Statistical Notices to Reporting Banks 2000/03
Statistical Notices should be received by all those responsible for the completion of Bank of England returns. To add names to the circulation list please contact the Domestic Banking Statistics Helpdesk (tel. 020 7601 5360 or e-mail peter.notman@bankofengland.co.uk).
This Statistical Notice covers the preparation for UK participation in MU under the following headings:
- Preparation for UK participation in the MU
- Changes to the Bank of England’s powers to obtain information
- Form structure and panels
- Minimum reserves
- Classification of accounts of counterparties resident in the MU (other than the UK)
- Implementation date
- Possible future changes
1 Preparation for UK participation in the MU
This Statistical Notice covers the additional reporting requirements that Monetary Financial Institutions [MFIs] in the UK would have to meet in the event of the UK’s participation in the Monetary Union [MU]. These requirements relate to the sectoral details of counterparties resident in the MU (including the UK) and a breakdown by major currencies to be covered by seven separate reporting forms, and changes to Form BT that will be needed to implement the application of minimum reserves by the European Central Bank [ECB]. The seven new forms (all in Microsoft Excel format), which will complement the existing suite of forms, are described briefly in section 3 of this Notice. The Notes and Definitions pages (all in Microsoft Word format) describe the reporting format in greater detail. Details of the changes to Form BT are described in section 4 of this Notice. Guidance on the classification of accounts of residents of the MU is contained in section 5. Section 6 discusses the likely procedure for implementation.
2. Changes to the Bank of England’s powers to obtain information
The existing powers of the Bank of England to obtain information are described in section 2 of the General Notes and Definitions in the Banking Statistics Folder [the ‘Yellow Folder’]. The legal basis within which the Bank of England collects statistical information, including meeting the needs of the minimum reserves scheme, will change when the United Kingdom enters the MU. The Treaty establishing the European Community and the Statute of the European System of Central Banks (ESCB) confer upon the ECB the competence to adopt legal acts and other legal instruments. In the field of statistics, the EU Council Regulation (EC No 2533/98) dated 23 November 1998 and published in the Official Journal L318 on 27 November 1998 lays down the overall framework applicable to the collection of statistical information for ESCB purposes. Within the framework of this EU Council Regulation, the ECB itself has issued a Regulation that is addressed to the actual reporting population and covers the reporting of the statistics comprising the consolidated balance sheet of the monetary financial institutions sector (ECB Regulation No 2819/98 of 1 December 1998). Under this Regulation, for statistical purposes, the ECB maintains the EU List of MFIs, which may be viewed here.
The reporting requirement for MU encompasses six ‘EMU forms’ that provide the sectoral information that the Bank of England requires in order to meet its statistical obligations to the ECB, at monthly-reporting and quarterly-reporting frequencies, of business with UK residents, residents of the other member countries of the MU, and with residents of all other countries of the world. The seventh form covers the currency breakdown that is needed by the ECB. Reporting will be on the basis of panels of reporting MFIs selected to meet the ECB minimum requirement of a 95% coverage. The forms (Microsoft Excel format) and the criteria for establishing the reporting panels are set out below.
General Notes and Definitions for EMU Forms (Microsoft Word document)
| Form | Definitions | Validations | Information collected | Reporting panel |
| EMA | EMA defs | EMA validations | Additional sectoral information monthly.Breakdown of business with UK residents | . Panel A MFIs contributing to 95% business with UK non-MFI, non-government sector residents. |
| EQA | EQA defs | EQA validations | Additional sectoral information quarterly. Breakdown of business with UK residents. |
|
| EMB | EMB defs | EMB validations | Additional sectoral information monthly. Breakdown of business with other MU area residents. |
Panel B MFIs contributing to 95% business with other MU area residents. |
| EQB | EQB defs | EQB validations | Additional sectoral information quarterly. Breakdown of business with other MU area residents. |
|
| EMC | EMC defs | EMC validations | Additional sectoral information monthly. Breakdown of business with the rest of the world. |
Panel C MFIs contributing to 95% business with the rest of the world. |
| EQC | EQC defs | EQC validations | Additional sectoral information quarterly. Breakdown of business with the rest of the world. |
|
| EQD | EQD defs | EQD validations | Quarterly currency breakdown. | Panels B and C. |
From the date of the UK’s adoption of the single currency, all credit institutions in the UK will be subject to the application of minimum reserves by the ECB. [From the same date, the cash ratio deposits scheme may cease.] The application of minimum reserves by the ECB is established in Council Regulation (EC) No 2531/98 of 23 November 1998 (published in the Official Journal L318 on 27 November 1998). The reserve base is defined within Regulation (EC) No 2818/98 of the ECB of 1.12.98 on the application of minimum reserves (ECB/1998/15). The reserve base of a credit institution will be calculated using information as defined within the reporting framework for money and banking statistics.
