European Central Bank: Regulatory powers

The European Central Bank needs legislative and decision-making powers in order to function as a central bank.


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Current treaty

Article 110 (ex Article 108a) of the Treaty establishing the European Community (TEC) sets out the regulatory powers conferred upon the European Central Bank (ECB), i.e. to legislate and to decide in order to fulfil its tasks as the central bank, in principle for the European Union, but in practice for the Eurosystem (euro area).

Here is the text of Article 110 TEC, from the latest consolidated version of the treaties, OJ 29.12.2006 C 321 E/89:

Article 110 TEC

1. In order to carry out the tasks entrusted to the ESCB, the ECB shall, in accordance with the provisions of this Treaty and under the conditions laid down in the Statute of the ESCB:

— make regulations to the extent necessary to implement the tasks defined in Article 3.1, first indent, Articles 19.1, 22 and 25.2 of the Statute of the ESCB and in cases which shall be laid down in the acts of the Council referred to in Article 107(6),

— take decisions necessary for carrying out the tasks entrusted to the ESCB under this Treaty and the Statute of the ESCB,

— make recommendations and deliver opinions.

2. A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States.

Recommendations and opinions shall have no binding force.

A decision shall be binding in its entirety upon those to whom it is addressed.

Articles 253, 254 and 256 shall apply to regulations and decisions adopted by the ECB.

The ECB may decide to publish its decisions, recommendations and opinions.

3. Within the limits and under the conditions adopted by the Council under the procedure laid down in Article 107(6), the ECB shall be entitled to impose fines or periodic penalty payments on undertakings for failure to comply with obligations under its regulations and decisions.


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Original Lisbon Treaty

In Article 2, point 95, of the original Treaty of Lisbon (ToL) the intergovernmental conference (IGC 2007) amended Article 110 (OJ 17.12.2007 C 306/74):

95) In Article 110, the first four subparagraphs of paragraph 2 shall be deleted.

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Renumbering

The TFEU table of equivalences confirms that Article 110 TFEU (ToL) in the original Treaty of Lisbon was to be renumbered Article 132 TFEU in the consolidated version, under the title ‘Economic and monetary policy’, renumbered Title VIII (OJ 17.12.2007 C 306/214).

(In the consolidated version of the Lisbon Treaty, OJ 9.5.2008 C 115, the Tables of equivalences start on page 361, but the ToL numbers have been omitted.)

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Consolidated Lisbon Treaty: TFEU

Article 132 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/104:

Part Three Union policies and internal actions

Title VIII Economic and monetary policy

Chapter 2 Monetary policy

Article 132 TFEU
(ex Article 110 TEC)

1. In order to carry out the tasks entrusted to the ESCB, the European Central Bank shall, in accordance with the provisions of the Treaties and under the conditions laid down in the Statute of the ESCB and of the ECB:

— make regulations to the extent necessary to implement the tasks defined in Article 3.1, first indent, Articles 19.1, 22 and 25.2 of the Statute of the ESCB and of the ECB in cases which shall be laid down in the acts of the Council referred to in Article 129(4),

— take decisions necessary for carrying out the tasks entrusted to the ESCB under the Treaties and the Statute of the ESCB and of the ECB,

— make recommendations and deliver opinions.

2. The European Central Bank may decide to publish its decisions, recommendations and opinions.

3. Within the limits and under the conditions adopted by the Council under the procedure laid down in Article 129(4), the European Central Bank shall be entitled to impose fines or periodic penalty payments on undertakings for failure to comply with obligations under its regulations and decisions.

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Regulatory powers

The powers of the European Central Bank are limited generally by the treaties and the ESCB Statute; Article 110(1) TEC.

The legislative powers, to make regulations, are further limited by the enumerated provisions of the ESCB Statute and the acts of the Council mentioned; Article 110(1) TEC first indent. The instruments are called ECB Regulations.

The power to take binding decisions (ECB Decisions) is accompanied by the competence to impose sanctions for failure to comply, in accordance with Article 110(3) TEC.

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ESCB Statute

With minute differences, ESCB Statute Article 34 on legal acts reiterates the wording of Article 110 TEC. See Protocol (No 18) on the Statute of the European System of Central Banks and of the European Central Bank (1992), OJ 29.12.2006 C 321 E/272-273:

CHAPTER VII
GENERAL PROVISIONS

Article 34 ESCB Statute
Legal acts

34.1. In accordance with Article 110 of this Treaty, the ECB shall:

— make regulations to the extent necessary to implement the tasks defined in Article 3.1, first indent, Articles 19.1, 22 or 25.2 and in cases which shall be laid down in the acts of the Council referred to in Article 42;

— take decisions necessary for carrying out the tasks entrusted to the ESCB under this Treaty and this Statute;

— make recommendations and deliver opinions.

34.2. A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States.

Recommendations and opinions shall have no binding force.
A decision shall be binding in its entirety upon those to whom it is addressed.

Articles 253, 254 and 256 of this Treaty shall apply to regulations and decisions adopted by the ECB.

The ECB may decide to publish its decisions, recommendations and opinions.

34.3. Within the limits and under the conditions adopted by the Council under the procedure laid down in Article 42, the ECB shall be entitled to impose fines or periodic penalty payments on undertakings for failure to comply with obligations under its regulations and decisions.


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Summaries

How has the ECB used its regulatory powers?

The ECB booklet Legal framework of the Eurosystem and the European System of Central Banks – ECB legal acts and instruments (July 2008) presents summaries of the relevant ECB Regulations and ECB Decisions in the following areas:

– ECB institutional provisions;
– Monetary policy and operations;
– Payment and settlement systems (TARGET2);
– Banknotes and coins, means of payment and currency matters;
– Foreign reserves, foreign exchange and reserve management services;
– Statistics; and
– Fraud prevention, transparency and data protection.




Ralf Grahn

European Central Bank IV: Article 129 TFEU

The current Treaty establishing the European Community (TEC) was ─ perhaps still is ─ destined to become the Treaty on the Functioning of the European Union (TFEU), and generally the so called innovations as agreed in the 2004 IGC were to be inserted into the Treaty by way of specific modifications ‘in the usual manner’ (points 17 and 18, pages 6 and 7).

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Original Lisbon Treaty

In Article 2, point 92 of the original Treaty of Lisbon (ToL) the IGC 2007 agreed on the following concerning Article 107 TEC (OJ 17.12.2007 C 306/74):

93) Article 107 shall be amended as follows:

(a) paragraphs 1 and 2 shall be deleted and paragraphs 3, 4, 5 and 6 shall be renumbered 1, 2, 3 and 4 respectively;

(b) in paragraph 4, renumbered 2, the words ‘Statute of the ESCB’ shall be replaced by the following: ‘Statute of the European System of Central Banks and of the European Central Bank, hereinafter referred to as “Statute of the ESCB and of the ECB”’;

(c) paragraph 5, renumbered 3, shall be replaced by the following:

‘3. Articles 5.1, 5.2, 5.3, 17, 18, 19.1, 22, 23, 24, 26, 32.2, 32.3, 32.4, 32.6, 33.1(a) and 36 of the Statute of the ESCB and of the ECB may be amended by the European Parliament and the Council, acting in accordance with the ordinary legislative procedure. They shall act either on a recommendation from the European Central Bank and after consulting the Commission or on a proposal from the Commission and after consulting the European Central Bank.’.

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Renumbering

The TFEU table of equivalences confirms that Article 107 TFEU (ToL) in the original Treaty of Lisbon was to be renumbered Article 129 TFEU in the consolidated version, under the title ‘Economic and monetary policy’, renumbered Title VIII (OJ 17.12.2007 C 306/211─212).

(In the consolidated version of the Lisbon Treaty, OJ 9.5.2008 C 115, the Tables of equivalences start on page 361, but the ToL numbers have been omitted.)

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Consolidated Lisbon Treaty: TFEU

Article 129 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/103:

Part Three Union policies and internal actions

Title VIII Economic and monetary policy

Chapter 2 Monetary policy

Article 129 TFEU
(ex Article 107 TEC)

1. The ESCB shall be governed by the decision-making bodies of the European Central Bank which shall be the Governing Council and the Executive Board.

2. The Statute of the European System of Central Banks and of the European Central Bank (hereinafter referred to as ‘the Statute of the ESCB and of the ECB’) is laid down in a Protocol annexed to the Treaties.

3. Articles 5.1, 5.2, 5.3, 17, 18, 19.1, 22, 23, 24, 26, 32.2, 32.3, 32.4, 32.6, 33.1(a) and 36 of the Statute of the ESCB and of the ECB may be amended by the European Parliament and the Council, acting in accordance with the ordinary legislative procedure. They shall act either on a recommendation from the European Central Bank and after consulting the Commission or on a proposal from the Commission and after consulting the European Central Bank.

4. The Council, either on a proposal from the Commission and after consulting the European Parliament and the European Central Bank or on a recommendation from the European Central Bank and after consulting the European Parliament and the Commission, shall adopt the provisions referred to in Articles 4, 5.4, 19.2, 20, 28.1, 29.2, 30.4 and 34.3 of the Statute of the ESCB and of the ECB.


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With this and the preceding blog post we are moving towards a much shorter treatment of the TEC and TFEU Articles, normally leaving out the intervening treaty reform stages and the detailed comments in order to wade through the treaties more quickly.

Ralf Grahn

European Central Bank III: Article III-187 Constitution

The intergovernmental conference (IGC 2004) amended the main institutional provision on the European System of Central Banks (ESCB) and the European Central Bank (ECB) in Article III-79 of the draft Constitution, proposed by the European Convention.


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In the Treaty establishing a Constitution for Europe, the provisions on monetary policy are located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter II ‘Economic and monetary policy’, Section 2 ‘Monetary policy’.

Article III-187 sets out a shorter text, by deleting the first two paragraphs of the draft Constitution, OJ 16.12.2004 C 310/82:

Article III-187 Constitution

1. The European System of Central Banks shall be governed by the decision-making bodies of the European Central Bank, which shall be the Governing Council and the Executive Board.

2. The Statute of the European System of Central Banks is laid down in the Protocol on the Statute of the European System of Central Banks and of the European Central Bank.

