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Boris Osorno Torres

21 June 2023
OCCASIONAL PAPER SERIES - No. 318
Details
Abstract
Central banks around the world are increasingly monitoring climate change risks and how these affect their balance sheets and their monetary policy transmission. The European Central Bank (ECB) extensively reviewed its monetary policy implementation framework in 2020-21 to better account also for climate change risks. This paper describes these considerations in detail to provide a holistic perspective of one central bank’s climate-related work in relation to its monetary policy implementation framework. The paper starts by characterising the strategic reflections behind the principles of the enhanced framework and their relationship with the ECB monetary policy strategy review. Climate-related disclosures, improvements in risk assessment, a strengthened collateral framework and tilting of corporate bond purchases are the main pillars of the framework enhancements. The paper sheds light on the key motivations behind these enhancements, including the aspects that were reviewed but left unchanged. It also takes stock of the different challenges involved in the identification and estimation of climate change-related risk, how these can be partially overcome, and when they cannot be overcome, how they can constrain the ability of financial institutions, including central banks, to take further action. The integration of climate change considerations into the monetary policy implementation framework is at its inception. As data availability and quality improve, and risk methodologies develop, central banks will be able to deepen their approach. This paper also examines possible future avenues that central banks, including the ECB, might take to further refine their monetary policy implementation using an assessment framework for climate change-related adjustments.
JEL Code
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
D53 : Microeconomics→General Equilibrium and Disequilibrium→Financial Markets
  1. Official reserve assets and other foreign currency assets
  2. Predetermined short-term net drains on foreign currency assets
  3. Contingent short-term net drains on foreign currency assets
  4. Memo items

Eurosystem: End-October 2016

First release: 15 November 2016. Updated: 15 March 2017

I. Official reserve assets and other foreign currency assets
(approximate market value, EUR millions)
A. Official reserve assets 717,288
1. Foreign currency reserves
(in convertible foreign currencies)
234,449
(1a) Securities 204,709
of which: issuer headquartered in the euro area 262
(1b) total currency and deposits with: 29,741
(i) other national central banks, BIS and IMF 21,142
(ii) banks headquartered in the euro area and located abroad 2,461
(iii) banks headquartered and located outside the euro area 6,137
2. IMF reserve position 23,888
3. SDRs 51,363
4. Gold
(including gold deposits and gold swapped)
403,111
-volume in millions of fine troy ounces 346.781
5. Other reserve assets 4,476
-financial derivatives −136
-loans to nonbank nonresidents 4,612
-other 1
B. Other foreign currency assets 36,366
-securities not included in official reserve assets 9,118
-deposits not included in official reserve assets 27,335
-loans not included in official reserve assets 18
-financial derivatives not included in official reserve assets −105
-gold not included in official reserve assets ...
-other ...
II. Predetermined short-term net drains on foreign currency assets (nominal value, EUR millions)
  Total Maturity breakdown (residual maturity)
  Up to 1 month More than 1 and
up to 3 months
More than 3 months
and up to 1 year
1. Foreign currency loans, securities, and deposits −1,945 −1,942 ... −4
-outflows (-) Principal −1,938 −1,937 ... ...
-outflows (-) Interest −17 −5 ... −12
-inflows (+) Principal ... ... ... ...
-inflows (+) Interest 9 ... ... 8
2. Aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic currency
(including the forward leg of currency swaps)
−16,451 −5,667 −6,386 −4,398
(2a) Short positions (-) −20,789 −7,563 −7,668 −5,559
(2b) Long positions (+) 4,338 1,897 1,281 1,161
3. Other (specify) −13,687 −11,423 112 −2,376
-outflows related to repos (-) −9,646 −7,238 −32 −2,376
-inflows related to reverse repos (+) ... ... ... ...
-trade credit (-) ... ... ... ...
-trade credit (+) ... ... ... ...
-other accounts payable (-) −9,204 −8,944 −260 ...
-other accounts receivable (+) 5,163 4,759 404 ...
III. Contingent short-term net drains on foreign currency assets (nominal value, EUR millions)
  Total Maturity breakdown (residual maturity)
  Up to 1 month More than 1 and
up to 3 months
More than 3 months
and up to 1 year
1. Contingent liabilities in foreign currency ... ... ... ...
(1a) Collateral guarantees on debt falling due within 1 year ... ... ... ...
(1b) Other contingent liabilities ... ... ... ...
2. Foreign currency securities issued with embedded options
(puttable bonds)
...      
3. Undrawn, unconditional credit lines        
3_1 Undrawn, unconditional credit lines provided by: ... ... ... ...
(3_1 a) other national monetary authorities, BIS, IMF, and other international organizations ... ... ... ...
-other national monetary authorities (+) ... ...