Statistics for European Monetary Union

By Liz Dixon
Tel: 0171 601 5453
This article summarises the main recommendations of the EMI’s July 1996 Implementation Package
report which set out the ECB’s statistical requirements for Stage Three of Monetary Union. The UK is
not obliged to meet these requirements in full unless it decides to join the single currency – the article
describes the preparations being made to enable the UK to supply the ECB with monetary data before
and after joining Monetary Union.

Background
The European Central Bank (ECB) and the statistical
arm of the European Commission, the Statistical Office
of the European Communities (EUROSTAT ), will be
responsible for Monetary Union (MU) area macro-
economic statistics. The Treaty on the European Union
allows for the possibility of the ECB collecting data
directly from economic agents. The intention,
however, is that the national authorities1 will continue
to collect and compile the required statistics at national
level and supply the ECB and EUROSTAT with
aggregated data.
The main forum for co-operation between the ECB and
EUROSTAT is the Committee for Monetary, Financial and
Balance of Payments Statistics, which comprises heads
of statistics departments of national central banks and
senior officials of national statistical institutes in the
European Economic Area (EEA) and candidate EU
countries. 2 A network of statistical committees,
working groups and task forces provides support at a
conceptual and practical level.
It was agreed between the European Monetary Institute
(EMI – the forerunner to the ECB) and EUROSTAT that
the EMI had full responsibility for developing money
and banking statistics. The ECB is likely to retain
responsibility for this broad area of statistics as it
considers them to be at the heart of its monetary policy
and operational responsibilities (see Figure 1).
Moreover, expertise in their production tends to be
heavily concentrated in central banks.
In two other areas of close interest to the monetary
policy process, balance of payments and financial
accounts statistics, responsibility will be shared
between the ECB and EUROSTAT. This mirrors the
allocation of
responsibility at the national level and reflects the
wider general interest in these data (which form part of
the national economic accounts).
Other aggregate MU-level statistics – such as those
relating to prices (including the harmonised index of
consumer prices (HICP)) and costs, government
finances and the labour market – will be the
responsibility of EUROSTAT. Although not the
responsibility of ECB, these data will nevertheless be
used in the definition and conduct of monetary policy.
The ECB is liaising with EUROSTAT to ensure that its
needs will be met.
No decisions have been made about the dissemination
of the ECB’s statistics, but it is expected that a full
range of euro area statistics will be published.
EUROSTAT has already said that it intends to publish MU-
level aggregates, as well as EU/EEA aggregates for the
statistics that are its responsibility.
This article will consider the following:
• The ECB’s requirements for money and
banking statistics;
• Compilation of euro area monetary aggregates;
• Balance of payment statistics;
• Statistical reporting by non-participating EU
Member States to the ECB;
• Implications for money and banking statistics
in the UK, before and after any future decision to
adopt the single currency, and
The treatment of the euro in Bank of England
statistical returns.

In the UK, the Bank of England and the Office for National Statistics.
2
Representatives of the ECB, the Bank for International Settlements, the United Nations and the International Monetary
Fund have observer status on the CMFB.
1
 Figure 1. Responsibility for statistics at the single Luxembourg did not previously collect any statistical
data from domestic MFIs. Recognising that far-
reaching changes to collection procedures have been
required in some countries, the Implementation
ECB EUROSTAT Package requires back data to September 1997 only.
JOINT

Compilation of monetary aggregates

Money and Balance of payments, HICPs,
banking statistics financial accounts labour market, Regardless of whether the ECB decides to use inflation
government
finance statistics or monetary targeting (or a combination of the two) to
guide its monetary policy, it will almost certainly
monitor the growth in the money supply.

