DNB's balance sheet grows due to stimulus measures

Statistical news
Datum 3 augustus 2016

The balance sheet of De Nederlandsche Bank (DNB) has grown significantly since early March 2015 (+ EUR 117 billion). Such growth was previously seen during the credit crisis and the subsequent European sovereign debt crisis. Partly due to money market stress, euro-area banks borrowed and deposited billions of euros with their central banks, among which DNB. The current balance sheet growth is mainly explained by the exceptional measures taken to further ease monetary policy, e.g. asset purchasing programmes.

Since the launch of the ECB's first asset purchasing programme (Covered Bond Purchase Programme I) in July 2009, DNB's securities holdings have increased by EUR 60 billion to EUR 78 billion at end June 2016. The Eurosystem directly injects liquidity into the economy by buying up securities. The first two purchase programmes (Covered Bond Purchase Programme I and II) are having a relatively small effect on the current holdings, partly owing to the limited size and short remaining maturity of the securities held under these programmes. Since early March 2015, holdings of securities have increased substantially (+ EUR 49 billion) mainly due to the recent purchase programmes (Covered Bond Purchase Programme III and Public Sector Purchase Programme). EUR 40 billion of this amount is accounted for by paper issued by public bodies, and over EUR 9 billion is attributable to covered bonds issued by banks. This has lifted the proportion of securities in DNB's total assets to 30%, from 20% recorded in early March 2015.

In addition to securities holdings, the Target2-balance, claims that DNB has on the Eurosystem, also grew sharply to EUR 72 billion as a result of the ECB's quantitative easing (QE) programme. This is due to the fact that banks are holding more additional liquidity with DNB than DNB itself creates by purchasing securities under QE. Liquidity creation within the euro area and additional contributions by banks having their registered offices in the Netherlands are pushing up bank-held deposits at DNB. The latter grew by almost EUR 108 billion to EUR 149 billion between early March 2015 and end June 2016.

Finally, the balance-sheet item "currency in circulation" also grew by 8% (+ EUR 4.2 billion) relative to early March 2015. This increase is attributable to the rise in the total value of all euro banknotes in circulation the euro area, which the Eurosystem allocates to DNB in accordance with its fixed banknote allocation key. The difference between the amount allocated to DNB according to the capital allocation key and the amount it actually issued itself constitutes a claim on the Eurosystem, and is included under "other assets".

DNB provides monthly information on its balance sheet. From 2 August 2016, the ECB will also publish comparable data on the balance sheets of the national central banks of the Eurosystem on its website.

Figure 1: Total assets DNB (EUR billion) according to asset class (%, right axis)

Figure 1: Total assets DNB (EUR billion) according to asset class (%, right axis)

*December 2014 saw a break in the series of other and total assets (+ EUR 12 billion).