13 March 1998
OPINION OF THE EUROPEAN MONETARY INSTITUTE
at the request of the French Ministry of Economy, Finance and Industry under Article 109f
(6) of the Treaty establishing the European Community (the “Treaty”), Article 5.3 of the
Statute of the EMI and Council Decision 93/717/EC of 22 November 1993 on a draft law
amending Act 93/980 of 4 August 1993 on the Statute of the Banque de France and the
activities and supervision of credit institutions (the “draft law”)
(CON/98/12)
1. On 16 February 1998, the EMI received a request for an opinion on the draft law from the
French Ministry of Economy, Finance and Industry. This opinion is primarily based on the
English translation of the draft law, but takes also account of the original text in French.
References in this opinion to articles are references to articles in the draft law unless otherwise
indicated.
2. The EMI is competent to deal with the present consultation under Article 1.1, second indent, of
Council Decision 93/717/EC of 22 November 1993, since the draft law concerns the status and
powers of the Banque de France.
3. The draft law intends to adapt the statute of the Banque de France to Treaty and ESCB/ECB
Statute requirements under Article 108 of the Treaty as repeated in Article 14.1 of the
ESCB/ECB Statute with a view to Stage Three of Monetary Union.
4. Article 8 of the draft law provides for an entry into force of the draft law on 1 January 1999 or,
alternatively, the date on which France will adopt the single currency if that would be a later
date. As far as this applies to provisions ensuring the legal integration of the Banque de France
in the ESCB, this is compatible with the Treaty and ESCB/ECB Statute. However, as far as
requirements on central bank independence are concerned, Article 108 requires that adaptations
in this area enter into force at the latest at the date of the establishment of the ESCB/ECB. This
is important as the ECB and NCBs will take many decisions between this establishment and the
end of 1998 which will pre-determine the monetary policy of the euro area and which need to be
implemented at a national level by the national central banks in advance of the starting date of
Stage Three.
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The above applies in particular to the last paragraph of Article 1 incorporating the prohibition of
instructions in the statute of the Banque de France, and to Article 6 of the draft law, modifying
Article 19, submitting the Governor’s appearances before Parliament to Articles 107 of the
Treaty and the secrecy rules of the European Central Bank. These should enter into force at the
latest at the date of the establishment of the ESCB.
Furthermore, and although the Bank may be considered as independent with regard to the
formulation and the implementation of monetary policy, the independence requirements need to
be applied to the Banque de France as an institution and not only to the members of the
Monetary Policy Council and extended to all ESCB-related tasks and not limited to monetary
policy functions.
5. The reference in Articl e 1 of the draft law to Articles 105(1), 105(2) and 105(5) may be
interpreted as an exhaustive enumeration and it should therefore simply refer to the Treaty.
6. Article 2 of the draft law provides that the Banque de France shall, within the conditions
established by the ESCB Statute, hold and manage the State’s gold and foreign exchange
reserves and that such reserves shall be recorded as assets of the Bank in its balance sheet.
However, this Article also adds that this function will have to be executed in accordance with
“procedures” (“ modalités ” in the French text) which will be set by a formal agreement between
the State and the Banque de France. The Banque de France’s activities in this context are
governed by the Treaty and the Statute as well as the legal acts adopted by the ECB in this
respect. Whilst it is assumed that the above agreement leaves the Bank every freedom not to
accept any procedures which might infringe on ESCB-related obligations, references to national
rules, which may hinder the Bank’s independence and status as an integral part of the ESCB,
must be deleted if the above procedures could have such an effect. The above agreement needs,
in any case, being submitted to the ECB for prior approval.
One NCB points out that, in any case, a  formal agreement in the area of ESCB-related tasks
with a national Government, even if it hypothetically required the approval by the ECB, would
not be compatible with the independence of the ECB and NCBs as established by the Treaty
and the Statute of the ESCB and with the legal integration of NCBs in the ESCB. Therefore,
any reference to that formal agreement should be deleted from the draft law.
7. Article 2 also states that the Banque de France may, without prejudice to Article 6.2 of the
ESCB/ECB Statute, participate in international monetary “agreements” (or “accords” in the
French text) with the permission of the Minister in charge of Economy. The wording is
confusing. Article 6.2 of the ESCB Statute deals with the ECB’s competence to approve the
participation of national central banks in international monetary institutions while Article 109  of
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the Treaty establishes the Community’s competence in the field of international agreements on
monetary and foreign exchange regime matters. The latter Article indicates, incidentally, that
there will be no freedom for Member States any more to  enter into international monetary
agreements. Article 2 should therefore refer, in accordance with Article 6.2 of the ESCB/ECB
Statute to participation in international monetary “institutions”. Should it be purported to have a
wider scope, then it would have to specify that this capacity is “without prejudice to Article  109
of the Treaty”.
The Banque de France states that the agreements falling within the scope of Art icle 2 will not
concern ESCB-related tasks; however, this statement should be clearly reflected in the language
of the draft law.
It would be contrary to the independence of the Banque de France to provide for an approval of
the Minister in charge of Economy either to participate in international monetary institutions or in
international agreements on monetary and foreign exchange regime matters.
One NCB, however, considers that the necessity for the approval of a national Government
would not in any case be compatible with the institutional independence required for NCBs by
the Treaty and the Statute of the ESCB, and therefore such national constraint should be deleted
from the draft law.
