*EP**** * PE * ***** EUROPEAN PARLIAMENT DIRECTORATE GENERAL FOR RESEARCH ~1(" RESEARCH AND DOCUMENTATION PAPERS /THE DEGREE OF CENTRAL BANK AUTONOMY IN THE COMMUNITY MEMBER STATES,.,.---· ~(Ownership, appointments and organizational set-up, responsibilities, state financing) ~ Economic Series No • / 0 16 LIBRARY ('I ·.u A. 8-1990 100355EN24/17-9-90 ;;_. .-- ~ :; 0 Also published in the same series: LANGUAGE No 7 The Automobile Industry in the Community December 1985 EN, FR, DE, IT, SP No 8 US-EC Monetary Relations June 1986 EN, DE No 9 Achievement of the Internal Market: Action Taken by the Commission and Council on Parliament's Opinions September 1986 EN, FR No 10 Audio-Visual Policies of the Community The Role of the European Parliament August 1987 EN No 11 La France et la libre circulation des capitaux en Europe Septembre 1987 FR No 12 EC-Japan Economic Relations October 1987 DE, EN No 13 The Economic and Social Cohesion of the Community January 1988 FR, EN No 14 The Liberalisation of Capital Movements in the Community and its Implications for Greece April 1988 EN No 15 Economic Problems of Value-Added Tax Harmonization and Completion of the Internal Market December 1989 DE, EN This study does not represent the official op1n1on of the European Parliament. It takes account of the situation up to I July 1990. .. 'i RESEARCH AND DOCUMENTATION PAPERS THE DBGREE OF CENTRAL BANK AUTONOMY IN THB COMMUNITY MEMBI:II STATES (Ownership, appointments and organizational set-up, responsibilities, state financing) This publication is available In the following languages: DA DE GR EN available ES FR ~: IT NL PT II\ Cataloguing data can be found at the end of this publication. "''I Luxembourg: European Partiament ISBN: 0 Catalogue number: 0 © ECSC-EEC-EAEC, Bruseels • Luxembourg, 1990 Reproduction Is authorized. except for commerctaf purposes, provided that the source is acknowledged. This study does not represent the official optn1on of the European Parliament Printed in Luxembourg PREFACE The independence of Central Banks from the State is generally considered as a basic prerequisite for monetary stability. However, it is often pointed out that "independence does not mean independence from the government , but independence within the Gover1111ent '' . In a Resolution (A3-99/90) on Econo.ic and Monetary Union (EMU) adopted in Hay 1990, the European Parliament stressed that the European • Central Bank System (ECBS), to be established in the later stages of EMU, must be given sole power to control the money supply and to use, without requiring prior authorization, all the instruments necessary to influence the money markets. The Parliament also e•phasized, that this autonomy should be "situated in the context of concerted action and cooperation with the Community institutions and the national authorities and . implies a duty to lend active support to the general economic policy objectives laid down by the Co•unity•s political authorities". The objective of the present ca.parative study, prepared by the Directorate General for Research of the European Parliament, is to describe the degree of autonomy of the Central Banks of the Member States in their relationships with Government. Ownership of capital, appointment procedure for key posts and organizational structure, responsibilities as laid down by law and the existence or not of legally prescribed limits in financing the State are the major autonomy indicators used in this study . .. Observations and supple88ntary infor•ation are welcome and should be sent to: European Parlia.ent • Directorate General for Research Schuman Building 6/46 L-2929 Luxembourg Tel.: 00.352.4300.2929 Fax: 00.352.437071 - 2 - CONTENTS BELGIUM.................................. 4 •· DENMARK.................................. 6 FEDERAL REPUBLIC OF GERMANY.............. 8 FRANCE................................... 11 GREECE....... • • • . • . • • . • • . • • • 13 IRELAND.................................. 15 ITALY ...•......••••.••..•...•..••..••.••. 17 LUXEMBOURG . • . • . • . • • . • . 19 PORTUGAL. • • . • . • • • . • . 21 SPAIN.................................... 23 THE NETHERLANDS. • .. .. • . .. .. • • .. .. 25 ... UNITED KINGDOM........................... 