Phil Hogan
Question:92 Mr. Hogan asked the Minister for Finance his views on the future use of Central Bank reserves. [25604/02]
Written Answers. - Central Bank Reserves.
When discussing the Central Bank's reserves, it is important to specify the reserves in question. The official external reserves are principally composed of the foreign currency assets of the Central Bank. As of end October 2002, these stood at €5.32 billion. The management of these foreign currency assets is subject to any guidelines issued by the ECB under Article 31(3) of the statute of the European system of central banks and of the European Central Bank to ensure that these operations will not interfere with the monetary and exchange rate policies of the euro area.
In the Central Bank's balance sheet, the bank's total assets, including its external reserves, have a counterpart in liabilities. These liabilities include banknotes in circulation and credit institution and Government deposits. However, the bank does have accounting reserves which have been accumulated over the years from income earned by its operations. As of end October 2002, they stood at €1,317 million. The bank also has a revaluation account which reflects unrealised gains from valuation changes in its assets. This acts as a contingency provision against currency and other market fluctuations. As of 25 October 2002, the value of the revaluation account was €878 million.
The appropriate level of the bank's accounting reserves is a prudential matter for the Central Bank board. Of course, an event such as the changeover to the euro which has a large effect on the financial system gives rise to some consideration of the role and purpose of the accounting reserves. I, therefore, took the opportunity late last year to invite the board of the Central Bank to consider whether a portion of its accounting reserves might be made available to the State. In its reply, the board indicated that, when the changeover to the euro was completed, it would conduct a review of the level of accounting reserves. I will examine the results of this review when they become available.
Current discussions in the European Central Bank could have implications for the level of national central bank reserves. The Central Bank of Ireland will take account of the outcome of these discussions in drawing up a view on the appropriate level of reserves in the Irish case.