09:56 a.m. Jul 08, 1998 Eastern
FOCUS-Duisenberg says ECB to control ESCB gold, FX
FRANKFURT, July 8 (Reuters) - Dollars, gold and other foreign reserve assets held by national central banks will be brought under indirect control of the European Central Bank by the end of 1998, ECB President Wim Duisenberg said on Wednesday.
The statement may go some way to reassuring the gold and foreign exchange markets that ''excess'' national reserves will not be dumped and thereby depress prices after EMU (economic and monetary union) starts in January next year.
''Before the end of this year the governing council will have to adopt an ECB guideline...which will subject all operations in foreign reserve assets remaining with the national central banks, including gold, to approval by the European Central Bank,'' Duisenberg told a news conference.
Duisenberg confirmed that the 11 euro zone central banks would pool 39.5 billion euros of their foreign reserve assets with the ECB on January 1, 1999, according to each bank's share in the ECB's capital.
Gold would make up 15 percent of this total, while unspecified other ''foreign currency assets'' would make up the remainder.
Gold has been under pressure for the last 18 months due to fears that central banks of the 11 euro-zone countries would sell off surplus gold. The price of the metal sank in January to 18-1/2 year lows below $280 an ounce.
After Duisenbergs statement, the price fell about two dollars an ounce on market disappointment that he had not announced tougher curbs on gold sales by central banks. At 1311 GMT, gold was quoted at $292.50/93.00 per ounce, down from Tuesday nights New York close of $294.70/95.20.
The national central banks (NCBs) already pool 20 percent of their gold and dollar reserves with the ECB in order to back up the European Monetary System. In return they receive official Ecus on their balance sheets. These quarterly Ecu swaps will continue until the end of 1998, central bankers have said.
In answer to a question, Duisenberg said the valuation of gold and other reserves to be transferred to the ECB would be determined later in the year, meaning the exact tonnage of gold to be pooled in Frankfurt cannot yet be estimated.
Duisenberg said the ECB guideline on assets remaining with the NCBs would be issued under Article 31 of the ESCB statutes.
That article obliges NCBs to seek prior approval from the ECB for reserve operations above an undefined ''certain limit...in order to ensure consistency with the exchange rate and monetary policies of the Community.''
Before announcing that national reserves would be brought under ECB control, Duisenberg said: ''I should stress that the decision on the percentage of gold to be transferred to the ECB will have no implications for the consolidated gold holdings of the European System of Central Banks.''
It was not immediately clear what that statement meant
HUH????:-)
but the ESCB also extends to central banks outside the euro zone. NCBs from countries not taking part in EMU are exempted from the obligation to pool their assets in Frankfurt, explaining why the 39.5 billion euros announced on Wednesday is below the 50 billion euros level set out in the Maastricht treaty.
((Frankfurt Newsroom +49 69 756525, frankfurt.newsroom+reuters.com))
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