ECB’s Governing Council says that exceptional circumstances justify leverage ratio relief

PRESS RELEASE

17 September 2020

ECB’s Governing Council confirms exceptional circumstances
Opinion instrumental in ECB Banking Supervision’s decision to allow banks to exclude central bank exposures from leverage ratio
See also ECB Banking Supervision announcement on leverage ratio

The Governing Council of the European Central Bank (ECB) has decided that it concurs with ECB Banking supervision that there are ‘exceptional circumstances’ allowing the temporary exclusion of certain central bank exposures from the leverage ratio.

The Governing Council said in an opinion: “The situation brought about by the coronavirus (COVID-19) pandemic has affected all euro area economies in an unprecedented and profound way. This situation has resulted in an ongoing need for a high degree of monetary policy accommodation, which in turn requires the undeterred functioning of the bank-based transmission channel of monetary policy. In the view of the Governing Council, therefore, the condition of exceptional circumstances warranting the temporary exclusion of certain exposures to central banks from the calculation of banks’ total exposure measures is met for the euro area as a whole. Euro area national competent authorities which intend to exercise the discretion provided for under Article 500b(2) of the CRR in relation to less significant institutions may rely upon this opinion issued by the ECB as monetary authority of the euro area.”

This opinion of the Governing Council is a precondition for ECB Banking Supervision to allow significant banks that it directly supervises to exclude certain central bank exposures from the leverage ratio. Such assets include coins and banknotes as well as deposits held at the central bank.

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Quotes

José Manuel Fernandes (EPP, PT), co-rapporteur: “Today, history has been made in the European Parliament. For 32 years, the EU did not have new own resources. The European Commission never went to the markets to borrow at this scale. This report paves the way for the approval of the Own Resources Decision by the Council and to the ratification process in the national parliaments. Time is of the essence for us to have the Recovery Fund after 1 January 2021. What is the Council waiting for?”

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More information is available in the draft legislative resolution.

Background

Parliament’s vote on the legislative opinion is a key step that will allow for the Own Resources Decision to be adopted by the Council and submitted for ratification by the 27 member states’ parliaments. The ORD is the legal basis that provides for the revenue sources of the EU budget.

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Quote

Rapporteur Jutta Paulus (Greens/EFA) said: “Today, we are sending a strong signal in line with the European Green Deal and the climate emergency: Monitoring and reporting CO2 emissions is important, but statistics alone do not save a single gram of greenhouse gas! That’s why we are going further than the Commission proposal and demanding tougher measures to reduce emissions from maritime shipping”.

Next steps

Parliament is now ready to start negotiations with member states on the final shape of the legislation.

Background

Maritime transport remains the only sector with no specific EU commitments to reduce greenhouse gas emissions. Global shipping activity emits significant amounts of GHG emissions, estimated to be around 2-3% of total global GHG emissions. This is more than the emissions of any EU member state. In 2017 in the EU, 13 % of total EU greenhouse gas emissions from transport came from the maritime sector