8. Whilst Article 3 of the draft law on the issue of banknotes refers explicitly to Article 105a of the
Treaty, it also states that the Banque de France shall have the sole right to issue (“ émettre ”)
banknotes with legal tender status within metropolitan France. It is understood that this is meant
to protect the sole right of the Banque de France to issue French franc banknotes during the
transitional period, since after that period euro banknotes issued by the ECB and/or NCBs have
such status as well.
The restriction of the right to issue legal tender banknotes to “metropolitan France” is
incompatible with Article 105a(1) of the Treaty according to which only the ECB and the NCBs
may issue legal tender banknotes within the whole euro area. In fact, the French franc
banknotes issued (“ émis”) by the Banque de France are also legal tender in the Départements
d’Outre-Mer  (which are an integral part of the Community and hence of the euro area), while
they are put into circulation (“ mis en circulation ”) not by the Banque de France itself but by the
IEDOM on behalf of the former. The EMI has stated, in its Opinion on CON/98/09 dated
19 February  1998, that “ the IEDOM is not an NCB nor is it vested with the requirements that
the Treaty requires for NCBs. .”
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Therefore, this arrangement may not be valid anymore after the start  of Stage Three. In general,
the tasks assigned to the ESCB in the Treaty and the Statute have to be fulfilled exclusively by
the ECB and the NCBs. Other national institutions are not subject to the guidelines and
instructions of the ECB; such ECB acts may be used to establish the regime and the modalities
under which banknotes are put in circulation, exchanged and withdrawn within the euro area,
and therefore, also eventually within the French Départements d’Outre-Mer . Member States
cannot, therefore, entitle their national central bank to delegate competencies in ESCB-related
tasks to other national institutions without, as a minimum, such delegation being statutorily subject
to a prior approval by the ECB. Such approval, because concerning ESCB- related tasks, may
eventually establish limits and conditions. This should be clearly explicited in the draft law.
The view has been taken by a minority of NCBs, that a permanent delegation of an ESCB task
to any national institution other than the NCB, even if hypothetically subject to a prior approval
by the ECB, would not be compatible with the Treaty and the Statute of the ESCB, which do not
foresee any delegated attribution of ESCB-related tasks outside the ESCB. In this perspective,
the reference in Article 3 of the draft law to “metropolitan” France should be deleted, as well as
any other reference in the French legislation to delegation of ESCB-related tasks to the IEDOM.
9. Article 4 of the draft law defines the responsibilities of the Monetary Policy Cou ncil. The EMI
Council notes with satisfaction that the independence of its members remains unchanged.
Although the draft law recognises that the Banque de France will have to act in accordance with
guidelines and instructions of the ECB, it also states that the Monetary Policy Council shall
“determine” (“ détermine ” in the French text) the nature of collateral. Along the same lines as
above, although it is no doubt the intention to be in line with ESCB/ECB Statute requirements on
this point and although monetary policy in Stage Three in accordance with Article 12.1, third
paragraph, of the ESCB/ECB Statute is expected to be executed in a decentralised manner
(i.e. by the Banque de France in France), the word “ détermine ”, to the extent that it conveys the
idea of ample discretion, is inappropriate as such action will fall within the exclusive competence
of the governing bodies of the ECB. A more general wording would be more in line with the
Treaty.
10. Additional points raised by several NCBs:
(a) Article 9 of the present statute of the Banque de France remains unchanged and gives,
inter alia, the right to the Prime Minister and the Minister of Economic Affairs and
Finance to attend meetings of the Monetary Policy Council and to propose motions. This is
a provision parallel to what is provided in Article 109b(1) of the Treaty at Community
level. However, De Nederlandsche Bank, Sveriges Riksbank and Suomen Pankki
consider this formal right as an imperfection requiring re-consideration, because  the right
of Government representatives to propose motions within a NCB decision-making body is
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a statutory mechanism to exert national political influence on the performance of ESCB-
related tasks, whereby such tasks are primarily directed towards Community objectives. It
would therefore be appropriate to use this legislative reform to delete this right from the
Bank’s statute.
(b) The Deutsche Bundesbank points out that:
- Article 8, fourth paragraph, provides for replacement terms of office of less than
five years which is incompatible with the term of office as laid down in Article 14.2
of the Statute of the ESCB/ECB.
- There are various provisions on operations which fall within the scope of Chapter
IV of the ESCB/ECB Statute. Therefore, these operations are subject to guidelines
and instructions of the ECB. They cannot be considered as other tasks as referred
to in Article 14.4 of the Statute of the ESCB. This applies in particular to Article 11,
fourth paragraph, on the allocation of the Bank’s own funds (see Article 25 of the
Statute of the ESCB), Article 15, second paragraph, 17 and 18 on the fiscal agent
function (see Article 21 of the Statute of the ESCB), the holding of accounts for
third parties (see Article 17 of the Statute of the ESCB) and the execution of
foreign exchange operations (see Article 23 of the Statute of the ESCB),
respectively. Furthermore, the General Council is responsible for these operations
according to the draft law, and it does not fulfil the requirements of independence of
the Treaty and of the Statute of the ESCB for decision-making bodies competent
for ESCB-related tasks.
(c) De Nederlandsche Bank considers that the wording of Article 1 whereby the Banque de
France shall support the general economic policy of the Government, raises doubts on
whether, being part of the ESCB, NCBs will remain competent to support, even as a
subsidiary objective, national economic policies and will retain instruments for such tasks.
11. The EMI has no objections to this opinion being made public.
13.3.1998