3. Article 5(1), (2) and (3), Articles 17 and 18, Article 19(1), Articles 22, 23, 24 and 26, Article 32(2), (3), (4) and (6), Article 33(1)(a) and Article 36 of the Statute of the European System of Central Banks and of the European Central Bank may be amended by European laws:

(a) either on a proposal from the Commission and after consultation of the European Central Bank;

(b) or on a recommendation from the European Central Bank and after consultation of the Commission.

4. The Council shall adopt the European regulations and decisions laying down the measures referred to in Article 4, Article 5(4), Article 19(2), Article 20, Article 28(1), Article 29(2), Article 30(4) and Article 34(3) of the Statute of the European System of Central Banks and of the European Central Bank. It shall act after consulting the European Parliament:

(a) either on a proposal from the Commission and after consulting the European Central Bank;

(b) or on a recommendation from the European Central Bank and after consulting the Commission.

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The next post is going to present Constitutional Treaty Article III-187 as it appears in the Treaty of Lisbon.

Ralf Grahn

European Central Bank IIb: Legal materials on Article III-79 draft Constitution

Having made a textual comparison of the main institutional framework of the European System of Central Banks (ESCB) and the European Central Bank (ECB) in the current Treaty establishing the European Community (TEC) and in the draft Constitution, we turn to some legal materials and descriptions of the proposal of the European Convention in the draft Constitution.

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de Poncins

Étienne de Poncins presented the proposed text of Article III-78 of the draft Constitution in ‘Vers une Constitution européenne’ (Éditions 10/18, 2003), on page 303─304. His comment leads us to believe that the European Convention really intended the European Parliament to participate fully in the simplified revision procedures mentioned in paragraph 5:

« Commentaire : le paragraphe 5 autorise la modification du statut de la Banque centrale européenne. Actuellement cette législation requiert l’unanimité du Conseil et l’avis conforme du Parlement européen. La procédure législative sera d’application, le Conseil se prononçant à la majorité qualifié. »

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Sweden

Sweden remains outside the third phase of economic and monetary union (EMU), without an opt-out, but following the 14 September 2003 referendum. Still, the normal EU/EC institutions operate, in case of simplified revisions of the ESCB Statute or complementary legislation according to Article 42 of the Statute, which means that the member states with a derogation participate in the Council. In principle, these member states are seen as future participants in the Eurosystem.

I found no mention of Article III-79 in the Swedish government’s memorandum on the draft Constitution, ‘Europeiska konventet om EU:s framtid’ (Utrikesdepartementet, Departementsserien (Ds) 2003:58, 2003).

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Sweden

Ahead of the intergovernmental conference (IGC 2003─2004), but after the euro referendum, the government of Sweden made a reference to technical the participation of the European Parliament in certain matters pertaining to the ESCB Statute, in ‘Europeiska konventet om EU:s framtid’ (Regeringens skrivelse 2003/04:13, den 2 oktober 2003), on page 49 (in the last quoted sentence):

”Europeiska centralbankens tillsynsbefogenheter och stadgar

Konventet föreslår att beslutsregeln för överföring av tillsynsbefogenheter för den finansiella sektorn till Europeiska centralbanken (ECB) skall ändras. I dag krävs enhällighet i rådet och samtycke av Europaparlamentet. Förslaget innebär att rådet skall besluta med kvalificerad majoritet och att Europaparlamentet skall ges medbeslutande för en sådan överföring. Vidare föreslås att Europaparlamentet ges medbeslutande beträffande vissa frågor i stadgan för Europeiska centralbankssystemet.”

The Swedish government admitted the reasons for functioning decision-making within the eurozone and the interest of euro area members to effective representation in international financial institutions, but in between the government expressed its will to be included in the coordination processes generally (on page 50):

”Det kan finnas skäl för euroländerna att på olika sätt säkerställa ett väl fungerande beslutsfattande i euroområdet. Det är dock viktigt att samordningsprocesserna behåller sin gemensamma karaktär. Det är också förståeligt att euroländerna vill uppnå en effektiv representation av euroområdet i internationella finansiella institutioner.”


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United Kingdom

The United Kingdom has opted out of the third stage of economic and monetary union (EMU). (In the latest consolidated version of the treaties, Protocol (No 25) on certain provisions relating to the United Kingdom of Great Britain and Northern Ireland, OJ 29.12.2006 C 321 E/299).
Between the European Convention and the intergovernmental conference, the UK government presented its general approach ─ most British ─ in ‘A Constitutional Treaty for the EU; The British Approach to the European Union Intergovernmental Conference 2003’ (Cm5934, September 2003), under Economic Governance on pages 34─35:

“74. Many of the issues discussed in the European Convention and raised in the draft Constitutional Treaty could have significant consequences for the future performance of EU economies. The draft Constitutional Treaty proposed by the Convention has proposed changes to the EU’s existing system of economic governance and other aspects of the EU fiscal framework; the institutional balance between the Union and Member States in economic policy coordination; and the role of the Eurogroup, the informal grouping of euro area finance ministers. The Government will oppose any such proposals which might lead to unnecessary rigidities or undermine the central role of Member States in determining their economic policies. It will work to ensure outcomes that will bolster stability, promote flexibility and enhance the ability of European countries to raise productivity and employment levels.

75. The draft Treaty does not alter the terms of the UK’s Economic and Monetary Union protocol (allowing the UK to decide whether or not to join the euro). This will need formally to be re-adopted on the conclusion of the IGC.”

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Finland

Finland is part of Euroland.

The Finnish government, in ‘Valtioneuvoston selonteko Eduskunnalle konventin tuloksista ja valmistautumisesta hallitusten väliseen konferenssiin’ (VNS 2/2003 vp), mentioned the adoption of the (normal) legislative procedure concerning amendments to certain Articles of the ESCB Statute in draft Constitution Article III-79. The Finnish government remarked on the proposal to extend qualified majority voting in the Council of Ministers to amendments proposed by the Commission, not only the ECB. This had raised fears of weakening the position of the central bank, and the Finnish Convention delegates had resisted this amendment (page 66):
”Perustuslaillisella sopimuksella muutetaan myös joitakin päätöksentekomenettelyjä talous- ja rahapolitiikan alalla. Lainsäädäntömenettely ulotetaan kattamaan myös rahoituslaitosten valvontaa koskevien erityistehtävien siirtäminen EKP:lle (III-77 artikla) sekä EKP-järjestelmän perussäännön tiettyjen artiklojen muuttaminen (III-79 artikla). EKP:lle voidaan normaalia lainsäädäntömenettelyä noudattaen antaa erityistehtäviä jotka koskevat luottolaitosten sekä muiden rahoituslaitosten kuin vakuutusyritysten toiminnan vakauden valvontaa. Nykysopimuksessa tämä edellyttää neuvostossa yksimielisyyttä. Suomen taholta ei yhdistetyn valvontavastuun tavoittelua unionissa ole pidetty tarkoituksenmukaisena, koska kyse on erittäin herkkäluonteisista kysymyksistä joilla on myös taloudellisia vaikutuksia. EKP:n keskuspankin perussääntöä voidaan puolestaan jatkossa muuttaa ministerineuvostossa määräenemmistöllä myös komission, ei vain EKP:n aloitteesta. Tämän on pelätty heikentävän keskuspankin asemaa. Suomen edustajat konventissa vastustivatkin näitä muutoksia.”

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The attentive reader, with an eye for detail, may have noticed that my initial text comparison did not bring all the aspects to the fore. Neither did the researched documents individually, but using several sources gives us a fuller picture of the Article studied.

We will follow the Article III-79 proposed by the European Convention as it reappears after the intergovernmental conferences leading to the signing of the Constitutional Treaty and the Treaty of Lisbon.

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Ralf Grahn

European Central Bank IIa: Article III-79 draft Constitution

The European System of Central Banks (ESCB) and the European Central Bank (ECB) were part of the all-encompassing draft Treaty establishing a Constitution for Europe.

But did the European Convention propose any material or stylistic change to the existing provisions?

We look at the contents of the institutional basics in draft Constitution Article III-79.

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Article III-79 of the draft Constitution, proposed by the European Convention, corresponds with Article 107 of the Treaty establishing the European Community (TEC), and it is located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter II ‘Economic and monetary policy’, Section 2 ‘Monetary policy’.

Article III-79 draft Treaty establishing a Constitution for Europe is found in OJ 18.7.2003 C 169/42─43:

Article III-79 Draft Constitution

1. The European System of Central Banks shall be composed of the European Central Bank and of the national central banks.

2. The European Central Bank shall have legal personality.

3. The European System of Central Banks shall be governed by the decision-making bodies of the European Central Bank, which shall be the Governing Council and the Executive Board.

4. The Statute of the European System of Central Banks is laid down in the Protocol on the Statute of the European System of Central Banks and the European Central Bank.

5. Articles 5.1, 5.2, 5.3, 17, 18, 19.1, 22, 23, 24, 26, 32.2, 32.3, 32.4, 32.6, 33.1(a) and 36 of the Statute of the European System of Central Banks and the European Central Bank may be amended by European laws:

(a) either on a proposal from the Commission after consultation of the European Central Bank;

(b) or on a recommendation from the European Central Bank after consultation of the Commission.

6. The Council of Ministers shall adopt the European regulations and decisions laying down the measures referred to in Articles 4, 5.4, 19.2, 20, 28.1, 29.2, 30.4 and 34.3 of the Statute of the System of European Central Banks and the European Central Bank. It shall act after consulting the European Parliament:

(a) either on a proposal from the Commission after consulting the European Central Bank;

(b) or on a recommendation from the European Central Bank after consulting the Commission.

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Texts compared

The following differences can be noted between the current Article 107 TEC and Article III-79 draft Constitution:

The draft Constitution spells out the acronyms ESCB and ECB in full, for ease of reading.
In paragraph 4, the draft Constitution defined more exactly in which Protocol the ESCB Statute lay hidden; namely ‘the Protocol on the Statute of the European System of Central Banks and the European Central Bank’.

In paragraph 5, the simplified revision of certain provisions of the ESCB Statute referred to the existing Articles. This left the detailed work to the coming intergovernmental conference, if changes to the Statute were to be made. The Convention, preoccupied by the main institutional building-blocks of the European Union, left only a rudimentary collection of eight draft protocols and declarations in all.

The legal instruments to be used were defined as European laws. The two-pronged approach, either a recommendation from the ECB or a proposal from the Commission, was maintained, although they were mentioned in reverse order. No mention was made of the European Parliament, whereas the assent of the EP is required currently. On the other hand, paragraph 5 did not say that the Statute amendments were to be adopted by the Council (alone).

