EN
OPINION OF THE EUROPEAN CENTRAL BANK
of 2 August 2001
at the request of the German Ministry of Finance on
a draft Seventh Law amending the Deutsche Bundesbank Act
(CON/2001/17)
1. On 20 June 2001, the European Central Bank (ECB) received a request from the German
Ministry of Finance for an opinion on a draf t Seventh Law amending the Bundesbank Act
(hereinafter referred to as the draft Act).
2. The ECBs competence to deliver an opinion is based on Article 105(4) of the Treaty
establishing the European Community (hereinafter referred to as the Treaty) and the thirdindent of Article 2(1) of Council Decision 98/415/EC of 29 June 1998 on the consultation of
the European Central Bank by national authorities regarding draft legislative provisions
1. In
accordance with the first sentence of Article 17.5 of the Rules of Procedure of the EuropeanCentral Bank, this opinion has been adopted by the Governing Council of the ECB.
3. The express intention of the draft Act is mainly the design of the structure of the Deutsche
Bundesbank in such a way that it is better suited to the current and future requirements of the
European System of Central Banks (ESCB). Therefore, the draft Act is intended to strengthenand centralise the decision-making structure a nd management of the Deutsche Bundesbank and
to strengthen the position of its President. This is  justified as a consequence of the start of Stage
III of economic and monetary union on 1 January 1999 and the transfer of monetary policy andexchange rate policy decision-making powers to the Eurosystem. In this respect, the draft Actprovides for the following amendments: (i) the abolition of the Central Bank Council
(Zentralbankrat ), the Directorate ( Direktorium ) and the Executive Boards of the main offices of
the Deutsche Bundesbank ( Vorstände der Landeszentralbanken ) including their independent
decision-making powers (known as reserved sphere s of responsibility) and the appointment of a
Bundesbank Executive Board ( Vorstand ) (hereinafter referred to as the Board) consisting of
the President, the Vice-President and four other members; and (ii)  the repeal of the right ofmembers of the Federal Government to attend the meetings of the Central Bank Council andtheir right to propose motions. 
                                                     
1OJ L 189, 3.7.1998, p. 42.
24. The ECB very much welcomes these amendments as they enhance the ability of the Deutsche
Bundesbank to act efficiently as an integral part of the Eurosystem and of its President, inparticular, as a member of the Governing Council and the General Council.
5. The draft Act furthermore clarifies for the first time that the tasks of holding and managing the
foreign reserves of the Federal Republic of Germany, as well as contributing to the stability ofpayment and clearing systems, fall to the Deutsche Bundesbank. The draft Act also stipulatesthat the Deutsche Bundesbank's transactions with credit institutions will no longer be limited tocounterparties that are established in the Federal Republic of Germany. The ECB takes note ofthese amendments and welcomes them in so far as the powers of the Deutsche Bundesbank areclarified and the wording of the Bundesbank Act has been brought further in line with theStatute of the European System of Central Banks and of the European Central Bank (hereinafterreferred to as the Statute). In addition, regarding the Deutsche Bundesbank's transactions withpublic authorities, the provision referring to th e involvement of the Deutsche Bundesbank in the
issuance of federal debt securities (paragraph 2 of Section 20 of the Bundesbank Act) has been
repealed. The ECB understands that this repeal does not impair the competence of the DeutscheBundesbank to act as a fiscal agent of the Government.
6. The ECB notes that the expanded definition of the functions of the Deutsche Bundesbank under
the second sentence of Section 3 of the draft Act does not include the responsibilities of theDeutsche Bundesbank with regard to the pursua nce of financial stability. The ECB considers
that, in view of the express intention of the draft Act of optimising the central banking functionsof the Deutsche Bundesbank in the Eurosystem context, the draft Act is the appropriate legalinstrument in which to clarify that the Deutsche Bundesbank has the responsibility for
contributing to the overall stability of the financial system  as a whole, as a separate function
from hands-on supervision and financial regulation. This clarification would, first, confirm theconcrete role played by the Deutsche Bundesban k in the institutional framework for financial
stability in the Federal Republic of Germany. Secondly, the formal attribution of suchresponsibility to the Deutsche Bundesbank w ould support the role of the Eurosystem in
monitoring the risks to financial stability in the eu ro area. In this context, it is recalled that, in
accordance with Article 105(5) of the Treaty, the Eurosystem is entrusted with the task ofcontributing to the smooth conduct of policies pursued by the competent authorities relating tothe prudential supervision of credit institutions and the stability of the financial system. Thirdly,considering the envisaged integration of supervision of financial intermediaries in the FederalRepublic of Germany, it would contribute to a smooth interaction between central banking and
supervisory functions.
7. The ECB understands that the definition of the responsibilities of the Deutsche Bundesbank
with regard to prudential supervision will be specifically dealt with in the German
Governments forthcoming proposal for legislation to set up integrated supervision of financialintermediaries. Without prejudice to the opinion which will be given in that context, the ECB
3suggests that assignation to the Deutsche Bundesbank in the draft Act of the statutory
responsibility of contributing to the prudential regulation and supervision of financial
intermediaries might be considered. This would follow from the clarification that the Deutsche
Bundesbank has a clear mandate regarding achievement of financial stability as mentionedabove. With regard to the more specific operational involvement of the Deutsche Bundesbank inprudential supervision, the ECB will present its views once it has been consulted on the GermanGovernments proposal.
