Core Focus: The unique decentralised management model, where NCBs act as agents of the ECB in managing the foreign reserves, the legal framework for agency relationships, and the ability to abstain from or pool management activities.

In-Depth Notes:
The ECB’s foreign reserve management framework is unique among central banks around the world, as it involves all of the national central banks which are part of the Eurosystem . The foreign reserves transferred to the ECB are managed in a decentralised manner by the NCBs . This special characteristic influenced the design of the framework, as well as its functioning and governance .

The Agency Relationship:
Each NCB manages a proportion of the ECB’s reserves . NCBs act on behalf of the ECB on a disclosed agency basis so that market participants can differentiate between operations carried out on behalf of the ECB and those undertaken on NCBs’ own behalf . In relation to all operations that the NCBs conduct on the ECB’s behalf, they shall disclose to all parties the ECB’s status as principal both by name and by reference to an account number or identifier . When carrying out operations involving the foreign reserve assets of the ECB as the ECB’s agent, each euro area NCB shall subordinate its own interests, or the interests of any other entity for which it carries out operations, to the ECB’s interests . When asked by a counterparty of the ECB for proof of its authority to carry out operations as the ECB’s agent, a euro area NCB shall provide such counterparty with proof of its mandate of agency .

Abstention and Pooling:
A euro area NCB may decide to abstain from such management or to pool such management with one or more other euro area NCBs . If a euro area NCB decides to abstain from such management, then the other euro area NCBs shall manage the assets that otherwise would have been managed by the abstaining NCB . A request by a euro area NCB to the ECB or another euro area NCB to assume certain tasks whilst retaining other tasks relating to the management of the foreign reserve assets transferred to the ECB shall also be possible . The ECB and the relevant euro area NCB are free to consent to or to reject such a request . Since 2006, NCBs may refrain from participating in operational activities, allowing them to specialize and combine portfolios .

The Currency Specialisation Model:
The ECB adopted a currency specialisation model in 2006 . Prior to that, each NCB managed both a USD and a JPY portfolio. After the change, each NCB normally manages a single portfolio (either USD or JPY) . This specialisation allows NCBs to focus their expertise and achieve greater efficiency. The number of portfolios has been reduced over time: initially 12 USD and 12 JPY portfolios; after 2006, 8 USD and 6 JPY portfolios; and since 2012, 11 USD and 4 JPY portfolios, plus one CNY portfolio since 2017 .