To enable the compilation of flows and growth rates of

currency area level
Money and banking statistics
In July 1996, the EMI outlined the statistics required
for Monetary Union in its Implementation Package
report. 3
From July 1998, national central banks (NCBs) in the
single currency area are required to send the ECB
monthly balance sheet data consistent with the
harmonised framework set out in the Implementation
Package (see Annex 1). The data, which are to be sent
within 15 working days, cover separately the business
of the NCBs and other Monetary Financial Institutions
(MFIs – the European statistical definition of a ‘bank’,
see box). Individual institutions’ balance sheets will
provide the statistical basis for the system of minimum
reserves.
More detailed currency, geographical and sectoral
analyses are required quarterly within 28 working days
of the end of period to which they relate. These data
are not essential for compiling monetary aggregates,
but will allow further analysis of monetary
developments and may be used for other purposes (eg
in the financial accounts). The first quarterly data are
required as at end-December 1998.
The extent to which Member States have had to change
their statistical systems in order to comply with the
Implementation Package has varied widely. The
balance sheet framework is closely modelled on
existing balance sheet reporting schemes, such as those
used in the UK and Germany. At the other extreme,
monetary aggregates and counterparts, NCBs will be
required to submit monthly adjustments (for
revaluations, reclassifications, joiners/leavers to the
MFI population etc) in addition to balance sheet data.
The M3H concept of harmonised broad money, which
is derived from national definitions of money, will
cease to exist from the start of Monetary Union. 4 The
following liabilities (possibly incorporating maturity
cut-offs)5 of MFIs to residents of the euro area are
likely components of a replacement to M3H (see Annex
1):
Notes and coin in circulation
Overnight deposits
Term deposits with an agreed maturity
Deposits redeemable at notice
Repos
Shares/units issued by money market funds
Debt securities issued
Money market paper
The balance sheet breakdown in the Implementation
Package is sufficiently flexible to allow the compilation
of a range of measures of money (eg a narrow measure
of money could be constructed from notes, coin and
overnight deposits).

3
Copies of the Implementation Package and other EMI/ECB publications related to statistics are available from
Mrs Collette Collings; Telephone 0171 601 4312.
4
In the UK, M3H is defined as M4 plus the M4 private sector’s foreign currency deposits (including CDs and other short-
term paper), and public corporations’ (£ and foreign currency) deposits.
5
The maturity breakdown in the IP allows for a cut-off at one or two years’ original maturity for deposits with an agreed
maturity and debt securities issued, and at three months for deposits redeemable at notice.
2
 A Europe-wide statistical definition of a bank.
The Implementation Package introduced the term ‘Monetary Financial Institution’ (MFI). MFIs are defined as “credit
institutions as defined in Community Law, and all other resident financial institutions whose business is to receive
deposits and/or close substitutes for deposits from entities other than MFIs, and, for their own account (at least in
economic terms), to grant credits and/or make investments in securities”. This coincides with the definition of the
central bank and other monetary financial institutions sub-sectors in the European System of National and Regional
Accounts (ESA95) which serves as the central framework of reference for EU economic statistics. In the UK, the MFI
population comprises the Bank of England, banks, building societies and money market funds. 6
The List of MFIs in the European Union, published in April 1998, defines a population of some 11,000 financial
institutions. The List will facilitate the production of money and banking statistics in the single currency area. It forms
the starting point for the selection of monetary policy counterparties and will be used to identify those institutions to be
subject to minimum reserves. The List will be accessible on the ECB’s Internet site from September and will be
updated on a regular basis to ensure it remains accurate.

The Implementation Package foresees the collection of Balance of payments statistics