8. The draft Act strengthens the position of the President of the Deutsche Bundesbank by
empowering him to nominate, with the exception of the Vice-President, the four other members
of the Board, in addition to his right to appoint civil servants within the Deutsche Bundesbank.In addition, he is granted a right of veto with regard to the annual accounts and, particularlyimportantly, the standard costs account and the investment plan. 
9. While realising that the Treaty and the Statute are silent on the organisational structure of the
decision-making bodies of the national central banks, the ECB wishes to point out that, in thecase that a decision is made in favour of a collegiate body, a right of veto given to the President,who is also a Member of the Board, with regard to the standard cost account, the investmentplan and the annual accounts could, in particular, be regarded as being in conflict with thecollegiate nature of the Board. By providing that the Board is to take its decisions by simplemajority voting, the draft Act establishes the principle of collegiate responsibility. This principleis based on equal participation by the Board members in the adoption of decisions, from whichit follows in particular that decisions are adopted on the basis of collective deliberations and thatall members of the Board bear collective responsibility at a political level for adopted decisions.
10. Finally, it is particularly significant that the draft Act introduces for the first time compulsory
preparation of a budget including a cost estimate (standard cost account) and an investmentestimate (investment plan) for the Deutsche Bundesbank (following the practice in the past),specific veto rights of its President (see Section 7 of the draft Act) and the right of the GermanFederal Parliament to propose recommendations to improve the efficiency of the DeutscheBundesbank. The details of the new regime are as follows: (i) the Board of the DeutscheBundesbank prepares the annual accounts; (ii) in order to support its management andadministration, the Deutsche Bundesbank prepares a standard cost account; (iii) for eachfinancial year, the Deutsche Bundesbank draws up a standard cost account and an investmentplan before the beginning of each financial year and a comparative analysis of the budgetedfigures and the actual costs and investment (hereinafter referred to as the comparativeanalysis) at the end of each financial year. The comparative analysis is to be reviewedseparately by the auditors; (iv) the annual accounts, the standard cost account, the investmentplan, the comparative analysis and the reports of the auditors are to be forwarded to the FederalMinistry of Finance and the Federal Court of Auditors; (v) the German Federal Parliament willbe provided with the annual accounts, the comparative analysis and the reports of the auditors;
4(vi) the Federal Court of Auditors is to report its findings to the German Federal Parliament; and
finally (vii) the German Federal Parliament may use the report of the auditors and the report ofthe Federal Court of Auditors as a basis for recommendations to improve the efficiency of theDeutsche Bundesbank. 
11. The ECB is concerned that the new Bundesbank Act will carry risks for the current high level of
independence of the Deutsche Bundesbank. The ECB notes, however, that the draft Act, whichhas been submitted to the ECB for consultation, differs from the draft published on the websiteof the Federal Ministry of Finance in April 2001. This previous version provided that theGerman Federal Parliament could not only adopt recommendations concerning expenditure ofthe Deutsche Bundesbank but could also decide on the discharge of the Board of the DeutscheBundesbank on the basis of the report by the auditors and the report of the Federal Court ofAuditors. The ECB is pleased to note that the draft Act submitted to the ECB no longer foreseessuch a discharge procedure. Article 108 of the Treaty requires that the Member States and, inparticular, the Governments of the Member States, undertake to respect the independence of thenational central banks and not seek to influence the members of their decision-making bodies inthe performance of their ESCB-related tasks. The ECB considers that such a dischargeprocedure or similar procedures would lead to  an increase in external political influence,
enabling pressure to be exercised over the members of the Board and, in particular, thePresident. This would be incompatible with the independence of decision-making bodiesrequired by Article 108 of the Treaty. The draft Act submitted at this stage assigns a right to theGerman Federal Parliament to adopt recommenda tions. This formulation is justified in the
Explanatory Memorandum on the grounds that it is modelled on relevant provisions underCommunity Law. According to Article 248 of the Treaty, the European Court of Auditors
reports to the European Parliament. However, an explicit statutory right of the EuropeanParliament to issue recommendations concerning possible improvements in the efficiency of theECB is clearly not foreseen. Furthermore, th e scope of the recommendations that could be
adopted by the German Federal Parliament is particularly wide, since their objective is animprovement in the efficiency of the Deutsche Bundesbank in general and, therefore, couldalso cover Eurosystem-related activities, for instance the implementation of monetary policydecisions. Although recommendations adopted by the German Federal Parliament are bydefinition not legally binding on the Deutsche Bundesbank, it will be virtually impossible inpractice for the Deutsche Bundesbank to ignore them, given the political pressure which wouldbe exercised over the Board. Such external political pressure would also affect the President'sposition as a member of the Governing Council of the ECB and, as a consequence, theindependence of a decision-making body of the ECB. Therefore, the right of the GermanFederal Parliament as foreseen in the present draft Act to adopt recommendations to improvethe efficiency of the Deutsche Bundesbank is incompatible with the independence of theDeutsche Bundesbank and the ECB. Moreover , such a provision will send negative and
incorrect signals. Traditionally, the Deutsche Bundesbank has always been a model of central
5bank independence. In preparation for the Maastricht Treaty, Germany always took a
particularly strong position as regards extensive central bank independence and insisted that thenew ESCB and the ECB enjoy the same degree of independence as the Deutsche Bundesbank. Ifthe amendments are now adopted as proposed, this might be interpreted by the financial marketsand the general public as a fundamental change in approach. The simple reference to Article 108of the Treaty in the relevant provision of the draft Act, without further clarification, does notallow for any other conclusion. 
Done at Frankfurt am Main on 2 August 2001.
The President of the ECB
[signed]
Willem F. DUISENBERG