Term commonly used to refer to all Community law including EU treaties, regulations and directives. Countries joining the EU must have implemented the existing acquis communautaire by the time of accession.
Attractive prices means psychological prices, i.e. prices which end with the figures 9, 95, 98, fractional prices which end with the figures 0 and 5 and rounded prices which are multiples of 100.
When analysing business cycles, the evolution of annual variation rates of a variable are often explained by "base effects". A base effect occurs when the evolution of a variable’s annual rate from month t to month t+1 varies because of the evolution of the variable’s level 12 months before and not because of the variation of the variable’s level between month t and month t+1.
An entity which holds and administers securities or other financial assets and enables securities transactions to be processed by book entry. Assets may exist either physically (but immobilised within the CSD) or in a dematerialised form (i.e. only as electronic records).
Assets pledged (e.g. by credit institutions with central banks) as a guarantee for the repayment of loans, as well as assets sold (e.g. to central banks by credit institutions) as part of repurchase agreements.
This is obtained by netting out inter-MFI positions (e.g. inter-MFI loans and deposits) on the aggregated MFI balance sheet. It provides statistical information on the MFI sector’s assets and liabilities vis-à-vis non-MFI euro area residents (i.e. general government and other euro area residents) and on its external assets and liabilities (i.e. balances vis-à-vis non-euro area residents). This consolidated balance sheet is the main statistical source for the calculation of monetary aggregates and it provides the basis for the regular analysis of the counterparts of M3.
A mechanism established by the European System of Central Banks with the aim of enabling counterparties to obtain credit from the central bank of the country in which they are based using collateral held in another country. In the CCBM, an NCB acts as custodian for the other NCBs with regard to the securities held in its domestic securities settlement system (SSS).
The opposite party in a financial transaction (e.g. any party transacting with a central bank).
An institution covered by the definition in Article 1 of Directive 2000/12/EC of the European Parliament and of the Council relating to the taking up and pursuit of the business of credit institutions. Thus, a credit institution is: (i) an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credit for its own account.
Comprises banknotes and coins which are legal tender. Deposit facility: a standing facility of the Eurosystem which counterparties may use to make overnight deposits at a national central bank and which are remunerated at a pre-specified interest rate.
The Treaty describes the process of achieving EMU in the European Union (EU) in three stages. Stage One of EMU started in July 1990 and ended on 31 December 1993. It was mainly characterised by the dismantling of all internal barriers to the free movement of capital within the EU. Stage Two of EMU began on 1 January 1994. It provided for, inter alia, the establishment of the European Monetary Institute (EMI), the prohibition of financing of the public sector by the central banks, the prohibition of privileged access to financial institutions by the public sector and the avoidance of excessive government deficits. Stage Three started on 1 January 1999 with the transfer of monetary competence to the European Central Bank (ECB) and the introduction of the euro. The cash changeover on 1 January 2002 completed the set-up of EMU.
Nominal EERs consist of a geometric weighted average of various bilateral exchange rates. Real EERs are nominal EERs deflated by a weighted average of foreign, relative to domestic, prices or costs. They are thus measures of price and cost competitiveness. The European Central Bank calculates nominal EER indices for the euro against the currencies of a narrow and a broad group of trading partners of the euro area. Since January 2001, the narrow group has consisted of 12 industrial and newly industrialised partner countries, while the broad group has been made up of 38 trading partners including emerging market and transition economies. The real EER indices for the euro are calculated using alternative measures of prices and costs.
An electronic store of monetary value on a technical device that may be widely used as a prepaid bearer instrument for making payments to undertakings other than the issuer, without necessarily involving bank accounts in the transactions.
The exchange rate arrangement which provides the framework for exchange rate policy cooperation between the euro area and EU Member States not participating in the euro area from the start of Stage three of Economic and Monetary Union. Membership of the mechanism is voluntary. Nevertheless, Member States with a derogation are expected to join the mechanism. Foreign exchange intervention and financing at the margins of the standard or narrower fluctuation bands are, in principle, automatic and unlimited, with very short-term financing available. The European Central Bank and the participating non-euro area national central banks could, however, suspend automatic intervention if this were to conflict with their primary objective of maintaining price stability.
