6 Colum. J. Eur. L. 167 (2000)
Dr. Rosa María Lastra. Senior Lecturer in Law, Centre for Commercial Law Studies, Queen Mary and Westfield College, University of London.
The Euro was introduced on schedule on January 1, 1999. The European System of Central Banks, which started operations on June 1, 1998, is now in charge of the monetary policy of the eleven Member States that have qualified for monetary union. However, the success of the launch of the Euro, with no major payment and settlement problems during the conversion weekend, and the smooth operation of the System so far, should not lead to complacency. Major challenges remain ahead, not only with regard to the need to wait for the introduction of Euro notes and coins – to take place at the start of the year 2002 – but also with regard to the responsibilities that have not been clearly transferred from the national to the supranational arena, such as banking supervision and regulation, crisis management and exchange rate policy. The challenge is further compounded by the division between the European Union (EU) Member States participating in the European Monetary Union (EMU) and the EU Members not participating in EMU on the one hand, and by the division of responsibilities between the European Central Bank (ECB) and the National Central Banks (NCBs) within the scope of responsibilities entrusted to the European System of Central Banks (ESCB), on the other. The latter constitutes the subject of my analysis in this article.
The primary community legislation applicable to the ESCB (the ECB and the NCBs) comprises Articles 105 to 109m of the Treaty Establishing the European Communities (TEC), as amended by the Treaty on European Union (TEU), and the protocol on the Statute of the European System of Central Banks and the European Central Bank (ESCB Statute), which is annexed to the TEC. Since the entry into force of the Amsterdam Treaty – which amends and renumbers the EC and the EU Treaties – on May 1, 1999, Articles 105 to 109m have become Articles 105 to 124 TEC. For the purposes of clarity and legal certainty, treaty references should now be made according to the new enumeration introduced by the consolidated version of the Amsterdam Treaty, followed by the original number of the Article in brackets.
There is also a range of legal acts available to the ECB (ECB regulations, decisions, recommendations and opinions) and intra-ESCB agreements on internal matters between the ECB and the NCBs, which constitute the secondary community legislation available within the ESCB. Article 34 of the ESCB Statute refers to legal acts, and Article 14. 3 of that ESCB statute refers to “guidelines and instructions” of the ECB to the NCBs. There is other secondary Community legislation available to the ESCB, notably three Ecofin Council regulations on minimum reserves, statistical information gathering, and sanctions which the ECB may impose. My analysis will mainly focus on the primary community legislation, i.e., on the TEC and the ESCB Statute provisions pertaining to the division of responsibilities between the ECB and the NCBs.
It is worth recalling that the System (ESCB) as such does not have legal personality, and that therefore, it is not a carrier of rights and obligations. The entities that do have a legal personality are the ECB (European Central Bank) and the NCBs (National Central Banks). Only the ECB and the NCBs, but not the ESCB, have the powers to sue and to be sued. Indeed, Article 35.6 of the ESCB Statute allows the ECB to sue a NCB if the latter does not comply with its obligations under this Statute (though, interestingly, there is no corresponding provision allowing the NCB to sue the ECB).
It is important to bear in mind that the NCBs act in a dual capacity. On the one hand they are the operational arms of the ESCB when carrying out operations that form part of the tasks of the ESCB. On the other hand, they are national agencies when performing non-ESCB functions. For these reasons, while the law governing the ECB is solely EC law, the laws governing the status of the NCBs emanate not only from EC sources, but also from their respective national legislation (though such legislation needs to be compatible with Community Law before the establishment of the ESCB according to Article 109 (ex Article 108) TEC). Furthermore, there are substantial differences between the range of functions and responsibilities assigned to each NCB in the various jurisdictions that comprise the Euro zone. For instance, some central banks have exclusive responsibility for banking supervision (e.g., in Spain or Italy), while others either share supervisory responsibilities with other bodies (e.g., in France) or do not have formal supervisory responsibilities at all (e.g., in Germany). It should also be pointed out that the NCBs of those countries that have either have opted out of EMU (i.e., the UK and Denmark) or that have not qualified for EMU (i.e., Greece and, arguably, Sweden) are nonetheless participating members in one of the governing bodies of the ESCB, namely in the General Council.” However, though they are not members of the other governing bodies, the Executive Board and the Governing Council are entrusted with the execution of the tasks that have been transferred from the national to the supranational arena, particularly with regard to the conduct of monetary policy. Though the TEU and the ESCB Statute refer to the “monetary policy of the Community” in certain Articles (e.g., Article 105.2 of the EC Treaty and Articles 3.1, 12.1 and 31.2 of the ESCB Statute), 3 in such instances “the Community” refers to the Member States that participate in EMU (i.e., those Member States without a derogation or an opt-out).
The division of responsibilities between the ECB and the NCBs within the ESCB resembles to some extent the structure of the Federal Reserve System (the “Fed”) in the United States. Indeed, while the ESCB functionally is reminiscent of the pre-1999 Bundesbank, geographically it resembles the Federal Reserve System. As acknowledged, the Federal Reserve System as such does not have legal personality. The entities with legal personality are the Board of Governors and the Federal Open Market Committee (which are both federal agencies and, as such, public legal persons) on the one hand, and the twelve Federal Reserve Banks on the other. However, in contrast to the NCBs, which are typically public legal persons (publicly managed and, for the most part, publicly owned), the Federal Reserve Banks have private legal personality, with private ownership (100% owned by the member banks in each district) and private management.’4 Nonetheless, the analogy between the Federal Reserve System and the ESCB is useful in understanding the duality of functions of the NCBs. In some instances, the NCBs act as a part of the ESCB, and in other instances on their own, i.e., separately and independently from the ECB. In term of its capital structure, it should be noted that the NCBs are the ECB’s sole shareholders.
The analogy between the Fed and the ESCB is also helpful to cast some light on potential developments within the “Eurosystem.” For instance, the influential role played by the Federal Reserve Bank of New York (FRBNY) within the Federal Reserve System is an interesting “precedent” that suggests the possibility of one (or a few) of the NCBs playing a predominant role within the ESCB in future. Because of its location in New York City, the world’s leading financial center, the FRBNY undoubtedly performs a major role within the Federal Reserve System (as a part of the US central banking system) and in the international banking community (as a corporate entity). In its capacity as a part of the US central banking system, the FRBNY carries out a variety of functions, in some instances independently of the Executive Branch of the US government (e.g., in regard to the implementation of monetary policy) and in some others as an agent of the Government (e.g., when it acts as an agent of the Treasury in the carrying out of foreign exchange operations or when it acts as a fiscal agent of the US Government in matters specified by the US Treasury). In its corporate capacity, on the other hand, the FRBNY carries out corporate activities, such as managing depository accounts for foreign central banks, including custodian and investment services.