The EMU Forms issued with this Statistical Notice do not cover the additional information which will be required to calculate the reserve base. This information will be integral to the Form BT. Although it is a different concept to that of eligible liabilities, many of the items which feed into the eligible liabilities calculation will also be needed for the reserve base. It is envisaged that changes will be made to the Form BT to collect the detail needed to calculate the reserve base and that these would be implemented at the time of, or shortly before, UK entry to MU.
A revised Form BT, together with an explanation of how to build the reserve base by reference to the BT item numbers, will be sent to reporting MFIs following a parliamentary decision to join MU. The revised Form BT will include some additional items and a change to the definition of deposits with an original maturity of more than two years (these are set out below).
The reserve base consists of euro and foreign currency deposit liabilities (including repo), debt securities issued and money market paper issued, excluding any liabilities owed to the ECB, to participating national central banks or to any other credit institution subject to the ECB's minimum reserve requirement. The EU List of MFIs is on the ECB web-site, together with a page that sets out the parameters of the minimum reserve system. The Regulation allows for each category within the reserve base to attract a different reserve coefficient of between 0% and 10%. In practice, according to the current arrangements, the following categories attract a ratio of 0%.
- Deposits with agreed maturity over 2 years
- Deposits redeemable at notice over 2 years
- Liabilities under sale and repurchase agreements
- Debt securities issued with an agreed maturity over 2 years.
A ratio of 2% is applied to all other liabilities in the reserve base.
The following changes will be required to Form BT to permit the calculation of the reserve base:
-
Notes on completion – Note 5
The * marking of the items required for the calculation of eligible liabilities will be amended to show the items required for the calculation of the reserve base. - BT5 (Other paper issued)
Item 5B will be sub-divided in order to meet the ECB definitions of money market paper and debt securities, which are based on a 2 year maturity cut-off. This entails sub-dividing the existing item 5B, as set out overleaf -
5A Commercial paper
5BA All instruments other than CDs and commercial paper of up to and including two years' original maturity
5BB All instruments other than CDs and commercial paper of more than two years' and up to and including five years' original maturity
5C Unsubordinated instruments of more than five years' original maturity
-
BT45A (Deposit liabilities of greater than two years original maturity)
Whereas this item is optional so far as the calculation of eligible liabilities is concerned, this option will be removed from UK entry to MU, and all reporting MFIs will be required to identify deposits over 2 years’ original maturity, but excluding any liabilities owed to the ECB, to participating central banks or to any other credit institution subject to the minimum reserve requirement. The new definition of BT45A will be set out in the BT definitions that will be issued to reporting institutions following a parliamentary decision to join MU. A further two new Form BT items will be required in order to identify reporting MFIs' business with MU area central banks and credit institutions from their total business with non-residents. Item BT45A will contain three sub-items, as follows -BT45A Total deposit liabilities, excluding those to MU area central banks and credit institutions, of greater than two years' original maturity
BT45AB Total deposit liabilities to central banks and credit institutions in the MU area (non-UK)
BT45AC Total liabilities under repo with central banks and credit institutions in the MU area (non-UK)
-
BT46 Total eligible liabilities
This item will be re-named ‘Reserve base’. - Change in the definition of deposit liabilities of greater than
two years original maturity
The current definition for item BT45A relates to deposits, which cannot be withdrawn under any circumstances within two years of being placed. In the calculation of the reserve base, however, ‘deposits with agreed maturity’ is interpreted as allowing the possibility of earlier redemption after prior notification, or of redemption on demand subject to certain penalties. TESSAs, SAYE and Sharsave accounts and ISAs will not be included within the reserve base. These items are already separately identified on the Form BT and will be excluded from the calculation through use of these items. TESSAs, SAYE and Sharsave accounts and ISAs must not be included in BT45A.