The rate at which a prime bank is willing to lend funds in euro to another prime bank. The EURIBOR is computed daily for interbank deposits with a maturity of one to three weeks and one to 12 months as the average of the daily offer rates of a representative panel of prime banks, rounded to three decimal places.
The name of the European single currency adopted by the European Council at its meeting in Madrid on 15 and 16 December 1995 and used instead of the term ECU originally employed in the Treaty.
The area encompassing the EU Member States which have adopted the euro as their single currency in accordance with the Treaty and in which a single monetary policy is conducted under the responsibility of the Governing Council of the European Central Bank.
The ECB lies at the centre of the European System of Central Banks (ESCB) and the Eurosystem and has legal personality under Community law. It ensures that the tasks conferred upon the Eurosystem and the ESCB are implemented either through its own activities or the national central banks, pursuant to the Statute of the European System of Central Banks and of the European Central Bank. The ECB is governed by the Governing Council and the Executive Board, and, as a third decision-making body, by the General Council.
A temporary institution established at the start of Stage Two of Economic and Monetary Union on 1 January 1994. The two main tasks of the EMI were to strengthen central bank co-operation and monetary policy co-ordination and to make the preparations required for the establishment of the European System of Central Banks, for the conduct of the single monetary policy and for the creation of a single currency in Stage Three. It went into liquidation upon the establishment of the European Central Bank on 1 June 1998.
Composed of the European Central Bank (ECB) and the national central banks of all 16 Member States, i.e. it includes, in addition to the members of the Eurosystem, the national central banks of the Member States which have not yet adopted the euro and are thus not involved in the conduct of the monetary policy of the Eurosystem.
Comprises the European Central Bank (ECB) and the national central banks (NCBs) of the Member States which have adopted the euro in Stage Three of Economic and Monetary Union (see also euro area). There are currently 16 NCBs in the Eurosystem. The Eurosystem is governed by the Governing Council and the Executive Board of the ECB.
These comprise the reserve assets of the European Central Bank (ECB) and the reserve assets held by the national central banks (NCBs) of the participating Member States. Reserve assets must be under the effective control of the relevant monetary authority, whether the ECB or the NCB of one of the participating Member States, and comprise highly liquid, marketable and creditworthy foreign (i.e. non-euro) currency-denominated claims on non-euro area residents, plus gold, special drawing rights and the reserve positions in the International Monetary Fund of the participating NCBs.
Second decision-making body of the European Central Bank (ECB). It comprises the President and the Vice-President of the ECB and four other members appointed by common accord by the Heads of State or Government of the Member States that have adopted the euro.
A non-regular open market operation executed by the Eurosystem mainly in order to deal with unexpected liquidity fluctuations in the market.
Simultaneous spot and forward transactions exchanging one currency against another. The Eurosystem can execute open market operations in the form of foreign exchange swaps, where the national central banks (or the European Central Bank) buy or sell euro spot against a foreign currency and, at the same time, sell or buy them back in a forward transaction.
One of the decision-making bodies of the European Central Bank (ECB). It comprises the President and the Vice-President of the ECB and the governors of all 27 EU national central banks.
The supreme decision-making body of the European Central Bank (ECB). It comprises all the members of the Executive Board of the ECB and the governors of the national central banks of the Member States that have adopted the euro.
The measure of prices used by the Governing Council for the purpose of assessing price stability. The HICP was developed by the European Commission (Eurostat) in close liaison with the national statistical institutes and the European Monetary Institute, and later the European Central Bank, in order to fulfil the Treaty requirement for a consumer price index constructed on a comparable basis, taking into account differences in national definitions.
A regular open market operation executed by the Eurosystem in the form of a reverse transaction. Longer-term refinancing operations are carried out through monthly standard tenders and have a maturity of three months.
A fixed amount which a credit institution deducts in the calculation of its reserve requirement within the minimum reserve framework of the Eurosystem.
See monetary aggregates.
A regular open market operation executed by the Eurosystem in the form of a reverse transaction. Main refinancing operations are conducted through weekly standard tenders and normally have a maturity of two weeks.
A standing facility of the Eurosystem which counterparties may use to receive overnight credit from a national central bank at a pre-specified interest rate against eligible assets.
