The BCL is in charge of issuing and circulating banknotes and of circulating coins, on behalf of the Finance Ministry which issues them. Banks of the financial centre receive coins and banknotes from the BCL in view of the withdrawals and deposits made by their own clients.
The counterfeiting of money is a serious offence and is strictly punished by law. In this respect, a European Counterfeit Monitoring System (CMS) has been set up. The BCL contributes to this system through the quick detection of forgeries.
If you want to know more about it, please see the Banknotes & Coins section.
A payment system is a set of instruments, procedures and, in general, of fund transfer systems between banks, aimed at easing the circulation of money. TARGET is a real-time gross settlement (RTGS) system. As such, it processes payments on a one-by-one basis in real time. TARGET handles payments of large amounts in euro. Each monetary policy operation within the Eurosystem must be performed through TARGET. This system offers a high quality service for the execution of these operations. TARGET has been operational within the ESCB since 1999. The new generation, TARGET2, started operations on 19 November 2007. The BCL operates TARGET2-LU, the Luxembourgish component of TARGET2.
Moreover, the BCL has chosen Clearstream Banking Luxembourg S.A. and VP Lux as national central custodians of securities deposited by the counterparties as collateral.
The BCL also sees that payment systems comply with existing international standards and recommendations.
If you want to know more about it, please see the Payment systems section.
The BCL has an important role in the collection, analysis and diffusion of economic and financial information. It is entitled to collect the necessary statistical information, either from the competent national authorities, or directly from economic agents. It has the right to check this information on the spot. The BCL collects from its counterparties of the Luxembourg financial centre elements for the analyses concerning the development of the markets and cooperates closely with the Service central de la statistique et des études économiques (STATEC), the statistics institution of the Luxembourg State.
It collects, analyses and publishes statistical information, especially in the monetary and balance of payments fields. It uses these statistics for its own analyses or for those of the Eurosystem. These statistics are essential for the preparation of European monetary policy, and also for good economic governance. The BCL contributes to the continuous improvement of the quality of statistics.
Beyond a simple statistical reporting of economic transactions between an economic area and the rest of the world, the payments balances (to be specific) present a major interest for economic policy. Imbalances of external payments have an impact on money supply and on exchange rates. In an interdependent world economy, the need for statistics of this kind is increasing daily. Balance of payments data are in particular useful for public authorities in formulating their policies.
The BCL publishes working papers drafted by its specialists, as well as information bulletins containing analyses of topical economic and financial issues. These research activities not only help with the preparation of monetary policy decisions, but also help to develop expertise in monetary, financial and economic issues.
Apart from managing its own communication policy, the BCL forwards the Eurosystem communication notably information from the ECB.
If you want to know more about it, please see the Publications section.
Besides managing its own reserves, the BCL also manages part of the exchange reserves of the Eurosystem. It may also offer its reserve management services to central banks which are not members of the ESCB or manage the cash reserves of international institutions. The BCL then puts its resources and its know-how in terms of analysis and research at the disposal of those central banks and international institutions.
If you want to know more about it, please see the Reserve management section.
Is the BCL the bank of the State? No, because the BCL is not, for example, in charge of the State’s debt service, of collecting tax payments or of paying the salaries of civil servants. From a legal point of view, the BCL is specifically forbidden to grant an overdraft or a loan to the State. Nevertheless, the State has opened current accounts and restricted access deposits with the BCL. The BCL also puts into circulation the coins which the State issues. Finally, the BCL acts as the fiscal agent of the State towards the IMF and enters into its accounts the assets and liabilities of the Grand Duchy with regard to the IMF.
The BCL, at different levels, maintains strong contacts with the economic agents of the financial centre. In view of its interest in the development of the financial centre, the BCL organises a number of working groups and consultative bodies, such as:
- The Statistics Committee;
- The Payment and Settlement Systems Committee;
- The Market Operations Committee;
- The Fiduciary Money Committee;
- The Legal Committee;
- The IT Committee.
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