additional monthly information to augment the balance
sheet data. The ECB is planning to collect data relating
to deposits with central government institutions (such
as post office or Treasury accounts). 7 These deposits
account for a significant proportion of national money
measures, and M3H, in some MU countries (such as
France and Italy).
It is likely that the new broad measure of money will
include both euro and foreign currency liabilities.
Foreign currency liabilities contribute towards M3H at
present, and are included in many of the national
definitions of money currently compiled in MU
countries.
As noted above, fully harmonised NCB and MFI
balance sheet data will be available back to September
1997 only. In order to conduct econometric tests on
potential new monetary aggregates, the ECB will
require longer runs of data. These will be derived from
existing data sources, specifically a refinement of the
so-called ‘building blocks’ exercise. The building
blocks present the components and counterparts of
M3H in each EU Member State, disaggregated as far as
possible into individual time series. The data are
compiled according to national definitions of money.
NCBs are supplementing the building blocks with
additional data series to overcome their relative lack of
harmonisation.
The Implementation Package requirement for monthly
balance of payments covers a number of key items (see
box) of the current account (goods, services, income
and current transfers), capital account and financial
account (direct, portfolio and ‘other’ investment, and
reserve assets). The data are required by the ECB 30
working days after the end of the month to which they
relate and, so far as is practicable, will conform to the
IMF Balance of Payments Manual (5th edition).
A more detailed balance of payments for the single
currency area will be compiled quarterly and annually.
Broadly speaking, the ECB is responsible for the
compilation of the financial account (as well as
investment income) while EUROSTAT deals with the
remainder of the current and capital accounts. In
addition, the ECB will compile an annual statement of
external assets and liabilities (the International
Investment Position) for the single currency area.
The UK currently compiles balance of payments on a
quarterly basis (apart from trade in goods and services)
and remains sceptical of the need for monthly data for
monetary policy and operational purposes. The UK is
currently reviewing its position and will deliver a report
to the ECB later this year. In the meantime it is
attempting to derive best estimates of the monthly key
items from the existing quarterly system.