Currency in circulation, plus outstanding amounts of certain liabilities of monetary financial institutions and central governments that have a relatively high degree of liquidity and are held by non-MFI euro area residents outside the central government sector. The narrow monetary aggregate M1 has been defined as currency in circulation plus overnight deposits. The “intermediate" monetary aggregate M2 comprises M1 plus deposits with agreed maturity of up to two years and deposits redeemable at notice of up to three months. The broad monetary aggregate M3 includes M2 plus repurchase agreements, money market fund shares and units, money market paper and debt securities with a maturity of up to two years. In October 1998 the Governing Council announced a reference value for the growth of M3, which it has since reconfirmed (see also reference value for monetary growth).
Financial institutions which form the money-issuing sector of the euro area. These include the Eurosystem, resident credit institutions (as defined in Community law) and all other resident financial institutions whose business is to receive deposits and/or close substitutes for deposits from entities other than MFIs and, for their own account (at least in economic terms), to grant credit and/or invest in securities. The latter group consists predominantly of money market funds.
An operation executed on the initiative of the central bank in the financial markets involving one of the following transactions: (i) buying or selling assets outright (spot or forward); (ii) buying or selling assets under a repurchase agreement; (iii) lending or borrowing against underlying assets as collateral; (iv) issuing central bank debt certificates; (v) accepting fixed-term deposits; or (vi) conducting foreign exchange swaps between domestic and foreign currencies.
A transaction whereby assets are bought or sold up to their maturity (spot or forward).
The maintenance of price stability is the primary objective of the European Central Bank. In October 1998, the Governing Council published a quantitative definition of price stability in order to give clear guidance to expectations of future price developments and to be accountable. The Governing Council defined price stability as a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%. In May 2003, the Governing Council announced clarified that, in its pursuit of price stability, it aims to maintain inflation rates below, but close to, 2% over the medium term.
The tender procedure used by the Eurosystem for fine-tuning operations. Quick tenders are executed within a time frame of one hour and are restricted to a limited set of counterparties.
In order to assess monetary developments, the Governing Council has announced a reference value for the broad monetary aggregate M3. This reference value refers to the rate of M3 growth that is deemed to be compatible with price stability over the medium term. The reference value is derived in a manner that is consistent with and serves the achievement of the Governing Council’s definition of price stability on the basis of medium-term assumptions regarding trend real GDP growth and the trend in the velocity of circulation of M3. Substantial or prolonged deviations of M3 growth from the reference value would, under normal circumstances, signal risks to price stability over the medium term. However, the concept of the reference value does not entail a commitment on the part of the Governing Council to correct mechanically deviations of M3 growth from the reference value.
The sum of the balance sheet items (in particular liabilities) which constitute the basis for calculating the reserve requirement of a credit institution.
A ratio defined by the central bank for each category of balance sheet items included in the reserve base. The ratios are used to calculate reserve requirements.
The requirement for credit institutions to hold minimum reserves with the central bank. In the minimum reserve framework of the Eurosystem, the reserve requirement of a credit institution is calculated by multiplying the reserve ratio for each category of items within the reserve base by the amount of those items on the institution’s balance sheet. In addition, institutions are allowed to deduct a lump-sum allowance from their reserve requirement.
An operation whereby the central bank buys or sells assets under a repurchase agreement or conducts credit operations against collateral.
A settlement system in which processing and settlement take place on an order-by-order basis (without netting) in real time (continuously). See also TARGET.
The European System of National Accounts is an accounting framework applicable on an international level and allowing to describe in a systematic and detailed way what is called a "total economy" (i.e. a region, a country, a group of countries), its components and its relations with other total economies.
A system which permits the holding and transfer of securities or other financial assets, either free of payment or against payment (delivery versus payment).
A tender procedure used by the Eurosystem in its regular open market operations. Standard tenders are carried out within 24 hours. All counterparties fulfilling the general eligibility criteria are entitled to submit bids.
A central bank facility available to counterparties on their own initiative. The Eurosystem offers two overnight standing facilities: the marginal lending facility and the deposit facility.
The real-time gross settlement (RTGS) system for the euro. It is a decentralised system consisting of 16 national RTGS systems and the European Central Bank payment mechanism. These are interconnected by common procedures (Interlinking mechanism) to allow cross-border transfers throughout the EU to move from one system to another.
The Treaty establishing the European Community. It is often referred to as the “Treaty of Rome", as amended.
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