Was it a slip to drop the words ‘by the Council’, or did the Convention really mean to introduce the ordinary legislative procedure (European laws, with no qualification) for these enumerated simplified changes to the ESCB Statute?

On the other hand, although the potential scope for changes looked insignificant, when we studied Article 107(5) TEC, the ESCB Statute is, in principle, a treaty level document, so any exemption to normal treaty amending procedures (IGC and ratifications) might be seen as a serious matter.

The more important complementary legislation in paragraph 6 was re-written in the same manner as the preceding paragraph, but here the European regulations and decisions were to be adopted by the Council of Ministers, after consulting the European Parliament (as currently).

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The next post is going to look at some legal materials concerning the European Convention proposal. With luck, we might even find an answer to the baffling legislative ‘minutiae’ mentioned above.


Ralf Grahn

European Central Bank If: ESCB and ECB Statute

The legal framework of the European System of Central Banks (ESCB) and the European Central Bank (ECB) is set out at treaty level in the Treaty establishing the European Community (TEC) and in the Statute of the European System of Central Banks and of the European Central Bank (ESCB Statute).

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Article 107(4) TEC is the bridge between the treaty proper and the ESCB Statute:

4. The Statute of the ESCB is laid down in a Protocol annexed to this Treaty.


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ESCB Statute

We have referred to individual Articles of the ESCB Statute in a number of posts (and will do so again), because Protocol (No 18) on the Statute of the European System of Central Banks and of the European Central Bank (annexed to the latest consolidated version of the current treaties, OJ 29.12.2006 C 321 E/256─280) not only repeats, but elaborates on the treaty provisions.

This blog post is content to give you an overview of the ESCB Statute, by presenting a table of contents, which makes it easier to find what you want.


CHAPTER I
CONSTITUTION OF THE ESCB

Article 1 The European System of Central Banks


CHAPTER II
OBJECTIVES AND TASKS OF THE ESCB

Article 2 Objectives
Article 3 Tasks
Article 4 Advisory functions
Article 5 Collection of statistical information
Article 6 International cooperation


CHAPTER III
ORGANISATION OF THE ESCB

Article 7 Independence
Article 8 General principle
Article 9 The European Central Bank
Article 10 The Governing Council
Article 11 The Executive Board
Article 12 Responsibilities of the decision-making bodies
Article 13 The President
Article 14 National central banks
Article 15 Reporting commitments
Article 16 Banknotes


CHAPTER IV
MONETARY FUNCTIONS AND OPERATIONS OF THE ESCB

Article 17 Accounts with the ECB and the national central banks
Article 18 Open market and credit operations
Article 19 Minimum reserves
Article 20 Other instruments of monetary control
Article 21 Operations with public entities
Article 22 Clearing and payment systems
Article 23 External operations
Article 24 Other operations


CHAPTER V
PRUDENTIAL SUPERVISION

Article 25 Prudential supervision


CHAPTER VI
FINANCIAL PROVISIONS OF THE ESCB

Article 26 Financial accounts
Article 27 Auditing
Article 28 Capital of the ECB
Article 29 Key for capital subscription
Article 30 Transfer of foreign reserve assets to the ECB
Article 31 Foreign reserve assets held by national central banks
Article 32 Allocation of monetary income of national central banks
Article 33 Allocation of net profits and losses of the ECB


CHAPTER VII
GENERAL PROVISIONS

Article 34 Legal acts
Article 35 Judicial control and related matters
Article 36 Staff
Article 37 Seat
Article 38 Professional secrecy
Article 39 Signatories
Article 40 Privileges and immunities


CHAPTER VIII
AMENDMENT OF THE STATUTE AND COMPLEMENTARY LEGISLATION

Article 41 Simplified amendment procedure
Article 42 Complementary legislation


CHAPTER IX
TRANSITIONAL AND OTHER PROVISIONS FOR THE ESCB

Article 43 General provisions
Article 44 Transitional tasks of the ECB
Article 45 The General Council of the ECB
Article 46 Rules of Procedure of the General Council
Article 47 Responsibilities of the General Council
Article 48 Transitional provisions for the capital of the ECB
Article 49 Deferred payment of capital, reserves and provisions of the ECB
Article 50 Initial appointment of the members of the Executive Board
Article 51 Derogation from Article 32
Article 52 Exchange of banknotes in Community currencies
Article 53 Applicability of the transitional provisions

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ECB Rules of Procedure

The ECB Rules of Procedure supplement the Treaty establishing the European Community and the Statute of the European System of Central Banks and of the European Central Bank, and they define the term ‘Eurosystem’ to mean the European Central Bank (ECB) and the national central banks of those Member States whose currency is the euro.

In other words, for added detail on the operating rules of the ECB, you can go to the Decision of the European Central Bank of 19 February 2004 adopting the Rules of Procedure of the European Central Bank (ECB/2004/2); OJ 18.3.2004 C 080/33.

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ECB General Council Rules of Procedure

Since the European Union is doomed to have non-euro area national central banks for the forseeadle future, the European Central Bank has adopted Rules of Procedure of the ‘transitional’ General Council:

Decision of the European Central Bank of 17 June 2004 adopting the Rules of Procedure of the General Council of the European Central Bank (ECB/2004/12); OJ 30.6.2004 L 230/61.


Ralf Grahn

European Central Bank Ie: Governing Council and Executive Board

The governing bodies of the European System of Central Banks (ESCB) are written into the Treaty establishing the European Community (TEC) as if all EU member states had adopted the euro currency. In practice, the European Central Bank (ECB) is at the core of the Eurosystem, including the national central banks of the eurozone countries, but additional decision-making structures will have to accommodate three groups of “outsider” countries for a long time, possibly even permanently:

First, there are the old member states the United Kingdom and Denmark with, in principle, permanent opt-outs from the single currency, and Sweden technically not fit for the third stage of economic and monetary union (EMU).

The second group consists of the new member states with a derogation, not yet able (or willing) to adopt the euro currency.

Third, future EU member states will mean new recruits to the non-euro group, if the enlargement process continues, before they fulfil the convergence criteria.

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Eurosystem

Article 107(3) TEC reflects the “official position”, which is a reality for the 15 (soon 16) eurozone countries (in the latest consolidated version of the treaties, OJ 29.12.2006 C 321 E/88):

Article 107(3) TEC

3. The ESCB shall be governed by the decision-making bodies of the ECB which shall be the Governing Council and the Executive Board.


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Protocol (No 18) on the Statute of the European System of Central Banks and of the European Central Bank (OJ 29.12.2006 C 321 E/256─280) repeats and elaborates on the treaty provisions in Chapter III Organisation of the ESCB.

The single currency evidently needs centralised decision-making structures, reflected in the ESCB Statute, which reiterates that the decision-making bodies of the ESCB are those of the ECB:

Article 8 ESCB Statute
General principle

The ESCB shall be governed by the decision-making bodies of the ECB.

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The rest of Article 107(3) TEC is repeated in Article 9.3 of the ESCB Statute, which names the Governing Council and the Executive Board of the ECB as the decision-making bodies:


Article 9 ESCB Statute
The European Central Bank

9.1. The ECB which, in accordance with Article 107(2) of this Treaty, shall have legal personality, shall enjoy in each of the Member States the most extensive legal capacity accorded to legal persons under its law; it may, in particular, acquire or dispose of movable and immovable property and may be a party to legal proceedings.

9.2. The ECB shall ensure that the tasks conferred upon the ESCB under Article 105(2), (3) and (5) of this Treaty are implemented either by its own activities pursuant to this Statute or through the national central banks pursuant to Articles 12.1 and 14.

9.3. In accordance with Article 107(3) of this Treaty, the decision making bodies of the ECB shall be the Governing Council and the Executive Board.

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The basic treaty provisions on the composition of the decision-making bodies are set out in Article 112 TEC (ex Article 109a). The core group is the ECB Executive Board, with six members, the President, the Vice-President and four other members. They are also members of the larger Governing Council, where the Governors of the national central banks sit:

CHAPTER 3
INSTITUTIONAL PROVISIONS

Article 112 TEC

1. The Governing Council of the ECB shall comprise the members of the Executive Board of the ECB and the Governors of the national central banks.

2. (a) The Executive Board shall comprise the President, the Vice-President and four other members.

(b) The President, the Vice-President and the other members of the Executive Board shall be appointed from among persons of recognised standing and professional experience in monetary or banking matters by common accord of the governments of the Member States at the level of Heads of State or Government, on a recommendation from the Council, after it has consulted the European Parliament and the Governing Council of the ECB.

Their term of office shall be eight years and shall not be renewable.

Only nationals of Member States may be members of the Executive Board.


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ESCB Statute

Article 10 of the ESCB Statute modifies the voting rights in the ECB Governing Council, when the number of Eurosystem national central banks increases, for the first time when the number exceeds 15 (as it will on 1 January 2009), if the Governing Council does not decide to postpone the rotation system until the number of governors exceeds 18.

For certain decisions the votes are weighted according to the national central banks' shares in the subscribed capital of the ECB.

***

ESCB Statute Article 11 reiterates and expands upon the provisions on the ECB Executive Board in Article 112 TEC.

***

The main responsibilities of the ECB Governing Council and the Executive Board are set out in Article 12 of the ESCB Statute.

***

ECB Executive Board members


The first President of the Executive Board was Wim Duisenberg (from 1998 to 2003). The appointment of the current President Jean-Claude Trichet runs from 2003 to 2011.

Lucas Papademos is Vice-President and the four other members of the Executive Board are: Gertrude Trumpel-Guderell, José Manuel González-Páramo, Lorenzo Bini Smaghi and Jürgen Stark.


