Annex 3: Rules for Holdings of Minimum Reserves through an Intermediary
An institution subject to minimum reserves may ask the national central bank in the country where it is established for permission to hold all its minimum reserves through another institution acting as an intermediary (indirect holding of reserves). The reserve account balance of the intermediary will in this case count towards the reserve requirement of the intermediary itself as well as towards the reserve requirements of the institutions for which it is acting as an intermediary. The possibility to hold minimum reserves indirectly is, as a rule, restricted to institutions which are constituted in such a manner that part of their administration, such as treasury management, is normally effected through, or by, the intermediary (e.g. networks of domestic savings banks or co-operative banks may centralise their reserve holdings on the reserve account of one of the institutions participating in the network).
The intermediary must fulfil the following criteria:
- it must be an institution subject to the ESCB's minimum reserves system;
- it must be an institution which normally effects part of the administration (e.g. treasury management) of the institutions for which it is acting as an intermediary;
- it must be resident in the same country as the institution for which it acts as an intermediary;
- it must hold a reserve account with the national central bank in the country where it is resident.
The application for permission to hold minimum reserves indirectly must include an agreement between the intermediary and the institution for which it would act as an intermediary in which both parties express their consent to the arrangement. The agreement must also specify whether the institution holding its minimum reserves through an intermediary wishes to access ESCB standing facilities and open market operations. The agreement should have an agreed period of notice of at least twelve months.
On the basis of the application, the national central bank may grant permission to hold minimum reserves indirectly. As a rule, this permission will be granted for an indefinite period of time. The permission must come into effect at the beginning of a maintenance period.
During the period of validity of the permission, the holder of the permission is obliged to hold all its minimum reserve holdings on the reserve account of the specified intermediary. Similarly, the intermediary is obliged to hold on its reserve account the minimum reserves of the holder of the permission. The intermediary must maintain these reserve holdings in accordance with the general conditions of the ESCB's minimum reserves system.
Institutions that are allowed to act as intermediaries are obliged to report reserve base data and reserve holdings for each institution for which they act as an intermediary. These data must be provided to the national central bank where the minimum reserves are held. If the intermediary or any of the institutions for which it is acting as an intermediary are subject to full reporting requirements, the intermediary must provide all the aforementioned data according to the same format, frequency and deadline as those established for institutions with full reporting requirements within the general framework for the ECB's money and banking statistics (see Section 7.5 of the General Documentation on ESCB Monetary Policy Instruments and Procedures). The holding of reserves through an intermediary does not change the statistical reporting obligations of institutions holding reserves via an intermediary1.
Where there is evidence that an institution holding its minimum reserves through an intermediary has not complied with its reserve requirements for a given maintenance period, the ECB may impose sanctions or other measures either on the institution itself or on the intermediary, or on both, taking into account the reasons for the failure (see Section 7.6 of the General Documentation on ESCB Monetary Policy Instruments and Procedures).
Where an institution fails to comply with its obligations under the ESCB's minimum reserves system or on prudential grounds related to the intermediary, the ECB or the relevant national central bank may at any time withdraw the permission to hold minimum reserves indirectly.
The institution which holds its reserves indirectly as well as the intermediary may at any time ask for the permission to be suspended. The relevant national central bank has to certify the suspension before it becomes effective.
The termination date of the permission to hold minimum reserves indirectly must coincide with the end of a maintenance period, implying that any withdrawal or suspension cannot come into force until the end of the current maintenance period, at the earliest. The institution which holds its reserves indirectly as well as the intermediary will be informed of the withdrawal or suspension of the permission at least five working days before the end of the last maintenance period for which the permission remains in force.
| 1. | The ECB may decide not to require any further reporting from "tail" institutions other than the reserve base data provided through the intermediary. |
ECB - European Central Bank