3
Copies of the Implementation Package and other EMI/ECB publications related to statistics are available from
Mrs Collette Collings; Telephone 0171 601 4312.
4
In the UK, M3H is defined as M4 plus the M4 private sector’s foreign currency deposits (including CDs and other short-
term paper), and public corporations’ (£ and foreign currency) deposits.
5
The maturity breakdown in the IP allows for a cut-off at one or two years’ original maturity for deposits with an agreed
maturity and debt securities issued, and at three months for deposits redeemable at notice.
2
 Key items required for the monthly balance • The ECB has some Treaty responsibilities towards
non-participating MS, including statistical
of payments of the single currency area
harmonis-ation and the compilation of convergence
reports (at least biennially or as requested by the
I. Current Account
non-participating MS).
Goods
Services • If a non-participating MS joins Monetary Union
Income (which, in principle, it could do at short notice), it
Current transfers must fulfil all the requirements of the
II. Capital Account Implementation Package from the date of joining.
III. Financial Account
Direct investment: Abroad Non-participating MS will retain responsibility for their
In the reporting economy monetary policy, and will continue to compile money
Portfolio investment: Equity securities and banking statistics according to their national
Debt securities, of which definitions. To fulfil the ECB’s data requirements,
Bonds and notes each non-participating MS will be sending monthly
Money market instruments balance sheet data for the MFI sector that are as
Financial derivatives comparable as possible with the balance sheets
Other investment: Banks submitted by Monetary Union countries. These data
Long term need to be timely enough to fit the likely monthly
Short term briefing cycle in the ECB. Ideally, NCBs in non-
General government participating MS will provide the data set out in Annex
Monetary authorities 1 (both stocks and flows), and a table showing the main
Other sectors monetary aggregates and counterparts used
domestically, which may or may not be derivable from
IV. Reserve Assets
the MFI balance sheet.
(errors and omissions)
A breakdown of external positions of non-participating
MS MFIs with residents of the euro area is not required
Statistical requirements on the non-
to compile monetary aggregates. Where these data are
participating Member States available, however, the ECB wants to receive them.
Such data may prove to be of interest to both the ECB
Because the monetary policy responsibilities of the
and domestic policy makers in non-participating MS in
ECB (and hence its statistical needs) will be confined to
monitoring any shifts in business which occur following
the single currency area, non-participating Member
the introduction of the single currency.
States (MS) are not obliged to meet the full
requirements of the Implementation Package. There A three-way currency split (into national currency, euro
are a number of reasons, however, why it is desirable and other foreign currencies) will allow a more
for the UK, and the other non-participating MS, to complete analysis of the growth of the use of the euro
submit data to the ECB: in non-participating MS (and to what extent it becomes
established as an alternative to the national currency).
• The NCBs of all MS form part of the European
System of Central Banks and the General Council of The shared responsibility for balance of payments
the ECB comprises the governors of all EU NCBs. statistics leads to a data need from non-participating
Non-participating MS will have close financial and MS because the ECB will be compiling the BoP
economic ties with the single currency area and financial account of the EU as well as of the euro area.
there may be an interest, both within the ECB and
more generally, in monitoring statistics that are
compiled on a comparable basis to those of the
Monetary Union countries.
3
Copies of the Implementation Package and other EMI/ECB publications related to statistics are available from
Mrs Collette Collings; Telephone 0171 601 4312.
4
In the UK, M3H is defined as M4 plus the M4 private sector’s foreign currency deposits (including CDs and other short-
term paper), and public corporations’ (£ and foreign currency) deposits.
5
The maturity breakdown in the IP allows for a cut-off at one or two years’ original maturity for deposits with an agreed
maturity and debt securities issued, and at three months for deposits redeemable at notice.
2
Money and banking statistics in the UK
The current UK statistical system is broadly compatible
with the Implementation Package in terms of the
monthly coverage of the MFI sector and the timeliness
of balance sheet data. However, fully harmonised data
cannot be derived from the existing suite of reporting
forms. Discussions have taken place with the British
Bankers’ Association to agree an additional reporting
framework which, to minimise the reporting burden on
institutions, will be introduced only if the UK decides
to participate in Monetary Union. Building societies
will probably need to supply similar data.
While the UK remains a non-participating MS, it is
committed to supplying the ECB with monthly balance
sheet data compatible with the Implementation Package
compiled on a best endeavours basis. Reasonable
estimates of some of the missing data items may be
derived from alternative sources (eg monthly
projections of business with residents of the euro area
can be made from the country claims and liabilities
data reported on the quarterly Forms CC and CL). In
other areas (such as breakdowns of deposits by
maturity), there are little relevant data available. The
Bank is relying on market intelligence and ad-hoc
information from banks to construct an accurate a
picture as possible.
Two additional statistical returns – the ‘EMU’ forms:
monthly Form EM and quarterly Form EQ – have been
developed to collect the missing data items if and when
the UK adopts the single currency. These will include
details of the maturity breakdown of deposits and
lending, sectoral and instrument analyses of business
with residents of the euro area to a similar level of
detail as is currently provided for domestic residents,
and a small amount of additional information on
business with residents of the rest of the world.
sections if they have minimal business in one (or more)
area.
On joining Monetary Union, some additional monthly 9
information will be required from all banks to allow the
accurate calculation of individual institutions’ reserves
bases under the system of minimum reserves. These
items are currently included in the draft Form EM, but
it may prove more practicable to move them to the
Form BT (or introduce a supplementary monthly
return).
Treatment of the euro in Bank of England
statistical returns
The Bank has issued guidance to reporting institutions
on the statistical treatment of the euro. ‘Euro boxes’
have been introduced in all statistical returns so that
detailed statistics on the euro business of the banking
sector can be compiled. From end-January 1999, banks
will report, in the ‘euro boxes’, all business
denominated in euros and the eleven participating
currencies.
Before the start of Monetary Union, any balance sheet
positions resulting from transactions in ‘grey euros’
will be reported under ‘other currencies’. The only
exception to this would be any position that is
effectively an ECU position (eg holdings of ECU/Euro
Treasury notes and bills) which will continue to be
reported as ECU on forms where ECU is identified as a
separate currency.

It is anticipated that the ‘EMU’ forms will have a

limited reporting population, covering approximately
95% of the banking sector by total balance sheet size.
The Implementation Package makes explicit provision
for having a ‘tail’ of small institutions, who may report
less detailed balance sheet data to a lower frequency. 8
The total balance sheet footings of this ‘tail’ must not
exceed 5% of the aggregated balance sheet of the MFI
sector.

The forms have been structured into three geographical

sections so that banks are not obliged to report all
8
Money market funds and the smaller building societies will also fall below the cut-off size for full monthly statistical
reporting.
9
Existing quarterly reporters will be allowed to report these additional data quarterly.
5