The European Central Bank offers additional information on the Executive Board, including current and past members, at:

http://www.ecb.europa.eu/ecb/orga/decisions/eb/html/index.en.html


***

ECB Governing Council members


In addition to the six members of the Executive Board, the ECB Governing Council consists of the governors of the fifteen Eurosystem national central banks:

Guy Quaden (Nationale Bank van België / Banque Nationale de Belgique)
Axel A. Weber (Deutsche Bundesbank)
John Hurley (Central Bank and Financial Services Authority of Ireland)
Georgios Provopoulos (Bank of Greece)
Miguel Fernández Ordóñez (Banco de España)
Christian Noyer (Banque de France)
Mario Draghi (Banca d’Italia)
Athanasios Orphanides (Central Bank of Cyprus)
Yves Mersch (Banque centrale du Luxembourg)
Michael C. Bonello (Central Bank of Malta)
Nout Wellink (De Nederlandsche Bank)
Ewald Nowotny (Oesterreichische Nationalbank)
Vítor Manuel Ribeiro Constáncio (Banco de Portugal)
Marko Kranjec (Banka Slovenije)
Erkki Liikanen (Suomen Pankki – Finlands Bank)


The ECB’s web page on the Governing Council is available at:

http://www.ecb.europa.eu/ecb/orga/decisions/govc/html/index.en.html


***

Member States with a derogation

ECB General Council

The General Council of the European Central Bank is, in principle, a transitional body, where the President and the Vice-President of the ECB Executive Board and the governors of the Eurosystem national central banks are joined by the 12 governors of the non-eurozone national central banks.

Article 44 of the ESCB Statute on transitional tasks provides that the ECB shall take over those tasks of the EMI which, because of the derogations of one or more member states, still have to be performed in the third stage, and that the ECB shall give advice in the preparations for the abrogation of the derogations specified in Article 122 TEC.

ESCB Statute Article 45 is the main provision on the composition of the General Council:

Article 45 ESCB Statute
The General Council of the ECB

45.1. Without prejudice to Article 107(3) of this Treaty, the General Council shall be constituted as a third decision-making body of the ECB.

45.2. The General Council shall comprise the President and Vice-President of the ECB and the Governors of the national central banks. The other members of the Executive Board may participate, without having the right to vote, in meetings of the General Council.

45.3. The responsibilities of the General Council are listed in full in Article 47 of this Statute.


***

The Rules of Procedure of the General Council are dealt with in Article 46 and the Responsibilities of the General Council are laid down in Article 47 of the ESCB Statute.

***

ECB General Council members

In addition to the President and the Vice-President of the ECB Executive Board and the governors of the Eurosystem national central banks the ECB General Council joins the 12 governors of the non-eurozone national central banks (member states with a derogation):

Ivan Iskrov (Bulgarian National Bank)
Zdeněk Tůma (Česká národní banka)
Nils Bernstein (Danmarks Nationalbank)
Andres Lipstok (Eesti Pank)
Ilmārs Rimšēvičs (Latvijas Banka)
Reinoldius Šarkinas (Lietuvos bankas)
András Simor (Magyar Nemzeti Bank)
Slawomir Skrzypek (Narodowy Bank Polski)
Mugur Isǎresku (Banca Natională a Romăniei)
Ivan Šramko (Národná banka slovenska)
Stefan Ingves (Sveriges Riksbank)
Mervyn King (Bank of England)

The ECB’s web page on the General Council is accessible at:

http://www.ecb.europa.eu/ecb/orga/decisions/genc/html/index.en.html



Ralf Grahn

European Central Bank Ic: ESCB books and publications

One of the objectives of this blawg is to suggest reading materials for students of history, politics, economics and law on EU law and related subjects, here the European System of Central Banks (ESCB) and the European Central Bank (ECB), as well as European economic policy and the euro currency more widely.

***

An introductory brochure of a general nature, available in 23 EU languages, is ‘The European Central Bank, the Eurosystem, the European System of Central Banks’ (2nd edition, April 2008). It presents the history of economic and monetary union, the structure and tasks of the European System of Central Banks, monetary policy, the Target2 System, the euro banknotes and coins and banking supervision, and it offers a handy glossary for the general reader. The English version is available at the website of the European Central Bank:

http://www.ecb.int/pub/pdf/other/escb_en.pdf

***

Hanspeter K. Scheller: The European Central Bank ─ History, role and functions (2nd revised edition, 2006). The book is available in 13 languages; for the English version, go to:

http://www.ecb.int/pub/pdf/other/ecbhistoryrolefunctions2006en.pdf

***

The ‘Legal framework of the Eurosystem and the ESCB. ECB legal acts and instruments’ (July 2008), which “contains summaries of the legal acts and instruments constituting the legal framework of the Eurosystem and the ESCB. The publication presents the main legal acts and instruments in a readable form, with references to the official acts, which have been adopted by the ECB and published since the ECB’s establishment in June 1998 up to the end of 2007.”

In other words, this publication contains legal material at a deeper level than the treaty provisions, in the form of readable summaries. Go to:

http://www.ecb.int/pub/pdf/other/legalframeworkeurosystemescb2008en.pdf

***

If you need the (internal) institutional provisions, you might profit from having a handy publication. The ECB’s booklet ‘Institutional provisions’ contains the Statute of the ESCB and the ECB, the Rules of procedure of the Executive Board of the ECB and the Rules of procedure of the General Council of the ECB:

http://www.ecb.europa.eu/pub/pdf/other/ecbinstitutionalprovisions2004en.pdf



***

‘Legal aspects of the European System of Central Banks ─ Liber amicorum Paolo Zamboni Garavelli’ (2005) is a hefty compilation of articles about various legal aspects of European monetary policy:
http://www.ecb.int/pub/pdf/other/legalaspectsescben.pdf

***

European Central Bank: How the euro became our money. A short history of the euro banknotes and coins (unknown date ; 94 pages).

This illustrated history of the euro banknotes and coins is available at:

http://www.ecb.europa.eu/pub/pdf/other/euro_became_our_moneyen.pdf



***


Werner Becker: Der Euro wird zehn (EU Monitor 57, Deutsche Bank Research, 17. Juni 2008; 44 pages), is a detailed analysis, in German, of the successes and disappointments of nearly a decade of the single currency, since 1 January 1999 The strengths and weaknesses of the euro, the potential second world currency, are detailed in the face of approaching financial turmoil, which is going to be the first hard test of the Eurozone.

Available at:

http://www.dbresearch.com/PROD/CIB_INTERNET_EN-PROD/PROD0000000000226658.pdf

***

‘10th Anniversary of the ECB’ is the theme of the Special edition of the Monthly Bulletin (29 May 2008; 158 pages), with a comprehensive overview of monetary policy within the euro area. The English version is available at:

http://www.ecb.int/pub/pdf/other/10thanniversaryoftheecbmb200806en.pdf

***


The European Central Bank: The monetary policy of the ECB (2004; 128 pages), available at:

http://www.ecb.europa.eu/pub/pdf/other/monetarypolicy2004en.pdf


***

There are a number of useful publications on the ECB’s web pages, from the Monthly Bulletin and the handy Monthly Statistics Pocket Book to various specialist books and research papers. Look for Publications at:

http://www.ecb.europa.eu

The latest ECB Monthly Bulletin with economic and monetary developments, articles and euro area statistics (October 2008) is available at:

http://www.ecb.europa.eu/pub/pdf/mobu/mb200810en.pdf

The latest Statistics Pocket Book with macroeconomic data (October 2008):

http://www.ecb.europa.eu/pub/pdf/stapobo/spb200810en.pdf

***

Both long term decisions and the current financial turmoil are reflected in the European Central Bank’s press releases, available at:

http://www.ecb.europa.eu/press/pr/date/2008/html/index.en.html

***


The legal framework of the European Central Bank in its entirety can be accessed through:

http://www.ecb.int/ecb/legal/html/index.en.html

There is a helpful User Guide and links for detailed search.

***

For a quick recap of history, la Banque de France offers a convenient calender of events on the road to monetary union ‘Principales dates de l’Europe monétaire ─ et calendrier prévisionnel’:

http://www.banque-france.fr/fr/eurosys/telechar/europe/calendrier.pdf



***
The Banque de France article ‘Le statut juridique de la monnaie unique’ (an extract from Bulletin de la Banque de France No 108, December 2002) presents an overview of the legal framework of the euro currency:

http://www.banque-france.fr/fr/publications/telechar/bulletin/etu108_2.pdf


***

Deutsche Bundesbank, the national central bank of Germany, has published a fairly detailed overview of economic and monetary union, especially monetary policy. The 83 page publication ‘Die Europäische Wirtschafts- und Währungsunion’ (April 2008) is available at:

http://www.bundesbank.de/download/presse/publikationen/ewwu.pdf


***

The new Eurosystem entrant Malta presents ‘The law of the euro: Constitutive, institutional and external aspect’, by Ken Mifsud Bonnici (published by the Central Bank of Malta, 2008; 34 pages):

http://www.centralbankmalta.org/updates/downloads/pdfs/the_law_of_the_euro_2008.pdf

***

Michael Palmer offers a historical perspective in ‘The Banque central du Luxembourg in the European system of central banks’ (2001), with both national and European ingredients. The book, which contains a portrait of Pierre Werner (of the Werner Plan), is available at:

http://www.bcl.lu/fr/publications/autres_publications/bcl_european_system.pdf

***
The legal framework of the national central bank of Luxembourg is presented in Étienne de Lhoneux at al. ‘La Banque central du Lxembourg’:

http://www.bcl.lu/fr/publications/autres_publications/bcl_presentation_juridique.pdf

***

One example of interlocking national and European legislation is the Bank of Finland publication ‘Legal Provisions’ (2006):

http://www.bof.fi/NR/rdonlyres/0F437D54-9B58-4DA8-B5C4-CDCB3402CC51/0/saados_en.pdf

***

Some readers may be interested in the introduction of the euro currency in new entrants to the Eurosystem. Slovakia is going to be in the news during the last days of this year and at the beginning of 2009. You could start with the Slovakian government’s press release ‘Government approved the National Euro Changeover Plan’ (7 July 2005), with links to Part I and Part II of the Changeover Plan:

http://www.nbs.sk/INDEXA.HTM

You can then monitor further developments and updated plans by looking at the web page on the introduction of the euro at the National Bank of Slovakia.


You can also look for (official legal) opinions of the European Central Bank on various aspects concerning the euro changeover in Slovakia, or more generally at the web pages dedicated to the euro changeover.

Documents on the recent euro changeover (1 January 2007) in Slovenia are found on:

http://www.bsi.si/en/publications.asp?MapaId=717

***
Banco de España presents future perspectives in its conference report S. Fernández & F. Restoy (eds.) ‘Central Banks in the 21st Century’ (2006):

http://www.bde.es/informes/be/bcentral/bcentral_indice.htm

***

Next, this legal blog is going to return to the treaty and other provisions on the European System of Central Banks and the European Central Bank.


