I found that circa 2012 the ECB/Eurosystem changed their definition of M3 to exclude at least some repos, which previously were included. According to a 2014 Bundesbank publication, the change happened in 2012, but perhaps it was retroactively applied to indicators/statistics back to 2010 given some other graphs they show.

The increase in significance of the shadow banking system goes hand in hand with greater interaction between shadow banks and commercial banks. While an unconsolidated analysis of payment flows between the individual financial sector players is of interest from a financial stability perspective, monetary analysis seeks to adjust the monetary and credit aggregates affected by the interaction, if need be, so as to best capture the changes relevant to price developments.

Repo and reverse repo transactions

Secured money market transactions known as repo and reverse repo transactions, which commercial banks conclude with central counterparties (such as Eurex Clearing AG, which until recently was statistically classified as a non-bank financial intermediary), are examples of this. Repo transactions (reverse repo transactions) were originally presented in the banking statistics – which are crucial for monetary analysis – as an outflow (inflow) of funds for the money-holding sector. Yet for the most part, these transactions inherently constitute secured money market transactions between commercial banks in which the central counterparty merely acts as a go-between. Consequently, the money supply is not expanded at the macroeconomic level. These secured transactions grew steadily in importance over the course of the financial and economic crisis owing to the high level of uncertainty in the interbank market. They ultimately had such a significant impact on short-term monetary and credit developments, both in terms of quantity and their month-on-month volatility (see the chart on page 27), that the Eurosystem decided to exclude them from the calculation of M3 and its counterparts in August 2012.

But a more recent ECB page doesn't seem to mention any of this, and just says:

M3 is the sum of M2, repurchase agreements, money market fund shares/units and debt securities with a maturity of up to two years.

So have they changed their mind again to include all repos in M3, or is it just that some details are omitted in this shorter ECB page? I can't imagine the Bundesbank being able to decide this on its own (they're part of the Eurosystem), so the change was probably at ECB level, every time. So I'd like to see a clear timeline of these M3 ECB/Eurosystem definition changes (up to 2020).


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