28 - 3 - 8 E L G I U M (Banque NatiOQ!le d8 Belgique/Nationale Bank van Belgil) (a) OWNERSHIP 50% of shares are government-owned and 50% are freely traded. • However, the State controls, directly or indirectly, the absolute majority of the shares. (b) APPOINnENTS AND ORGANIZATIONAL SET-UP After a proposal by the government, the Crown appoints the Governor, who is ex-officio Chairman of both the Board of Directors (Comite de Direction) and the Supervisory Board (Conseil de Regence). The Governor's term of office runs for five years. He aay be dis•issed. In addition to the Governor, the Board of Directors comprises three to six Directors, who are appointed by the King for a.six·year term on a proposal by the Supervisory Board. The Board of Directors takes decisions on all matters not falling exclusively within the terms of reference of the Supervisory Board. The Supervisory Board comprises the Governor, the Directors and ten other members ('Regents'). The last-named officers are elected by the Shareholders' General Meeting for a three-year term. Two Directors are nominated by the trade unions, three are nominated by the industrial employers• associations, chaMber of commerce and farmers' organizations, two are representatives of the public-sector financial institutions and the other • three are nominated by the Minister for Finance. The Supervisory Board discusses all matters of general importance concerning the Central Bank, the banking and credit system and the economic development of the country. It sets interest rates and lays down the conditions governing re-discounting, collateralized loans and cash advances. - 4 - (c) RESPONSIBILITIES Responsibility for monetary policy in Belgium has been deliberately conferred jointly upon the Government and the Central Bank; reflecting Parliament's wish for monetary policy not to be subjected to Government's exclusive responsibility. The external monetary policy is being exercised by the Government, while the Central Bank plays an advisory role. The Belgian Central Bank is responsible for interest-rate and re-discounting policy, as well as for regulating bank credit. It also enjoys the exclusive right to •. issue notes and conducts the Government's transactions under the supervision of the National Audit Office. For the purposes of i•plementing banking legislation, the Central Bank may submit proposals and issue opinions. Banks are required not only to provide the Central Bank with information on credit which has been arranged or taken up, but also to subait to it a detailed annual balance sheet together with a profit-and-loss account and a .anthly interi• statement. All transactions by the Central Bank are supervised on behalf of the Minister for Finance by a Government Coamissioner: he is entitled to suspend any measure which runs counter to the law, the Bank's statutes or the •national interest•. (d) STATE FINANCING The budget deficit is •ainly financed by borrowing from the Central Bank, by borrowing on the money •arkets, by issuing mediu•- and long-term promissory notes, by borrowing on foreign financial markets and by drawing on .: reserves. Direct Central Bank lending to the Belgian Government depends on negotiations between the Minister for Finance and the Bank. All agreements related to Central Bank credit to the Govern.ent should be published in the Official Journal. - 5 - In addition, the Ministry of Finance can obtain Central Bank funding via the 'Fonds des Rentes'. This Fund has Central Bank powers, as it intervenes in the money and capital markets and decides about open market policy. It is directed by a committee cOMprising six representatives, three from the Ministry of Finance and three from the Central Bank, and is chaired by one of the representatives of the Ministry of Finance. The volu.a of Central Bank credit for the Fund is currently five to six times larger than the volume of direct credit granted to the Ministry of Finance. D E N MA R K (Danlarks N&tionalbank) (a) OWNERSHIP The Bank is organised as a non-profit self-governing institution. It is wholly owned by the State. (b) APPOitmiENTS AND ORGANIZATIONAL SET-UP The Board of Governors, the Board of Directors and the Committee of Directors are the main authorities of the Bank. The Board of Governors has three members. The Chairman is appointed by the Crown (i.e. the Government) and continues to hold office until the age of 70. The other two members are appointed by the Board of Directors. The Board of Governors is in charge of the planning and implementation of monetary policy on the basis of general principles laid down in cooperation with the • Government . The Board of Directors consists of 25 Directors: 8 are members of the Danish Parliament, 2 are appointed by the Minister for Economic Affairs and 15 are elected by the Board of Directors itself. The Minister is the Chairman of - 6 - the Board of Directors. The Governors answer to the Board of Directors. The • ! Board meets once every quarter. The Committee of Directors consists of 2 members of the Board of Directors who are appointed by the Minister for Economic Affairs and 5 further members of the Board who are elected annually. The Committee of Directors takes responsibility for administrative matters, and is the Bank's supervisory authority. It generally meets once a month. '. (c) RESPONSIBILITIES