World Economy

ECB Reveals Confidential Document

ECB Reveals  Confidential DocumentECB Reveals  Confidential Document

The eurozone’s 19 national central banks hold investment assets worth almost half a trillion euros, according to previously secret information published on Friday by the European Central Bank in Frankfurt.

The ECB set out details of the so-called Agreement on Net Financial Assets, a document signed before the introduction of the euro a decade and a half ago that regulated how the previously independent national central banks would manage their holdings of foreign currencies and bonds. While some of those national authorities have still to publish their individual accounts, the ECB said the outstanding amount stood at 490 billion euros ($547 billion) at the end of 2015, Bloomberg reported.

Even though the assets are separate from those built up by the ECB for monetary policy purposes—such as the current quantitative easing program—the increase in the total level of holdings during the sovereign debt crisis has led to accusations that national authorities were printing money to serve their own governments, a practice that would be illegal under European law. ANFA sets quotas for each country and aims to prevent national central banks’ investment activity from interfering with monetary policy.

  Confidential Document

“Although ANFA was previously a confidential document, the ECB and the national central banks of the Eurosystem took the unanimous decision that publishing the text along with an explanatory document would better serve their commitment to greater transparency,” the ECB said in the statement on its website.

National assets have grown at an average rate of 5% per year since the introduction of euro banknotes in 2002, the ECB said, adding that the increase was slower than that for cash in circulation. National central banks will release more details about their ANFA activities in their respective annual reports.

The document also includes an annex on the calculation of the quota system, which regulates how much each national central bank can hold. Before the introduction of the euro, some national institutions had considerable assets, often related to the management of their currencies. The assets now are frequently related to the management of pension funds and other tasks not related to monetary policy.

The quota system became briefly controversial in 2013 when the Irish central bank was allowed to exceed its own limit in order to process a debt swap with the government related to the country’s banking collapse. The deal was criticized by Germany and others for being close to prohibited monetary financing.

“ANFA purchases are entirely a matter for national central banks,” ECB President Mario Draghi said at a press conference on Dec. 3. “I would exclude completely any possibility of monetary financing.”