5. Classification of accounts of counterparties resident in the MU (other than the UK)
The ECB Regulation that applies to the consolidated balance sheet of the Monetary Financial Institutions sector (ECB/1988/16) follows classification principles that are consistent with the European system of national and regional accounts in the Community [‘ESA 95’], as far as possible. UK reporting MFIs already report in line with ESA 95 with regard to UK banking statistics and should be familiar with the principles that are currently set out in the Classification of Accounts guide in the ‘Yellow Folder’. With regard to counterparties resident in the MU, reporting MFIs are in a position to identify counterparties that are also defined as MFIs by reference to the EU List of MFIs. Other counterparties in the MU are identified according to their sector of economic activity, based on their principle activity and function. Guidance is available in the ECB’s Money and Banking Statistics Sector Manual - Guidance for the statistical classification of customers, available on http://www.ecb.int/
If the timing of the decision on UK entry allows, the Bank of England wishes to begin the collection of the ‘EMU Forms’ shortly (eg 3 months) before UK entry to MU, to enable the ECB to compile and analyse the new, UK-in, series and to calculate accurate break adjustments to their existing (pre-UK entry) series. Because of the importance of these data for monetary policy decisions, it is hoped that a lead-time of six months will be sufficient for MFIs to make the final preparations for the new reporting (this is the lead-time generally allowed by supervisory bodies when introducing new prudential returns). If the period between a government announcement in favour of joining MU and the date of entry were six months or less, however, the Bank of England would begin collecting the new forms from the date of entry and rely on estimated data for the adjusted series. The changes to Form BT to reflect the introduction of the minimum reserves scheme would be made from the date of UK entry.
The exact date for implementation will be finalised when a date for UK entry has been set. According to the Outline National Changeover Plan issued by HM Treasury it is very unlikely that the decision will be taken in favour of UK entry during this Parliament. The next general election must take place at the latest in May 2002 but may be called at anytime before this date. The minimum time between a government decision to recommend UK entry and the date of a referendum is estimated in the National Changeover Plan as four months.
No estimate is made at this stage as to the length of time required between a positive referendum vote and UK entry to MU. Reporting MFIs will want to draw their own conclusions, based on the information currently available, about whether there is a need to begin preparations before a decision is taken by the government.
The requirements outlined in this Notice cover the ECB’s statistical reporting requirements at the current date. It is possible that some of the reporting requirements may change during the period before the UK joins the MU. If any changes should occur to the reporting requirements, the decision as to whether to re-issue (any of) the EMU Forms will depend on how extensive the changes are. The Bank of England will consult with the British Bankers’ Association before deciding whether to up-date the EMU Forms or, as the case may be, re-iterate the requirements for calculating the reserve base. Our intention will be to keep reporting MFIs fully informed but at the same time to minimise any scope for confusion or add to the administrative burden. It is not envisaged that any changes to fundamental principles that underpin the entire suite of statistical forms (for example, a modest tightening of the netting rules may be required or the UK residency requirement may be relaxed) will be introduced until the EMU forms are needed. In addition it is recognised that reporting institutions cannot operate on two different accounting criteria for the EMU forms and the existing returns during the lead-in period. For the time being, this Statistical Notice and the ‘pack’ of EMU Forms and definitions should be filed in the ‘Yellow Folder’.
Bank of England
Monetary & Financial Statistics Division
17 April 2000
