MONETARY BASE

Consists of currency (banknotes and coins) in circulation, the reserves held by counterparties with the Eurosystem and recourse to the Eurosystem's deposit facility. These items are liabilities on the Eurosystem's balance sheet. Reserves can be broken down further into required and excess reserves. In the Eurosystem's minimum reserve system counterparties are obliged to hold required reserves with the NCBs. In addition to these required reserves, credit institutions usually hold only a small amount of voluntary excess reserves with the Eurosystem.