Circular BCL 2007/205 of 20 August 2007 — Adoption of the euro by Cyprus and Malta

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Luxembourg, 20 August 2007
To all credit institutions
CIRCULAR BCL 2007/205
Adoption of the euro by Cyprus and Malta

Ladies and Gentlemen,

On the occasion of the European Council meeting in Brussels on 10 July 2007, the Heads of State and Government of the European Union decided that, with effect from 1 January 2008, Cyprus and Malta will adopt the single currency, the euro.

The purpose of this circular is to describe the impact of the adoption of the euro by Cyprus and Malta on the preparation of monthly statistical reports as well as quarterly statistical reports.

1. Impact on statistical data collection by the BCL

The accession of Cyprus and Malta to the euro area with effect from 1 January 2008 will have an impact not only on the preparation of monthly and quarterly statistical reports, but also on the calculation of reserve requirements to which credit institutions are subject.

1.1 Impact on monthly statistical data collection

The monthly statistical reports S 1.1 "Monthly Balance Sheet", S 1.4 "Adjustments related to valuation effects" and S 1.5 "Information on interest rates in EUR" require an allocation of amounts according to the country of residence or registered office of the counterparty, i.e. the country in which the centre of economic interest of the counterparty in question is located, distinguishing the following three allocations:

• Luxembourg (LU)
• Other EMU Member States: i.e. Other Member States of the Monetary Union
• Rest of the world: i.e. countries that do not fall into the two categories mentioned above

With effect from 1 January 2008, the category "Other Member States of the Monetary Union" (Other EMU Member States) will also include Cyprus and Malta, which currently, and until 31 December 2007 inclusive, fall under the category "Rest of the world".

Furthermore, credit institutions are reminded that the inclusion of Cyprus and Malta under the category "Other Member States of the Monetary Union" implies a more detailed sectoral breakdown of assets and liabilities towards counterparties residing in Cyprus and/or Malta. The details of this sectoral breakdown can be consulted in Part III – S 1.1 "Monthly Balance Sheet" (pp. 5 to 15), Part III – S 1.4 "Adjustments related to valuation effects" (pp. 5 to 14) as well as Part III – S 1.5 "Information on interest rates in EUR" (pp. 7 to 9) of the Collection of Instructions to Banks.

Credit institutions are therefore invited to modify their reporting systems to include assets and liabilities towards a counterparty residing in Cyprus and/or Malta under the category "Other Member States of the Monetary Union" while ensuring that the appropriate sectoral breakdown is carried out.

1.2 Impact on report S 2.5 "Quarterly Balance Sheet"

The quarterly statistical report S 2.5 "Quarterly Balance Sheet" requires an allocation of amounts according to the country of residence or registered office of the counterparty, identifying the country in question by a two-character ISO code.

In this context, credit institutions are also reminded that the accession of Cyprus and Malta to the monetary union implies a much more detailed sectoral breakdown of assets and liabilities towards residents of Cyprus and Malta. The details of this sectoral breakdown can be consulted in Part III – S 2.5 "Quarterly Balance Sheet" (pp. 5 to 16) of the Collection of Instructions to Banks.

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2. Impact on the calculation of reserve requirements

Since exposures to the European Central Bank, the national central banks of Member States of the Eurosystem and credit institutions subject to the Eurosystem reserve requirement system are excluded from the reserve base, the volume of exposures included in the reserve base of exposures to Cypriot and Maltese credit institutions subject to the Eurosystem reserve requirement system must be reduced with effect from the reference period of January 2008.

For the maintenance period from 12 December 2007 to 15 January 2008, that from January 2008 to February 2008 and that from February 2008 to March 2008 1, exposures to Maltese and Cypriot credit institutions subject to the Eurosystem reserve requirement system may already be deducted from the reserve base of credit institutions.

Luxembourg credit institutions wishing to take advantage of this possibility must report the table in the annex to the Central Bank of Luxembourg for the months of October 2007, November 2007 and December 2007, considering Cypriot and Maltese credit institutions as already subject to the Eurosystem reserve system.

In this case, the amount of the reserve requirement reported on the basis of statistical report S 1.1 "Monthly Balance Sheet" will be amended taking into account the information provided on the basis of the aforementioned annex.

Reporting credit institutions are reminded that statistical reports S 1.1, S 1.4, S 1.5 as well as quarterly report S 2.5 must of course be completed in such a way as to consider Cyprus and Malta as not included in the monetary union until 31 December 2007 inclusive.

1 The precise start and end dates of the maintenance periods during the year 2008 will be communicated by way of BCL circular.

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3. Quality of data transmitted

The concerned institutions are once again reminded to ensure scrupulous identification of their counterparties and to use for this purpose, in particular, the official list of credit institutions published by the Commission de Surveillance du Secteur Financier as well as the official list of monetary financial institutions made available to reporting institutions on the website of the European Central Bank.

We therefore consider it necessary to once again highlight the importance of the quality of data transmitted to the BCL and the need to subject data to detailed verification rules in the technical documentation before transmission. Only rigorous control carried out at the time of data production will make it possible to meet both quality requirements and deadlines. This point is all the more important as the data collected in this way will be checked by the ECB services before being aggregated with data from other Member States. Any significant error or negligence will have damaging repercussions on the reputation of the entire national banking community.

4. Entry into force of the new provisions

The new classification of assets and liabilities towards residents of Cyprus and Malta is to be carried out for the first time when preparing monthly statistical reports relating to the period of January 2008 as well as when preparing quarterly statistical reports relating to the period of March 2008.

The annexed table relating to the calculation of reserve requirements relates to the periods of October 2007, November 2007 and December 2007.

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

CENTRAL BANK OF LUXEMBOURG
The Management

Serge KOLB Andrée BILLON Yves MERSCH
Annex.

Annex. Information to be provided to the Central Bank of Luxembourg for the reduction of the reserve base for the periods of October 2007, November 2007 and December 2007

Item	Currency	Country	Economic Sector	Initial Maturity
				<= 2 years > 2 years Not allocated
Demand liabilities	EUR	Cyprus and Malta	NC + CI subject to
	Other currencies	Cyprus and Malta	NC + CI subject to
Time deposits with notice	EUR	Cyprus and Malta	NC + CI subject to
	Other currencies	Cyprus and Malta	NC + CI subject to
Time deposits	EUR	Cyprus and Malta	NC + CI subject to
	Other currencies	Cyprus and Malta	NC + CI subject to
Repurchase and reverse repurchase operations	EUR	Cyprus and Malta	NC + CI subject to
	Other currencies	Cyprus and Malta	NC + CI subject to
Debt securities issued	EUR	Cyprus and Malta	NC + CI subject to
	Other currencies	Cyprus and Malta	NC + CI subject to

NC + CI subject to: National Central Banks of Malta and Cyprus and credit institutions subject to the Eurosystem reserve requirement system

The wording of the rows and columns of this table corresponds to those used for report S 1.1 to be submitted monthly to the Central Bank of Luxembourg. The credit institutions concerned can therefore rely on the definitions of the Collection of Instructions to Banks to establish this table.