Circular Letter ST.16-0827 — Revision of the flat-rate deduction from the reserve base and amendment of the regulation on the application of reserve requirements

2, boulevard Royal L-2983 Luxembourg Fax (+352) 4774-4943 E-mail: stat@bcl.lu ./.
Ref.: ST.16-0827 Luxembourg, 10 October 2016
Circular Letter
To all credit institutions
Subject: Revision of the flat-rate deduction from the reserve base and amendment of the regulation concerning the application of reserve requirements

Madam, Sir,

We wish to inform all reporting institutions that, following the decisions of the Governing Council of the European Central Bank (ECB) published on Friday, 23 September 2016, certain modifications are made to the flat-rate deduction from the reserve base applicable to liabilities with a duration of two years or less and belonging to the category of debt securities.

It should be recalled that the following liabilities are excluded from the reserve base:
(i) liabilities to any institution not listed in the list of institutions exempt from the ECB's reserve requirement obligations in accordance with Article 2, paragraph 3, of Regulation (EC) No 1745/2003 (ECB/2003/9) as amended; and (ii) liabilities to the ECB or a participating national central bank (NCB).

Regarding "issued debt securities" included in the reserve base, the aforementioned exclusion is carried out by deducting from the reserve base an amount as follows: (i) the institution provides proof to the relevant participating NCB of the amount of liabilities to be excluded, and the amount, for which proof is provided, is deducted from the reserve base; (ii) if the institution is unable to provide this proof to the participating NCB, the institution applies the flat-rate deduction published on the ECB website to the outstanding amount of debt securities it has issued and whose initial maturity is two years or less.

2, boulevard Royal L-2983 Luxembourg Fax (+352) 4774-4943 E-mail: stat@bcl.lu ./.

On 21 July 2016, the Governing Council decided, following an examination of newly available statistical data, to reduce the flat-rate deduction from the reserve base applicable to liabilities with a duration of two years or less and belonging to the category of debt securities from 30% to 15%, as specified in Regulation (EC) No 1745/2003 (ECB/2003/9) concerning the application of reserve requirements. This decision will take effect as of the reserve maintenance period beginning on 14 December 2016.

On 9 September 2016, the Governing Council adopted Regulation (ECB/2016/26) amending Regulation (EC) No 1745/2003 (ECB/2003/9) concerning the application of reserve requirements. The new regulation further clarifies the method used to apply the flat-rate deduction aimed at excluding interbank liabilities from the reserve base. Entering into force on 14 December 2016, Regulation (ECB/2016/26) has been published in the Official Journal of the European Union and can be consulted on the ECB website in all official languages of the Union.

The reporting instructions of the Central Bank of Luxembourg have been modified to reflect these changes and are downloadable at the following link:
http://www.bcl.lu/fr/reporting_reglementaire/Etablissements_credit/Statistiques-bancaireset-monetaires/Instructions/index.html

Reporting agents are requested to make the necessary adjustments to statistical report S 1.1, used for the calculation of the reserve requirement, as of the October 2016 reference period.

Please accept, Ladies and Gentlemen, the assurance of our most distinguished sentiments.

CENTRAL BANK OF LUXEMBOURG
Romain WEBER Roland NOCKELS
Head of the Section for Banking and Monetary Statistics Head of the Statistics Department