In addition to capital subscriptions, the NCBs of the member states participating in the euro area provided the ECB with foreign reserve assets equivalent to around €40 billion. The contributions of each NCB is in proportion to its share in the ECB's subscribed capital, while in return each NCB is credited by the ECB with a claim in euro equivalent to its contribution. 15% of the contributions was made in gold, and the remaining 85% in US dollars and UK pounds sterling.[citation needed]


No information about what they do with it seems to be available. I couldn't really find an answer as to what they use it for.

The European Central Bank (ECB) held foreign exchange reserves totaling approximately 85.602 billion dollars as of today. I am wondering why the ECB needs to hold as much when other European countries hold a lot of reserve, Germany alone has more than the U.S., which they can use to protect the value of the Euro against currency speculation. Is there a reason why the ECB needs to hold such a large foreign reserve? What does the ECB do with its large foreign currency reserve?


2 Answers 2


The primary purpose of the ECB is to maintain monetary stability. One tool it can use is purchasing financial assets to maintain their price. If it decides to purchase euros, to preserve the value of the euro relative to other currencies, it needs a reserve of foreign currency with which to purchase euros. Having a stock of foreign currency allows it leverage to maintain stability in the exchange markets, and so maintain stability in the value of the Euro and keep inflation at the target of 2&.

You can read more about the ecb at monetary policy decisions fo the ecb

  • "One tool it can use is purchasing financial assets to maintain their price. If it decides to purchase euros". The Euro itself wouldn't normally be considered an asset whose price is worth maintaining (relative to what?). I mean they tell use themselves they don't target exchange rates (except on the rare occasion when did though, LOL.) Commented Sep 2, 2023 at 10:02
  • @Fizz relative to goods and services in the eurozone Commented Sep 2, 2023 at 18:08
  • Yeah, well, the ECB can't buy goods and services much, so their ability to change that price point that way isn't too good, in one direction at least. Anyhow, why would they need dollars for that? Commented Sep 2, 2023 at 20:16
  • BTW, the amount of assets the ECB bought during the eurozone crisis (mostly not good and services, unless you somehow count financial assets as such) vastly exceeded those FX reserves, to the tune of 1.7 trillion euros jp.reuters.com/article/uk-ecb-policy-villeroy-idUKKCN0YG0Q2 Commented Sep 2, 2023 at 20:23

I am wondering why the ECB needs to hold as much when other European countries hold a lot of reserve

The 2nd part of your statement is true, but the first part is somewhat nonsensical in consequence.

In the case of the ECB, its total official reserve assets, including both foreign currency and non-foreign currency reserves, were equivalent to around EUR 68.6 billion at the end of 2018. These reserves comprise around EUR 49 billion in foreign currencies (US dollar, Japanese yen and onshore Chinese renminbi) and around EUR 18.2 billion in gold, with the remaining assets held in IMF SDRs. Official reserves were initially transferred to the ECB by the NCBs of those EU Member States that had adopted the euro, in proportion to their share in the ECB’s capital subscription.

At the end of 2018, the entire Eurosystem held EUR 719 billion in total official reserve assets, including the ECB’s official reserve assets. As this figure indicates, the NCBs [National Central Banks] hold significant additional official reserves on top of those held by the ECB. The NCBs have full autonomy over the management of their official reserve assets in terms of asset allocation, risk/return profile and management style and have multiple investment purposes for the assets. While the ECB’s official reserve assets can be regarded as the Eurosystem’s most liquid tranche that would be used as the first reserve pool to fund any foreign exchange interventions, the official reserves held by the NCBs can be seen as separate and autonomous investment tranches. Nevertheless, according to the Statute of the European System of Central Banks, a part of these reserves should be readily available for intervention purposes at short notice, if necessary.

So, the answer from the ECB is that they don't have control over these other reserves (which are 10 times greater), but theirs are the "tip of the spear". As for actual forex interventions, the ECB doesn't do much, but did some:

As for the ECB, the main purpose of holding foreign currency reserves is to ensure that the Eurosystem has a sufficient amount of liquid resources, whenever needed, for its foreign exchange policy operations involving non-EU currencies. The euro’s external value is not a policy target for the ECB. Against this background, the ECB’s rationale for holding foreign currency reserves is to be able to intervene in the foreign exchange market whenever needed, to prevent disorderly market conditions that could have an adverse impact on price stability in the euro area and at the global level. Such market conditions have been rare since the inception of the euro. The ECB’s foreign currency reserves were therefore only used to fund interventions in September/November 2000 and in March 2011.

That's from a 2019 writeup, I'm not sure if anything else happened in that regard with the war in Ukraine etc.

BTW, there's also this blurb about what guides their interventions, which I'm not sure exactly what it means in practice, but someone may want to investigate/explain this further:

Where the ECB engages in foreign exchange transactions to adjust the composition of the foreign currency reserves, it is to ensure compliance with the Foreign Exchange Global Code (FXGC). The FXGC is a set of global principles of good practice in the foreign exchange market that has been developed to provide a common code of conduct to promote the integrity and effective functioning of the wholesale foreign exchange market.

As for the historical interventions, they do have this from a 2019 presser (that was ref'd in that paper):

The Governing Council of the European Central Bank (ECB) has decided to publish additional data on the ECB’s foreign exchange interventions (FXI). The aim is to enhance communication and transparency in line with its accountability practices. The ECB has so far intervened in the foreign exchange market in 2000 and 2011. The last FXI was a coordinated intervention by the Group of Seven most advanced economies to weaken the Japanese yen after a major earthquake.

And the original presser from 2011:

In response to recent movements in the exchange rate of the yen associated with the tragic events in Japan, and at the request of the Japanese authorities, the authorities of the United States, the United Kingdom, Canada, and the European Central Bank will join with Japan, on 
18 March 2011, in concerted intervention in exchange markets. As we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We will monitor exchange markets closely and will cooperate as appropriate.

As for the one from 2000 it is slightly more cryptic, so you/someone may want to read something else about it; anyhow, here it goes:

The ECB has intervened today in the foreign exchange market owing to its concern about the global and domestic repercussions of the exchange rate of the euro, including its impact on price stability. The ECB confirms its view that the external value of the euro does not reflect the favourable conditions of the euro area.

I did mange to find something more explicit myself from a report of the time:

The sound fundamentals of the euro area should also increasingly be reflected in exchange rates. These have remained out of line with economic fundamentals for a prolonged period of time and this is posing risks to the world economy. In addition, for the euro area, the continued undervaluation of the euro vis-à-vis other major currencies is putting upward pressure on import prices.

For these reasons, the ECB intervened in foreign exchange markets in early November. Exchange rate developments will continue to be monitored closely.

And more recently they've also published the actual amounts of those interventions from 2000 & 2011.

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Reuters has slightly more context on the 2000 events:

Nov 10, 2000 - ECB in conjunction with national euro zone central banks intervenes to buy euros.

Nov 6, 2000 - ECB and other euro zone national central banks intervene to buy euros.

Nov 3, 2000 - ECB and other euro zone national central banks intervene at least twice to buy euros, following the currency’s 5 percent recovery from record lows set the previous week around $0.8225.

Sept 22, 2000 - Central banks in Europe, Japan and the United States, acting together for first time since 1995, intervene to drive euro higher after currency hits all-time low below 85 cents two days earlier, a loss of nearly 30 percent of its value since its January 1999 launch. Intervention is first by ECB since its birth.

N.B. There were no ECB forex interventions in 2022 despite the economic hardships that Europe faced related to the energy separation from Russia.

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