Press Releases

Adjustment of the reserve requirement framework of the Bank of Greece to that of the Eurosystem

30/06/2000 - Press Releases

To ensure the timely and full adjustment of monetary policy instruments in Greece to those used by the European Central Bank and euro area national central banks (the Eurosystem), the reserve requirement framework of the Bank of Greece is adjusted by Act 37/30 June 2000 of the Monetary Policy Council.

The adjustment concerns all aspects regarding the method of calculation and the maintenance of required reserves. The new system will enter into force on 10 July 2000, to enable credit institutions to familiarise themselves with it in time, as well as to ensure the effective fulfilment of their obligations to the Eurosystem from 1 January 2001 onwards.

Moreover, owing to significant differences between the new and the current system, especially as regards the level of the reserve ratio, the above-mentioned Act of the Monetary Policy Council includes special transitional provisions, aimed at preventing large and sudden changes in liquidity conditions in the interbank money market.

More specifically, according to Act 37/30 June 2000 of the Monetary Policy Council:

1. The reserve base is adjusted so as to be identical to that adopted by the European Central Bank in accordance with Regulation 2818/98. The categories of liabilities included in the reserve base are detailed in Bank of Greece Governor's Acts 2458/1 March 2000 and 2463/13 June 2000.

2. Reserve ratios are determined by category of liabilities and replace the single reserve ratio (12 per cent) applying currently. The general ratio is set at 2 per cent, with the exception of the following categories of liabilities, for which a 0 per cent ratio will apply:

• deposits with agreed maturity over two years;
• deposits redeemable at notice over two years;
• repos;
• debt securities with agreed maturity over two years.

3. Maintenance period starts on the 24th calendar day of each month and ends on the 23rd calendar day of the following month, instead of the currently effective period (10th calendar day of each month to the 9th calendar day of the following month).

4. A lump-sum allowance in drachmas, equivalent to EUR 100,000 and calculated according to the conversion rate of the drachma (1 euro = 340.75 GRD), is deducted from the total reserve requirements of each credit institution.

5. Credit institutions are entitled to utilize on a daily basis, the total amount of their reserve requirements (against a ceiling of 15 per cent on the amount they were entitled to raise so far), provided they comply with the averaging provision (maintenance of required reserves on an average monthly basis). This arrangement contributes to smoothing out daily fluctuations in short-term interbank market rates and reduces the need for central bank interventions to this end.

6. With effect from 24 October 2000, the Postal Savings Bank is also included in the reserve requirement system. Mortgage banks are also subject to the new, unified system.

7. With effect from 10 July 2000, foreign currency deposits subject to the provisions of Bank of Greece Governor’s Act 2358/25 April 1995 (deposits of Greek seamen and workers) will come under the new, unified reserve requirement system, while the relevant rate of redeposits with the Bank of Greece (stipulated in the above Governor’s Act, as applicable) is reduced to 58 per cent, from 60 per cent. The transitory regime relevant to the above deposits will be determined by a special Act of the Monetary Policy Council.

8. To achieve a smooth and controlled increase in liquidity, the Bank of Greece will gradually release the amount by which already existing required reserves exceed those derived from the new, lower reserve ratio. The amounts to be gradually released will be kept as time deposits maturing in 6, 12 and 18 months, with the exception of an amount equal to 10 per cent of the total, which will be returned to banks on 3 January 2001. These time deposits will be remunerated at market rates, i.e. at the rate applied by the European Central Bank for its main refinancing operations. In cases where the European Central Bank applies the multiple rate auction procedure, the above time deposits will be remunerated at the corresponding marginal tender rate.