In January 1999 the Governing Council of the ECB decided that €39.5 billion - that is, €50 billion adjusted downwards for the shares of the countries (UK, Sweden and Denmark) not participating in the euro area - should be transferred to the ECB at the commencement of EMU.
Each NCB’s contribution to the ECB reserves was in proportion to its shareholding in the ECB, which, in turn, is a function of each Member State’s shares of the euro-area’s GDP and population. Further reserves were transferred to the ECB as other countries joined EMU.
ECB investment policy
The basic objectives of ECB investment policy are to protect the value of the ECB’s reserves and to ensure that their assets are sufficiently secure and liquid to support the ECB’s monetary policy.
When foreign exchange intervention takes place, the foreign reserve assets of the ECB are used. At the end of 2013, the ECB’s net foreign reserve assets amounted to €54.9 billion.
Each national central bank (NCB) manages a proportion of the ECB’s reserves. Following a request from the Central Bank of Malta, we also manage Malta’s share of the ECB’s US dollar pooled reserves since 1 January 2008. The €0.7 billion portfolio represents the Bank's and Malta’s share of the Eurosystem's foreign exchange reserves.
The foreign reserves transferred to the ECB are managed in a decentralised manner by the NCBs. The ECB determines the investment parameters, makes policy decisions, including setting performance benchmarks, approving counterparties and setting permitted risk levels, and performs control and monitoring functions.
The benchmarking framework is set at both strategic and tactical levels and each NCB’s performance is measured against the tactical benchmark and against the other NCBs. Within this framework, each NCB undertakes management and settlement functions associated with their portion of the ECB reserves.
NCBs act on behalf of the ECB on a disclosed agency basis so that market participants can differentiate between operations carried out on behalf of the ECB and those undertaken on NCBs’ own behalf. The Bank enters trades onto the ECB reserve management system, which permits the ECB to monitor positions and exposures and to carry out performance measurement.