Dáil Éireann díospóireacht -
Thursday, 17 Oct 2002

Vol. 555 No. 4

Written Answers. - Central Bank Reserves.

Richard Bruton

Ceist:

78 Mr. R. Bruton asked the Minister for Finance the details of the current level of reserves within the Central Bank and of the trend in profits earned by the Central Bank over the past five years; the level of reserves; and the level of annual retained earnings required by the Central Bank to discharge its duties effectively. [18687/02]

Minister for Finance (Mr. McCreevy)

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. 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, 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 July 2002, they stood at €1,283 million. The bank also has a revaluation account which reflects unrealised gains from valuation changes. This acts as a contingency provision against currency and other market fluctuations. As of end July 2002, the value of the revaluation account was €825 million.

The bank's annual profits and retained earnings which were appropriated to reserves for the years 1997 to 2001 are set out below:

Year	Profit	Retained Earnings
	€ million	€ million
1997	148.2	21.0
1998	227.7	31.4
1999	251.6	34.5
2000	524.9	69.2
2001	567.8	32.4

Subject to legal provisions on the distribution of Central Bank profits, the appropriate level of retained earnings and the level of the 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. As the Deputy is aware, I 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.