Joint Statement on Gold (8 March 2004)

Box 14 Joint Statement on Gold (8 March 2004)

European Central Bank Banca d’Italia Banco de España Banco de Portugal Bank of Greece Banque centrale du Luxembourg Banque de France Banque Nationale de Belgique Central Bank & Financial Services Authority of Ireland De Nederlandsche Bank Deutsche Bundesbank Oesterreichische Nationalbank Suomen Pankki – Finlands Bank Schweizerische Nationalbank Sveriges Riksbank

In the interest of clarifying their intentions with respect to their gold holdings, the undersigned institutions make the following statement:

1. Gold will remain an important element of global monetary reserves. 2. The gold sales already decided and to be decided by the undersigned institutions will

be achieved through a concerted programme of sales over a period of five years, starting on 27 September 2004, just after the end of the previous agreement. Annual sales will not exceed 500 tonnes and total sales over this period will not exceed 2,500 tonnes.

3. Over this period, the signatories to this agreement have agreed that the total amount of their gold leasings and the total amount of their use of gold futures and options will not exceed the amounts prevailing at the date of the signature of the previous agreement.

This agreement will be reviewed after five years. Source: ECB Press Release of 8 March 2004.

exchange rate policy of the ECB. Transactions carried out by NCBs – either by themselves or on behalf of national governments – in fulfilment of their obligations towards international organisations, such as the BIS and the IMF, are also exempt from this requirement.

By analogy with euro area NCBs and in line with Article 31.3 of the Statute, EU Member States’ transactions with their foreign currency working balances are also subject to control by the ECB. 10

10 Guideline ECB/2003/12 of 23 October 2003 for participating Member States’ transactions with their foreign exchange working balances pursuant to Article 31.3 of the Statute of the European

System of Central Banks and of the European Central Bank (OJ L 283, 31.10.2003, p. 81).

3 . 3 PAY M E N T A N D C L E A R I N G S Y S T E M S

The Eurosystem’s task to promote the smooth operation of payment systems is substantiated in Article 22 of the Statute which entitles the ECB and the NCBs to provide facilities to ensure efficient and sound clearing and payment systems within the Community and other countries. To the same end, the ECB may issue regulations. 11

Efficient and sound payment systems and securities clearing and settlement systems are indispensable for the effectiveness of monetary policy. The Eurosystem uses payment systems to settle its monetary policy and intraday credit operations. Since these operations have to be collateralised, the ability of the Eurosystem’s counterparties to provide collateral rests on a sound and efficient infrastructure of securities clearing and settlement systems. The smooth working of both payment systems and securities settlement systems is also crucial for the functioning of the euro money market and, more generally, for other national and international financial markets (such as foreign exchange, securities and derivatives markets).

There are two basic kinds of financial risk associated with payment systems and securities clearing and settlement systems:

• the risk that a party within the system may be unable to meet its obligations either when such obligations fall due or at any time in the future (credit risk);

• the risk that a party within the system may have insufficient funds or securities to meet its obligations as and when expected, although it may be able to do so later (liquidity risk).

Both categories of financial risk might lead to a situation where the failure of one participant in an interbank funds transfer or securities clearing and settlement system to meet its obligations results in a domino effect in which other participants become unable to meet their obligations when due. Such a scenario could lead to widespread disturbances in the financial markets as a whole (systemic risk) which could also affect the broader economy.

In the case of securities clearing and settlement systems, there is also the risk of the loss or unavailability of securities held in custody caused by the insolvency or negligence of the custodian bank, or by any other adverse situation in which it finds itself (custody risk). This too has an impact on the ability of a participant to deliver securities when needed.

Besides being secure, payment and securities clearing and settlement systems should also be efficient and practical, both for their users and for the economy as

a whole. However, there is always a trade-off between minimising costs and meeting other objectives, such as safety. Minimum safety and efficiency standards and recommendations are therefore warranted to guide stakeholders in payment

11 So far, the ECB has not had need for recourse to the regulatory powers provided for by Article 22 of the Statute of the ESCB. For a more detailed discussion of the scope of the ECB’s regulatory

powers under Article 22 of the Statute, see the Article entitled “The role of the Eurosystem in payment and clearing systems” in the April 2002 issue of the ECB’s Monthly Bulletin.

and securities clearing and settlement systems in making their choices, which, in turn, fosters competition between payment systems and among securities clearing and settlement systems, and helps to avoid regulatory arbitrage.

In line with these considerations and the mandate given by the EC Treaty and the Statute of the ESCB, the policy objectives of the Eurosystem are geared towards ensuring safe and efficient systems. To this end, the Eurosystem:

• provides payment and securities settlement facilities; • oversees the systems with a view to ensuring their efficiency and security.

3 . 3 . 1 P r ov i s i o n o f p ay m e n t a n d s e c u r i t i e s s e t t l e m e n t f a c i l i t i e s

In line with its statutory task to promote the smooth functioning of payment systems, the Eurosystem provides a wide range of payment and securities settlement facilities, the most important of which is the TARGET system.

TA R G E T ( Tr a n s - E u r o p e a n A u t o m a t e d R e a l - t i m e G r o s s s e t t l e m e n t

E x p r e s s Tr a n s f e r s y s t e m )

The Eurosystem has developed TARGET to process large-value payments in euro in real time throughout the euro area. TARGET provides a level playing field for market participants and a tool through which the monetary policy-related transactions between the NCBs of the Eurosystem and credit institutions can be carried out in a timely and secure manner. It is the only payment system carrying out cross-border payments in euro which is directly accessible to all monetary policy counterparties. It thus enables the euro money market to function as a single market and makes a single monetary policy possible.