Ralf Grahn

European Central Bank Ib: European System of Central Banks

The European System of Central Banks (ESCB) is composed of the European Central Bank (ECB) and of the national central banks.



***

In addition to the provisions in the Treaty establishing the European Community (TEC), treaty level rules have been set out in a Protocol annexed to the treaty.

Protocol (No 18) on the Statute of the European System of Central Banks and of the European Central Bank (1992) defines the Constitution of the ESCB in Chapter 1, Article 1 (as in the latest consolidated version of the treaties, OJ 29.12.2006 C 321 E/256):

Article 1 ESCB Statute

The European System of Central Banks

1.1. The European System of Central Banks (ESCB) and the European Central Bank (ECB) shall
be established in accordance with Article 8 of this Treaty; they shall perform their tasks and carry
on their activities in accordance with the provisions of this Treaty and of this Statute.

1.2. In accordance with Article 107(1) of this Treaty, the ESCB shall be composed of the ECB
and of the central banks of the Member States (‘national central banks’). The Institut monétaire
luxembourgeois will be the central bank of Luxembourg.

***

Article 107(1) TEC applies to all member states. Consequently the national central banks of all EU member states form part of the ESCB, together with the ECB.

The term Eurosystem is narrower, in that it is applied to the ECB and the national central banks of the countries that have adopted the euro.

***

The 27 EU national central banks are the following:

Austria: Oesterreichische Nationalbank
Belgium: Nationale Bank van België/Banque Nationale de Belgique
Bulgaria: Bulgarian National Bank
Cyprus: Central Bank of Cyprus
Czech Republic: Česká národní banka
Denmark: Danmarks Nationalbank
Estonia: Eesti Pank
Finland: Suomen Pankki - Finlands Bank
France: Banque de France
Germany: Deutsche Bundesbank
Greece: Bank of Greece
Hungary: Magyar Nemzeti Bank
Ireland: Central Bank and Financial Services Authority of Ireland
Italy: Banca d´Italia
Latvia: Latvijas Banka
Lithuania : Lietuvos bankas
Luxembourg : Banque centrale du Luxembourg
Malta: Central Bank of Malta
Netherlands: De Nederlandsche Bank
Poland: Narodowy Bank Polski
Portugal: Banco de Portugal
Romania: Banca Naţională a României
Slovakia: Národná banka Slovenska
Slovenia: Banka Slovenije
Spain: Banco de España
Sweden: Sveriges Riksbank
United Kingdom: Bank of England


Source: European Central Bank (a web page with links to the central banks)
http://www.ecb.europa.eu/home/html/links.en.html

***

On 1 January 2009 Slovakia will join the Eurosystem, but until the end of the year 15 of the national central banks belong to the euro area and 12 countries are outside the eurozone.

Euroland: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, Spain (15).

Outside the eurozone: Bulgaria, the Czech Republic, Denmark, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Sweden, United Kingdom (12).

***

Later, we are going to see that the different groups of national central banks have repercussions for the tasks and the decision-making of the ESCB.


The next posts are going to present some reading suggestions for students of history, politics, economics and law, as well as for other interested EU citizens, and to look more closely at the legal framework of the ESCB.


Ralf Grahn

European Central Bank Ia: Article 107 TEC

A single currency is all very well, but someone has to care for it.

***

Article 7 of the Treaty establishing the European Community (TEC) mentions the institutions of the Community: the European Parliament, the Council, the Commission, the Court of Justice and the Court of Auditors.

The European Central Bank is not mentioned among the Community institutions.

Article 8 TEC (ex Article 4a) sets out the main institutional rules for monetary policy, with the establishment of the European system of central banks and the European Central Bank (in the latest consolidated version of the treaties, OJ 29.12.2006 C 321/47):
Article 8 TEC

A European system of central banks (hereinafter referred to as ‘ESCB’) and a European Central Bank (hereinafter referred to as ‘ECB’) shall be established in accordance with the procedures laid down in this Treaty; they shall act within the limits of the powers conferred upon them by this Treaty and by the Statute of the ESCB and of the ECB (hereinafter referred to as ‘Statute of the ESCB’) annexed thereto.

***

Article 107 TEC (ex Article 106) lays out the basic structure of the European System of Central Banks (ESCB) and the European Central Bank (ECB), OJ 29.12.2006 C 321/88:

Article 107 TEC

1. The ESCB shall be composed of the ECB and of the national central banks.

2. The ECB shall have legal personality.

3. The ESCB shall be governed by the decision-making bodies of the ECB which shall be the Governing Council and the Executive Board.

4. The Statute of the ESCB is laid down in a Protocol annexed to this Treaty.

5. Articles 5.1, 5.2, 5.3, 17, 18, 19.1, 22, 23, 24, 26, 32.2, 32.3, 32.4, 32.6, 33.1(a) and 36 of the Statute of the ESCB may be amended by the Council, acting either by a qualified majority on a recommendation from the ECB and after consulting the Commission or unanimously on a proposal from the Commission and after consulting the ECB. In either case, the assent of the European Parliament shall be required.

6. The Council, acting by a qualified majority either on a proposal from the Commission and after consulting the European Parliament and the ECB or on a recommendation from the ECB and after consulting the European Parliament and the Commission, shall adopt the provisions referred to in Articles 4, 5.4, 19.2, 20, 28.1, 29.2, 30.4 and 34.3 of the Statute of the ESCB.

***

Next, this blawg, founded on the rules of law, is going to take a closer look at the current Article 107 TEC.


Ralf Grahn

Euro banknotes and coins If: Protecting the euro

Protecting the euro banknotes and coins against counterfeiting is a demanding task for the European Central Bank (ECB) and the Eurosystem.

We look at the legal framework for the protection of the euro.

***

Council Regulation (EC) No 1338/2001 of 28 June 2001 laying down measures necessary for the protection of the euro against counterfeiting, OJ 4.7.2001 L 181/6, aims to protect the euro banknotes and coins against counterfeiting. The provisions have effect in the member states which have adopted the euro as their single currency.

***

Council Regulation (EC) No 1339/2001 of 28 June 2001 extending the effects of Regulation (EC) No 1338/2001 laying down measures necessary for the protection of the euro against counterfeiting to those Member States which have not adopted the euro as their single currency, OJ 4.7.2001 L 181/11, strives to offer the euro the same level of protection in the member states outside the euro area as inside.

***

The Recommendation of the European Central Bank of 6 October 2006 on the adoption of certain measures to protect euro banknotes more effectively against counterfeiting (ECB/2006/13), OJ 25.10.2006 C 257/16, suggested amendments to and common action under Regulation (EC) No 1338/2001.

***

Recommendation of the European Central Bank of 7 July 1998 regarding the adoption of certain measures to enhance the legal protection of euro banknotes and coins (ECB/1998/7), OJ 15.1.1999 C 11/13, sought to discourage misleading euro tokens and the like before the launch of the euro.

***

The Guideline of the European Central Bank of 7 July 1998 on certain provisions regarding euro banknotes, as amended on 26 August 1999, established the Counterfeit Analysis Centre (CAC) and the counterfeit currency database (CCD) of the European System of Central Banks (ESCB).

Under the aegis of the ECB, the CAC was intended to centralise the technical analysis of and data relating to the counterfeiting of euro banknotes issued by the ECB and the NCBs.

All relevant technical and statistical data concerning the counterfeiting of euro banknotes was centrally stored in the CCD.


A consolidated version (26.3.2003) is available at:

http://www.ecb.europa.eu/ecb/legal/pdf/ecb_1999_3_consolidated_en.pdf

The Decision of the European Central Bank of 8 November 2001 on certain conditions regarding access to the Counterfeit Monitoring System (CMS) (ECB/2001/11), OJ 20.12.2001 L 337/49, renamed the Counterfeit Currency Database (CCD) as the Counterfeit Monitoring System (CMS), and the decision set out detailed provisions concerning the CMS.


***

The European Central Bank has concluded agreements with Europol and Interpol.

The stated purpose of the Agreement between the European Police Office (Europol) and the European Central Bank (ECB) (2002/C 23/07), OJ 25.1.2002 C 23/9, is to provide for effective cooperation to combat the threats arising from counterfeiting of the euro, and to enhance and coordinate any assistance to the national and European authorities and to international organisations.

The purpose of the Cooperation Agreement between The European Central Bank - ECB – and The International Criminal Police Organisation – INTERPOL (2004/C 134/06), OJ 12.5.2004 c 134/6, is to establish a framework for cooperation between the Parties facilitating the prevention and detection of the counterfeiting of euro banknotes throughout the world, in particular in countries not belonging to the European Union.

***

The ECB has published a Template Agreement between the European Central Bank and the (acceding country national central bank), OJ 9.7.2003 C 160/7, the purpose of which is to enhance the cooperation between the parties in the areas of prevention and detection of counterfeiting of euro banknotes.


Such agreements have been concluded with the national central banks of six newish member states: Bulgaria, Estonia, Hungary, Lithuania, Poland and Slovenia.

The agreements are available at:

http://www.ecb.europa.eu/ecb/legal/1004/1019/html/index.en.html


Ralf Grahn

Euro banknotes and coins Ia: Principles

Monetary policy is an area of deep integration within economic and monetary union (EMU). The single currency, the euro, is a daily reminder for EU citizens in 15 of the member states and one of the leading world currencies.

We start by looking at the introductory treaty provisions, which lay the foundations for economic and monetary union and its concrete manifestation, the single currency.

***

Treaty on European Union

The preamble of the current Treaty on European Union (TEU) contains the following recital, which mentions the single currency:

-----
“RESOLVED to achieve the strengthening and the convergence of their economies and to establish an economic and monetary union including, in accordance with the provisions of this Treaty, a single and stable currency,”
-----

(Source: the latest consolidated version of the treaties, Official Journal of the European Union, OJ 29.12.2006 C 321 E/9.)

