User guide on the Eurosystem consolidated weekly financial statement

• Legal basis
• Publication dates
• Accounting conventions
• Content

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 (known as intra-Eurosystem claims and liabilities such as TARGET2 balances) cancel each other out and are therefore not shown.

The format and the 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/2016/34).

• ECB/2016/34
• 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 the movements in key balance sheet positions and aggregates as well as other issues, whenever necessary.

List of publication dates

While the WFS is made available in all official EU languages, the accompanying explanatory note is provided in English only.

Accounting conventions

General

Guideline ECB/2016/34 lays down rules for the accounting and financial reporting of the Eurosystem. The accounting rules are mandatory for all items material to Eurosystem operations

ECB/2016/34

Balance sheet valuation rules

The WFS reflects the valuation of the assets and liabilities of the Eurosystem in line with Guideline ECB/2016/34.

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 users 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 in order 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.

Balance sheet format

NCBs report their balance sheet data to the ECB in accordance with the format defined in Annex IV to Guideline ECB/2016/34, which also defines the composition of each balance sheet item. Consistency across NCB reports is crucial for the consolidation of the data. Further details on the content and structure of the balance sheet are provided in the following section.

Content

General

The WFS shows all 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 (known as 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 explanatory note are generally presented in billions of euro.

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.

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 this position is not included in the Net position of the Eurosystem in foreign currency, it is part of the Eurosystem’s official reserves. A dedicated paragraph is only included in the commentary in the event of significant movements compared to the previous week, for example due to an end-of-quarter revaluation.

The Net position of the Eurosystem in foreign currency (asset items 2 and 3 minus liability items 7, 8 and 9)^[1] includes holdings resulting from all customer and portfolio transactions in foreign currency (including special drawing rights – SDRs) with both euro and non-euro area residents, and foreign exchange liquidity-providing operations conducted for the benefit of euro area residents. This category contains the foreign currency part of the Eurosystem’s official reserves which is 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 the IMF’s 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.

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 lending 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.

• Asset item 5.1 Main refinancing operations refers to 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.
• Asset item 5.2 Longer-term refinancing operations covers liquidity-providing reverse transactions with a monthly frequency and a maturity of normally three months. Furthermore, this item contains non-standard monetary policy measures in the form of additional longer-term refinancing operations in euro which are further described in the open market operations section of the ECB website.
• Asset item 5.3 Fine-tuning reverse operations covers those market operations which 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.
• Asset item 5.4 Structural reverse operations covers liquidity-providing open market reverse operations executed by the Eurosystem mainly in order to adjust the structural liquidity position of the financial sector vis-à-vis the Eurosystem.
• Asset item 5.5 Marginal lending facility is a standing facility of the Eurosystem which counterparties may use to obtain overnight liquidity from an NCB at a pre-specified interest rate against eligible assets.
• Asset 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.

The Eurosystem’s Net lending to credit institutions is calculated by deducting the following liability sub-items from asset item 5.

• Liability item 2.2 Deposit facility is a standing facility of the Eurosystem which counterparties may use to hold overnight deposits remunerated at a pre-specified interest rate. (This sub-item has to be seen in connection with the asset sub-item 5.5 Marginal lending facility. While the former instrument may be used for the short-term placement of excess liquidity, the latter instrument may serve to cover short-term liquidity shortages.)

• Liability 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.

• Liability item 2.4 Fine-tuning reverse operations reflects irregular open market operations executed by the Eurosystem mainly in order to absorb unexpected liquidity inflows to the market. The equivalent on the assets side is Fine-tuning reverse operations (asset item 5.3).

• Liability 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).

Base money (liability items 1, 2.1 and 2.2)^[3] consists of:

• Liability item 1 Banknotes in circulation, which represents the nominal value of euro banknotes put into circulation by the Eurosystem central banks;
• Liability item 2.1 Current accounts (covering the minimum reserve system), which consists primarily 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;
• Liability item 2.2 Deposit facility (see above).

Asset item 7.1 Securities held for monetary policy purposes reflects the Eurosystem’s holdings of securities purchased within the scope of its monetary policy-related asset purchase programmes, broken down into different portfolios. Further details can be found on the ECB website in the section Asset purchase programmes.

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.

The Other issues section of the commentary may contain information on significant changes in any WFS balance sheet items which are not addressed by default in the commentary.

For example, this section was used to explain an accounting reclassification which took place in order to harmonise the disclosure of the emergency liquidity assistance (ELA) provided by the 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).