper Series 113, European Central Bank.
- Fédéric Holm-Hadulla & Sándor Gardó & Reiner Martin, 2010. "The impact of the global economic and financial crisis on central, eastern and south-eastern Europe - A stock-taking exercise," Occasional Paper Series 114, European Central Bank.
- John Beirne & Lars Dalitz & Jacob Ejsing & Magdalena Grothe & Simone Manganelli & Fernando Monar & Benjamin Sahel & Matjaž Sušec & Jens Tapking & Tana Vong, 2011. "The impact of the Eurosystem's covered bond purchase programme on the primary and secondary markets," Occasional Paper Series 122, European Central Bank.
- Michael Sturm & Nicolas Sauter, 2010. "The impact of the global financial turmoil and recession on Mediterranean countries’ economies," Occasional Paper Series 118, European Central Bank.
- Thierry Bracke & Éva Katalin Polgár & Kristel Buysse & Desislava Rusinova & Alexandre Francart & Jakob Ekholdt Christensen & Corinna Knobloch & Nikolaos Stavrianou & Pavel Diev & Emidio Cocozza & Jo, 2010. "Financial stability challenges in EU candidate countries - Financial systems in the aftermath of the global crisis," Occasional Paper Series 115, European Central Bank.
- Filippo di Mauro & Katrin Forster & Ana Lima, 2010. "The global downturn and its impact on euro area exports and competitiveness," Occasional Paper Series 119, European Central Bank.
- Cristina Bodea & Stefan Huemer, 2010. "Dancing together at arm’s length? – The interaction of central banks with governments in the G7," Occasional Paper Series 120, European Central Bank.
- Fédéric Holm-Hadulla & Kishore Kamath & Ana Lamo & Javier J. Pérez & Ludger Schuknecht, 2010. "Public wages in the euro area - towards securing stability and competitiveness," Occasional Paper Series 112, European Central Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications).
If references are entirely missing, you can add them using this form.