***

The objectives of the European Union (EU) are set out in Article 2 TEU (ex Article B), with economic and monetary union, including the single currency as a goal, mentioned in the first indent (OJ 29.12.2006 C 321 E/11):

Article 2 TEU

The Union shall set itself the following objectives:

— to promote economic and social progress and a high level of employment and to achieve
balanced and sustainable development, in particular through the creation of an area without
internal frontiers, through the strengthening of economic and social cohesion and through the
establishment of economic and monetary union, ultimately including a single currency in
accordance with the provisions of this Treaty,
-----


***

Treaty establishing the European Community

Article 2 of the Treaty establishing the European Community (TEC) singles out the common market and the economic and monetary union (EMU) among the common policies and activities designed to achieve the laudable objectives of the European Community (EC):

Article 2 TEC

The Community shall have as its task, by establishing a common market and an economic and
monetary union and by implementing common policies or activities referred to in Articles 3 and 4, to promote throughout the Community a harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection, equality between men and women, sustainable and non-inflationary growth, a high degree of competitiveness and convergence of economic performance, a high level of protection and improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.

(Source: OJ 29.12.2006 C 321/44.)

***

Article 4 TEC presents the guiding principles for the economic and monetary union (EMU), with the introduction of the single currency outlined in paragraph 2. The name of the currency has since changed from ‘ecu’ to ‘euro’, and the single currency has been introduced in 15 member states.

Here is the text of Article 4 TEC (ex Article 3a), as reproduced in the latest consolidated version of the treaties, Official Journal of the European Union (OJ) 29.12.2006 C 321 E/45─46:

Article 4 TEC

1. For the purposes set out in Article 2, the activities of the Member States and the Community shall include, as provided in this Treaty and in accordance with the timetable set out therein, the adoption of an economic policy which is based on the close coordination of Member States' economic policies, on the internal market and on the definition of common objectives, and conducted in accordance with the principle of an open market economy with free competition.

2. Concurrently with the foregoing, and as provided in this Treaty and in accordance with the timetable and the procedures set out therein, these activities shall include the irrevocable fixing of exchange rates leading to the introduction of a single currency, the ecu, and the definition and conduct of a single monetary policy and exchange-rate policy the primary objective of both of which shall be to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Community, in accordance with the principle of an open market economy with free competition.

3. These activities of the Member States and the Community shall entail compliance with the following guiding principles: stable prices, sound public finances and monetary conditions and a sustainable balance of payments.

***

Article 8 TEC (ex Article 4a) sets out the main institutional rules for monetary policy, with the establishment of the European system of central banks and the European Central Bank (OJ 29.12.2006 C 321/47):

Article 8 TEC

A European system of central banks (hereinafter referred to as ‘ESCB’) and a European Central Bank (hereinafter referred to as ‘ECB’) shall be established in accordance with the procedures laid down in this Treaty; they shall act within the limits of the powers conferred upon them by this Treaty and by the Statute of the ESCB and of the ECB (hereinafter referred to as ‘Statute of the ESCB’) annexed thereto.

***

The foundations have been laid, before we turn to the detailed treaty provisions on monetary policy, especially the euro currency.



Ralf Grahn

EU: Monetary policy VII Lisbon Treaty comments

The previous post mentioned a few brief UK references to Article 127 of the Treaty on the Functioning of the European Union (TFEU). We now turn to legal materials: outside the Eurozone from Sweden, inside Euroland Finland, as well as some EU commentaries in book form, to see if the objectives and the basic tasks of the European System of Central Banks (ESCB) and the European Central Bank (ECB), or potential European level financial supervision have elicited comments.

***


Lissabonfördraget (Sweden)

The consultation paper ’Lissabonfördraget’ was the first official Swedish description of the Lisbon Treaty amendments, and it is available at:

http://www.regeringen.se/content/1/c6/09/49/81/107aa077.pdf

It was followed by the Swedish government’s draft ratification bill ‘Lagrådsremiss – Lissabonfördraget’, published 29 May 2008:

http://www.regeringen.se/sb/d/5676/a/106277

The draft bill was given a green light by the Council on Legislation (Lagrådet):

http://www.lagradet.se/yttranden/Lissabonfordraget.pdf

The latest official government view, and now my standard reference for Sweden, is the ratification bill, with the Swedish parliament (Riksdagen) expected to decide on approval in late autumn, in November or even later in the year. Committee work has not even started. According to Europaportalen the latest estimate for a decision by the parliament (Riksdagen) is before Christmas. The ratification bill, Regeringens proposition 2007/08:168 Lissabonfördraget; 3 July 2008, is available at:

http://www.regeringen.se/content/1/c6/10/84/02/8c96cf3e.pdf

Economic and monetary policy (23.2 Ekonomisk och monetär politik) is mainly discussed on pages 180 to 185. The Swedish government briefly presents the objectives and the tasks of the European Central Bank on various pages of the bill according to Article 105 TFEU (ToL). The potential transfer of tasks pertaining to financial supervision is mentioned on page 185, in the context of amended decision-making procedures, where a certain weakening of the European Parliament’s position is acknowledged:

”Inom ramen för den monetära politiken får rådet i dag genom enhälligt beslut på förslag från kommissionen efter att ha hört Europeiska centralbanken och med Europaparlamentets samtycke tilldela Europeiska centralbanken särskilda uppgifter i samband med tillsynen över kreditinstitut och andra finansinstitut med undantag av försäkringsföretag. Genom Lissabonfördraget får Europeiska centralbanken genom förordningar som ska antas av rådet tilldelas dessa särskilda uppgifter. Rådet ska besluta med enhällighet efter att ha hört Europaparlamentet och Europeiska centralbanken (artikel 105.6 i EUF-fördraget). En viss försvagning sker här av Europaparlamentets inflytande i och med att dess samtycke ersätts med dess hörande.”

Sweden remains outside the Eurozone, despite the lack of an opt-out based on the treaties.

***

Lissabonin sopimus (Finland)

Finland is one of 15 member states currently forming Euroland, or the Eurosystem, as the European Central Bank calls it.

The Finnish ratification bill, ‘Hallituksen esitys Eduskunnalle Euroopan unionista tehdyn sopimuksen ja Euroopan yhteisön perustamissopimuksen muuttamisesta tehdyn Lissabonin sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta’ (HE 23/2008 vp), presents an overview of economic and monetary policy (Talous- ja rahapolitiikka) on pages 91 to 92.
An explanation of the chapter on monetary policy (Rahapolitiikka) and a description of Article 105 TFEU (ToL), renumbered Article 126 TFEU, follow on pages 210 to 211:

”Määräykset koskevat Euroopan keskuspankkijärjestelmän ja Euroopan keskuspankin perustehtäviä, niiden perussääntöä ja perussäännön tiettyjen osien muuttamista koskevia menettelyjä, Euroopan keskuspankin ja kansallisten keskuspankkien riippumattomuutta sekä Euroopan keskuspankin tehtäviensä suorittamiseksi tekemiä päätöksiä. Määräykset vastaavat EY-sopimuksen VII osaston 2 luvun määräyksiä, lukuun ottamatta tiettyjä päätöksentekomenettelyjä koskevia määräyksiä, uudeksi 245 a artiklaksi siirrettyjä määräyksiä Euroopan keskuspankkijärjestelmän kokoonpanosta ja Euroopan keskuspankin oikeushenkilöllisyydestä ja uudeksi 188 o artiklaksi siirrettyjä päätöksiä euroalueen ulkoisesta edustautumisesta. Lisäksi luvun loppuun on siirretty nykyisestä 4 luvusta tiettyjä määräyksiä toimenpiteistä, jotka ovat tarpeen otettaessa euro käyttöön yhteisenä rahana. Perustuslakisopimuksessa vastaavat määräykset on sisällytetty II luvun 2 jaksoon III-185–III-190 artiklaan.

105 artiklassa (uusi 127 artikla) määritellään Euroopan keskuspankkijärjestelmän tavoitteet ja tehtävät. Artiklan 6 kohtaa täsmennetään siten, että säädöstyypiksi, joka neuvostolla on käytössään sen päättäessä rahoituslaitosten valvontaa koskevien erityistehtävien antamisesta Euroopan keskuspankille, yksilöidään asetus. Lisäksi määräystä muutetaan siten, että Euroopan parlamentin puoltavan lausunnon sijasta riittää, että parlamenttia kuullaan ennen päätöksentekoa. Määräys vastaa perustuslakisopimuksen III-185 artiklaa.”

The Finnish ratification bill is available at:

http://www.finlex.fi/fi/esitykset/he/2008/20080023.pdf


The Swedish language version of the ratification bill ‘Regeringens proposition till Riksdagen med förslag om godkännande av Lissabonfördraget om ändring av fördraget om Europeiska unionen och fördraget om upprättandet av Europeiska gemenskapen och till lag om sättande i kraft av de bestämmelser i fördraget som hör till området för lagstiftningen’ (RP 23/2008 rd), offers the same general remarks on economic and monetary policy on pages 93 to 94. The detailed remarks, Article by Article, under ’Ekonomisk och monetär politik’ contain the same description of the chapter on monetary policy (Monetär politik) and of Article 105 TFEU (ToL), the future Article 127 TFEU as in Finnish, on page 213:

”Bestämmelserna gäller de primära uppgifterna för Europeiska centralbankssystemet och Europeiska centralbanken, förfaranden för ändring av deras stadga och vissa delar i stadgan, Europeiska centralbankens och de nationella centralbankernas oavhängighet samt beslut som Europeiska centralbanken fattar för att utföra sina uppgifter. Bestämmelserna motsvarar bestämmelserna i avdelning VII kapitel 2 i EG-fördraget, med undantag för vissa bestämmelser om beslutsförfaranden, bestämmelser om Europeiska centralbankssystemets sammansättning och Europeiska centralbankens status som juridisk person som överförts till ny artikel 245a och beslut om euroområdets yttre representation som överförts som ny artikel 188o. Till slutet av kapitlet har dessutom från nuvarande kapitel 4 överförts vissa bestämmelser om nödvändiga åtgärder när euron tas i bruk som gemensam valuta. Motsvarande bestämmelser ingår i kapitel II avsnitt 2 i artikel III-185–III-190 i det konstitutionella fördraget.

I artikel 105 (blivande artikel 127), definieras målen och uppgifterna för Europeiska centralbankssystemet. Artikel 105.6 preciseras så att den rättsaktstyp som rådet kan använda vid beslut om att tilldela Europeiska centralbanken särskilda uppgifter i samband med tillsynen över kreditinstitut och andra finansinstitut individualiseras som förordning. Bestämmelsen ändras dessutom så att i stället för ett samtycke från Europaparlamentet räcker det med att parlamentet hörs före beslutsfattandet. Bestämmelsen motsvarar artikel III-185 i det konstitutionella fördraget.”


The ratification bill in Swedish can be accessed at:

http://www.finlex.fi/sv/esitykset/he/2008/20080023.pdf

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de Poncins

Étienne de Poncins offers a few general comments on EU economic governance and budget matters, ‘La gouvernance économique et les questions budgétaires’ in his ‘Le traité de Lisbonne en 27 clés’ (Éditions Lignes de Repères, 2008), pages 245─251, but nothing specific on Article 127 TFEU.


Fischer

‚Der Vertrag von Lissabon‘, by Klemens H. Fischer (Nomos, Stämpfli & Verlag Österreich, 2008), traces the amendments Article by Article; here on pages 269─270. He remarks that the amendments in paragraphs 1 to 5 are editorial (horizontal), but with regard to paragraph 6 he states:

„Absatz 6 erhält eine neue Fassung, durch die das Anhöringsverfahren an die Stelle des Zustimmungsverfahrens tritt.“


Priollaud and Siritzky

François-Xavier Priollaud and David Siritzky offer a short introductory explanation on economic and monetary policy (pages 246 and 247). They succinctly present the main features of the chapet on monetary policy (La politique monétaire) on pages 254 an 255 of their book ‘Le traité de Lisbonne – Commentaire, article par article, des nouveaux traités européens (TUE et TFUE)’ (La Documentation française, Paris, 2008). They offer the following description of the powers of the European Parliament:

« La modification des pouvoirs du Parlement européen

La généralisation de la procédure legislative renforce le rôle du Parlement européen en ce qui concerne la modification de certaines dispositions des statuts du SEBC et de la BCE (art. 129 TFUE) et pour l’adoption des mesures nécessaires à l’usage de l’euro (art. 133 TFUE). Les pouvoirs du Parlement sont en revanche diminués par rapport à la situation actuelle en matière de contrôle prudentiel des établisseents et marchés financiers (art. 127 § 6 TFUE). Il ne sera que consulté (comme la BCE), alors que son avis conforme était jusq’à présent requis par l’art. 105 TCE. L’unanimité est en outre maintenue sur ce point. »

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Consultation procedure

The intergovernmental character of prudential banking supervision is striking. In Article 127 TFEU, the European Parliament is marginalized, consulted (as the ECB) in the unlikely case that all 27 member states would be shaken enough by the financial turmoil to be likely to agree on a unanimous decision (regulation) to confer supervisory powers on the ECB.

Just in case someone wants to reflect on the consultation procedure (and other decision-making procedures), Martin Gellermann offers a description in Rudolf Streinz (Hrsgb.): EUV/EGV Vertrag über die Europäische Union und Vertrag zur Gründung der Europäischen Gemeinschaft (C.H.Beck, 2003). I quote the beginning of Konsultations- oder Anhörungsverfahren (page 2204):

„Als Ursprungsmodell für eine Beteiligung des Europäischen Parlaments am Prozess der gemeinschaftlichen Rechtsetzung erscheint das Konsultations- oder Anhörungsverfahren in dem der Kommission das Initiativrecht, dem Parlament eine Beratungsbefugnis und dem Rat das alleinige Entscheidungsrecht gebührt.“

In this instance, we seem to be heading towards the beginnings of the Assembly.

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The next post is going to present a few pointers on financial regulation and prudential supervision in the context of economic and monetary union (EMU).

Ralf Grahn

EU: Monetary policy VI Lisbon Treaty on an island outside Euroland

Did the objectives and the basic tasks of the European System of Central Banks (ESCB), or the potential role in financial supervision of the European Central Bank (ECB), draw any attention on an island outside Euroland?

We look at UK comments on Article 127 of the Treaty on the Functioning of the European Union (TFEU).

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Statewatch

Professor Steve Peers covered the Treaty of Lisbon in a number of Statewatch Analyses. ‘EU Reform Treaty Analysis no. 3.4: Revised text of Part Three, Titles VII to XVII of the Treaty establishing the European Community (TEC): Other internal EC policies’ (Version 2, 24 October 2007) includes the current Title VII Economic and monetary policy.

Peers presented the text of Article 105 TFEU (ToL), to be renumbered Article 127 TFEU in the consolidated version, and highlighted the changes. He offered the following succinct comment (page 11):

“The EP’s role has been downgraded here, from consent to consultation. The Council must still vote unanimously.”

The analysis 3.4 and other useful Statewatch analyses are available through:

http://www.statewatch.org/euconstitution.htm


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FCO

The Foreign and Commonwealth Office (FCO) offers a convenient source of brief annotations on Lisbon Treaty amendments in ‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon’ (Command Paper 7311, published 21 January 2008). It offers the following comment on Article 127 TFEU, Article 105 TFEU (ToL) in the original Lisbon Treaty (page 12):

“Draws on Article 105 TEC. Paragraph 6 replaces EP assent with consultation with the EP.”

The FCO comparative table is available at:

http://www.official-documents.gov.uk/document/cm73/7311/7311.asp

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House of Commons Library

The UK House of Commons Library Research Paper 07/86 ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Community’ (published 6 December 2007) discussed ‘H. Economic and Monetary Policy’ on pages 61 to 64. Article 105 TFEU (ToL) is included in a brief description on page 62:

“Articles 105 ─ 110 (Constitution Articles III-185 ─ 190) on monetary policy are largely the same as the present Treaty Articles.”

The Library Research Paper 07/86 is available at:

http://www.parliament.uk/commons/lib/research/rp2007/rp07-086.pdf

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House of Lords

At this juncture, economic and monetary union (EMU) did not interest the House of Lords, so I found nothing on Article 105 TFEU (ToL) or 127 TFEU in the House of Lords European Union Committee report ‘The Treaty of Lisbon: an impact assessment, Volume I: Report’ (HL Paper 62-I, published 13 March 2008).

The report is available at:

http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeucom/62/62.pdf


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The following post is going to look at legislative materials and comments on Article 127 TFEU from other corners of Europe.


Ralf Grahn

EU: Monetary policy V Lisbon Treaty and European level supervision?

Have the objectives of the European System of Central Banks changed during the treaty reform process?

Are the basic tasks different?

Has prudential supervision of banks kept pace with reality?

We compare Article 127 of the Treaty on the Functioning of the European Union (TFEU) with the current treaty and the previous stages of the treaty reform process since 2001.

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Lisbon Treaty comparison

Substantially, the objectives of the European System of Central Banks (ESCB) and the European Central Bank (ECB) have remained unchanged from the current Treaty establishing the European Community (TEC), via the draft Constitution and the Constitutional Treaty, to the Treaty on the Functioning of the European Union (TFEU) (paragraph 1).

Price stability is the primary objective, from Article 105(1) TEC until Article 127(1) TFEU. The complementary objectives of supporting the economic policies of the Community/Union are essentially unchanged, as are the open market principles for action.

The treaty reform process has done nothing to change the important basic tasks of the ECB: to take full responsibility for monetary policy, to conduct foreign exchange operations, to hold foreign reserves and to improve payment systems (paragraph 2).

Mandatory consultation is retained. The European Central Bank still has to be consulted by the European Community (European Union) or by a member state on draft legislation relating to monetary policy (paragraph 4).


Actually the TFEU wording is more like the TEC text than the Constitutional Treaty, because the IGC 2007 drafters often saved ink when confronted with non-essential amendments (introduced by the European Convention or directly) in the Constitutional Treaty.

This far, things were fairly straightforward, but let us turn to banking supervision.

Despite global markets and European banks, national authorities are still responsible for the prudential supervision of credit institutions and the stability of the financial system ─ however fictitious their real mastery ─ and the contributory role of the ESCB has not changed one iota during the reform process (paragraph 5).

The European Convention proposed that at least some limited aspects ─ specific tasks ─ could be conferred on the ECB by the ordinary legislative procedure, but the IGC 2004 resolutely took away even the need for the European Parliament’s assent, and the governments agreed to immobilise themselves by reinstating the requirement of unanimity in the Council for such legislation (paragraph 6).

More often than not, unanimous legislation means no legislation. (Without qualified majority voting there would be no single market.) But even in the unlikely event of meaningful legislation of small ‘slices’ of responsibility, insurance undertakings are excluded from the scope of such future legislation.

[Reality may be staring everyone in the eye, but national administrations refuse to let it disturb their customary bureaucratic circles. This is a Europe based on governments and their straitjacket rules of intergovernmental international relations, not a union of citizens, fit to work primarily in the interest of citizens. Instead of hundreds of intricately self-incapacitating pages, a democratic European Union would need a readable Constitution of perhaps twenty pages.]

Back to comparing the text versions: The wording of paragraph 6 changed somewhat along the way; the Lisbon Treaty employs the terms ‘regulations in accordance with a special legislative procedure’.


Ralf Grahn

EU: Monetary policy IV ECB supervision and Lisbon Treaty

What does the EU Lisbon Treaty say about the objectives and the basic tasks of the European System of Central Banks (ESCB) and the European Central Bank (ECB)?

Would the Treaty of Lisbon be more likely to prevent financial meltdown by instituting banking supervision at European level, under the auspices of the European Central Banks?

Are the national supervisory structures appropriate for global and European financial institutions?

We start by looking at the contents of the Treaty of Lisbon.

***

The current Treaty establishing the European Community (TEC) was ─ perhaps still is destined ─ to become the Treaty on the Functioning of the European Union (TFEU), and generally the so called innovations as agreed in the 2004 IGC were to be inserted into the Treaty by way of specific modifications ‘in the usual manner’ (points 17 and 18, pages 6 and 7).

I found nothing specific in the mandate of the intergovernmental conference (IGC 2007 Mandate, Council document 11218/07, 26 June 2007) about Article 105 TEC.

***

In Article 2, point 91 of the original Treaty of Lisbon (ToL) the IGC 2007 agreed on the following concerning Article 105 TEC (OJ 17.12.2007 C 306/72):

MONETARY POLICY

91) Article 105 shall be amended as follows:

(a) in the first sentence of paragraph 1, ‘ESCB’ shall be replaced by ‘European System of Central Banks, hereinafter referred to as “ESCB”,’;

(b) in the second indent of paragraph 2, the reference to Article 111 shall be replaced by a reference to Article 188 O;

(c) The text of paragraph 6 shall be replaced by the following:

‘6. The Council, acting by means of regulations in accordance with a special legislative procedure, may unanimously, and after consulting the European Parliament and the European Central Bank, confer specific tasks upon the European Central Bank concerning policies relating to the prudential supervision of credit institutions and other financial institutions with the exception of insurance undertakings.’.


***

The TFEU table of equivalences confirms that Article 105 TFEU (ToL) in the original Treaty of Lisbon was to be renumbered Article 127 TFEU in the consolidated version, under the title ‘Economic and monetary policy’, renumbered Title VIII (OJ 17.12.2007 C 306/211─212).

(In the consolidated version of the Lisbon Treaty, OJ 9.5.2008 C 115, the Tables of equivalences start on page 361, but the ToL numbers have been omitted.)

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Consolidated Lisbon Treaty

Article 127 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/102─103:

Part Three Union policies and internal actions

Title VIII Economic and monetary policy

Chapter 2 Monetary policy

Article 127 Lisbon Treaty
(ex Article 105 TEC)

1. The primary objective of the European System of Central Banks (hereinafter referred to as ‘the ESCB’) shall be to maintain price stability. Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union as laid down in Article 3 of the Treaty on European Union. The ESCB shall act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources, and in compliance with the principles set out in Article 119.

2. The basic tasks to be carried out through the ESCB shall be:

— to define and implement the monetary policy of the Union,

— to conduct foreign-exchange operations consistent with the provisions of Article 219,

— to hold and manage the official foreign reserves of the Member States,

— to promote the smooth operation of payment systems.

3. The third indent of paragraph 2 shall be without prejudice to the holding and management by the governments of Member States of foreign-exchange working balances.

4. The European Central Bank shall be consulted:

— on any proposed Union act in its fields of competence,

— by national authorities regarding any draft legislative provision in its fields of competence, but within the limits and under the conditions set out by the Council in accordance with the procedure laid down in Article 129(4).

The European Central Bank may submit opinions to the appropriate Union institutions, bodies, offices or agencies or to national authorities on matters in its fields of competence.

5. The ESCB shall contribute to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system.

6. The Council, acting by means of regulations in accordance with a special legislative procedure, may unanimously, and after consulting the European Parliament and the European Central Bank, confer specific tasks upon the European Central Bank concerning policies relating to the prudential supervision of credit institutions and other financial institutions with the exception of insurance undertakings.

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The following post is going to compare Article 127 TFEU with the current TEC, the draft Constitution and the Constitution, and then take a look at some legislative materials and comments.


Ralf Grahn

EU: Monetary policy IIIb ECB supervision in Constitution?

Does the Constitutional Treaty differ from the draft Constitution with regard to the objectives and the basic tasks of the European System of Central Banks (ESCB) and the European Central Bank (ECB)?

Did the intergovernmental conference (IGC 2004) make it easier to supervise European and global banks at the European level?

Let us see what our legal materials have to say.

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Draft Constitution Article III-77 and Constitution Article III-185 texts compared

Renumbering the Articles referred to was a technical adjustment. In paragraph 4, where the draft Constitution spoke of ‘fields of competence’, the Constitutional Treaty used the slightly more direct expressions ‘areas within its powers’ (twice) and ‘matters within its powers’ (once), but without making any material difference.

The word ‘offices’ was added to what became the string ‘Union institutions, bodies, offices or agencies’ (paragraph 4).

The contribution ─ whatever that means ─ of the European system of Central Banks to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system, in paragraph 5, remained identical with the proposal by the European Convention. The draft Constitution, as we remember, was the same as the current Article 105(5) TEC; the draft only writing the ESCB ‘in extenso’.

In paragraph 6, the Convention had proposed ordinary European laws as a means to give the European Central Bank specific tasks concerning policies relating to the prudential supervision of credit institutions and other financial institutions. This would have meant co-decision by the European Parliament and qualified majority voting in the Council.

The IGC 2004 put paid to that. The governments reverted to the current unanimity rule, with some fine-tuning of the details.

Instead of the ordinary legislative procedure, proposed by the Convention, the Constitutional Treaty provided for a European law of the Council. In place of full participation (co-decision), as proposed by the draft Constitution, or even assent, as currently under the TEC, the European Parliament was further marginalised to be consulted, along with the European Central Bank.

In 2004 the member states’ governments (more or less) slammed the door on European level supervision of financial institutions, leaving the European Union with a fragmented network of national supervising authorities for increasingly global and European banks.

***

Sweden

The Swedish government memorandum ‘Fördraget om upprättande av en konstitution för Europa’ (Utrikesdepartemetet, Departementsserien (Ds) 2004:52; December 2004) described the signed Constitutional Treaty.

The Swedish government gave a factually correct description of the current Article 105(6) TEC and of Article III-185(6) Constitution. The government mentioned ‘some weakening’ of the European Parliament’s influence, since the EP was only to be consulted (page 241):

”Inom ramen för den monetära politiken får rådet i dag genom enhälligt beslut på förslag från kommissionen efter att ha hört Europeiska centralbanken och med Europaparlamentets samtycke tilldela Europeiska centralbanken särskilda uppgifter i samband med tillsynen över kreditinstitut och andra finansinstitut med undantag av försäkringsföretag. I det konstitutionella fördraget får Europeiska centralbanken i en europeisk lag som antas av rådet tilldelas dessa särskilda uppgifter. Rådet skall besluta med enhällighet efter att ha hört Europaparlamentet och Europeiska centralbanken (artikel III-185.6). En viss försvagning sker här av Europaparlamentets inflytande i och med att dess samtycke ersätts med dess hörande.”



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On the whole, here on page 173, the Swedish draft ratification bill ‘Lagrådsremiss ─ Fördraget om upprättande av en konstitution för Europa’ (2 June 2005) reiterated the remarks made in the memorandum mentioned above.

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Finland

The government of Finland laid out the Constitutional Treaty in its ratification bill ‘Hallituksen esitys Eduskunnalle Euroopan perustuslaista tehdyn sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta’ (HE 67/2006 vp). In the government’s view, the proposals concerning EMU legislative procedures did not change the institutional balance essentially, but it first mentioned the instances, where the ordinary legislative procedure was instituted, and then the ratification bill mentioned where the position of the European Parliament was weakened (pages 81─82):

”Perustuslakisopimus merkitsee tiettyjä muutoksia lainsäädäntömenettelyihin talous- ja rahaliiton alalla, mikä ei kuitenkaan muuta olennaisesti toimielinten valtasuhteita. Perustuslakisopimuksessa siirrytään tavanomaiseen lainsäätämisjärjestykseen monenvälistä valvontamenettelyä koskevien yksityiskohtaisten sääntöjen vahvistamisessa (III-179 artiklan 6 kohta), Euroopan keskuspankkijärjestelmän ja Euroopan keskuspankin perussäännön eräiden määräysten muuttamisessa (III-187 artiklan 3 kohta) sekä sellaisten toimenpiteiden osalta, jotka ovat tarpeen euron käytössä yhteisenä rahana (III-191 artikla). Toisaalta Euroopan parlamentin asema tietyissä talous- ja rahaliittoa koskevissa kysymyksissä heikkenee, kuten päätettäessä eräiden kieltojen täsmentämiseksi tarvittavista säännöistä (III-183 artiklan 2 kohta), erityistehtävien antamista Euroopan keskuspankille (III-185 artiklan 6 kohta) sekä liikkeeseen laskettavien eurometallirahojen yksikköarvojen ja teknisten määritelmien yhdenmukaistamisesta (186 artiklan 2 kohta).”

***

The same remarks on legislative procedures within EMU appear in Swedish in ’Regeringens proposition till Riksdagen med förslag om godkännande av Fördraget om upprättande av en konstitution för Europa och till lag om sättande i kraft av de bestämmelser i fördraget som hör till området för lagstiftningen (RP 67/2006 rd), with the Finnish government’s comments on page 84:

”Det konstitutionella fördraget innebär vissa ändringar i lagstiftningsförfarandena på området för den ekonomiska och monetära unionen, vilka ändå inte på något väsentligt sätt förändrar maktförhållandena mellan institutionerna. I det konstitutionella fördraget övergår man till ordinarie lagstiftningsförfarande i fråga om meddelandet av närmare föreskrifter om det multilaterala övervakningsförfarandet (artikel III-179.6), ändrandet av vissa bestämmelser i stadgan för Europeiska centralbankssystemet och Europeiska centralbanken (artikel III-187.3) samt nödvändiga åtgärder för att använda euron som gemensam valuta (artikel III-191). Å andra sidan försvagas Europaparlamentets ställning i vissa frågor som gäller den ekonomiska och monetära unionen, t.ex. när man skall besluta om regler som behövs för att närmare ange hur vissa förbud skall tillämpas (artikel III-183.2), särskilda uppgifter som tilldelas Europeiska centralbanken (artikel III-185.6) samt harmonisering av valörerna och de tekniska specifikationerna för de euromynt som skall sättas i omlopp (artikel 186.2).”

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Fischer

Klemens H. Fischer in ‘Der Europäische Verfassungsvertrag‘ (Nomos, Stämpfli & Manz, 2005) only made the observations that „Artikel III-185 EUVV korrespondiert mit Artikel 105 EGV“ and „Artikel III-185 EUVV korrespondiert mit Artikel III-77 VVE“ (page 316).

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United Kingdom

According to Protocol (No 13, in the Constitutional Treaty) on certain provisions relating to the United Kingdom of Great Britain and Northern Ireland as regards economic and monetary union, Article 4, the Constitution’s Article III-185(1) to (5) did not apply to the UK. The United Kingdom was thus exempted from the ESCB contribution to the smooth operation of national prudential supervisors, but the UK opt-out did not concern paragraph 6, so Britain (surprisingly) remained among the potential veto powers concerning the transferral of new supervisory tasks to the European Central Bank (if I understand correctly).

The UK Foreign and Commonwealth Office (FCO) ‘White Paper on the Treaty establishing a Constitution for Europe’ (Cm 6309, September 2004) briefly remarked that the government had advocated the amendment on prudential supervision put forward by the Irish presidency in document CIG 81/04, Annex 18 (page 46).

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In other words, in 2004 the EU member states unanimously signed the Constitutional Treaty requiring unanimous European laws by the Council (and marginalising the European Parliament) to confer financial supervision on the European Central Bank.

The next instalment turns to the IGC 2007 and the Lisbon Treaty.



Ralf Grahn