13th May 1996
OPINION OF THE EUROPEAN MONETARY INSTITUTE
CON/96/05
Consultation by the Finnish Ministry of Finance under Article 109f (6) of the Treaty
establishing the European Community and Arti cle 5.3 of the Statute of the EMI on draft
legislation establishing the statute of the Bank of Finland.
1 On 10th April 1996 the EMI received from the Fi nnish Ministry of Finance a request for
consultation  on draft legislation establishing the Stat ute of the Bank of Finland (“the Act”).
The documentation submitted for consultation comprises an explanatory memorandumaccompanying the draft (“the Memorandum”), the Act itself and, in addition, a draftamendment of paragraph 4 of Section 4 of the Currency Act (358/93), addressing a reallocation
of competences on currency matters within the d ecision-making bodies of the Bank of Finland
(“the Amendment Act”). All documentation has been received in the English language,translated by the consulting authority, and the present opinion is issued on the basis of such
translation.
2 The objective  of the Bank of Finland is defined in Section 2 of the Act as follows:  “to
safeguard the value of money”.  Article 2 of the ESCB Statute stipulates that: “ /g91.../g93 the primary
objective /g91.../g93 shall be  to maintain price stability”.  Although the EMI has received clarification
from the Bank of Finland that the present wording of Section 2 of the offi cial version of the Act
reflects an identical objective to the one expre ssed in Article 2 of the ESCB Statute, which
clarification has been duly noted, the importance of this provision mandates legal clarity and
full consistency between the Act and the Treaty.
3 Section 8 of the Act is purported to introduce into domestic law the content of Article 104  of
the Treaty. To avoid any potential discrepanc y with that Treaty ar ticle and with Council
Regulation (EC) n. 3603/93 of 13.12.1993, the language of Section 8 may be considered further
before the enactment of the Act.
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4 Article 109e(5) of the Treaty states that “During the second stage, each  Member State shall, as
appropriate, start the process leading to the independence of its central bank.”  Independence
of national central banks is a significant elem ent of central banks qualifying to become an
integral part of the ESCB, which needs to be accomplished  before the date of establishment of
the ECB and is a prerequisite to participati on in monetary union. Independence may, however,
be achieved through different measures, taking into account different institutional traditions in
the various Member States. The Act, namely if amended as suggested in the following, is oneexample of several possible alternatives for a legislative framework which would further the
degree of central bank independence, although additional adaptations for Stage Three may be
necessary as anticipated below. 
(a) The Act under review mentions, in Section 1, that “The Bank of Finland [...] is an
independent institution [...]”.  The EMI welcomes such an initial legal statement, which
gives a basis to Section 5, second paragraph, and may inspire the interpretation of othersections of the Act. The EMI moreover welcomes the disappearance in the Act of somesections of the current Statute which might have  been seen as inconsistent with the basic
principle of central bank indepe ndence required for by the Treaty.
(b) Sections 12 to 14 of the Act refer to a Parliamentary Supervisory Council, a body
foreseen in constitutional provisions and ch aracterised in Section 11 as one of the
Governing Bodies of the Bank of Finland. Being integrated by members of parliament, it
has to be defined as a political organ. The Treaty requirement of independence in
decision-making applies not only vis-à-vis Gove rnment but also in relation to any other
political body, and therefore it would not be achieved if the Parliamentary Supervisory
Council would have the possibility of interferin g in any manner with the decisions of the
Board on monetary matters. The permanency of a political body within the internalstructure of the Bank would be  consistent with the required level of independence to the
extent that statutory tasks by such a body could not interfere with the required autonomy
of the decision-making process of the centr al bank with respect to monetary policy
issues. 
The EMI notes that the new list of tasks vest ed in the Parliamentary Supervisory Council
does not explicitly include monetary powers. Th e EMI reads the draft text of the Act, and
in particular Section 16, as implying that th e list of tasks vested in the Parliamentary
Supervisory Council through Section 13 is exha ustive, and draws the conclusion that the
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supreme decision-making body of the Bank in monetary matters would be the Board.
Hence, Sections 6 and 7 of the Act would have to be read as implying that the exclusive
responsibility for monetary policy decisions is vested with the Board. This interpretation
is coincident with the explanations cont ained in the Memorandum. Provided that the
supervisory powers of the Parliamentary S upervisory Council are limited to the tasks
listed in Section 13, and further provided that these supervisory powers are without
prejudice to the exclusive competence of the Board as regards monetary matters, thisaspect of the projected legal architecture for the Bank of Finland w ould not appear to be
incompatible with the letter and the spirit of the Treaty.
(c) Sections 12 and 15 of the Act are drafted in a manner which does not explicitly preclude
the appointment of a member of the Parliame ntary Supervisory Council as member of the
Board. Simultaneous membership of both the Parliamentary Supervisory Council and the
Board could result in a situation where a conflict of interest may possibly arise whichmay hinder the required independence of the Board on monetary policy matters.
(d) The second paragraph of Section 5 of the Act reads: “In carrying out its tasks related to
monetary policy, the Bank of Finland may not seek or take instructions concerning its
activities”.  The EMI interprets the Act as prov iding for the exclusive responsibility of
the Board on “tasks related to monetary policy”.  The Board, as supreme decision-
making body on monetary policy matters, should not seek nor take instructions from theParliamentary Supervisory Council, nor from any other internal or external body or
institution. Moreover, the requirement of centr al bank independence as specified by the
Treaty addresses not only institutional indepe ndence of central banks and its decision-
making bodies as collective organs, but also  the personal independence of the members
of such organs. To achieve more legal clarity  and full consistency with Article 7 of the
ESCB Statute, the language of  Section 5 may be considered further before the enactment
of the Act.
The first paragraph of Section 5 imposes on the Bank of Finland the obligation to
“cooperate with the Council of State and other authorities.”  In order to enhance the
overall importance of independence and of the prohibitions contained in the second
paragraph of that Section 5, it may be su ggested to change the order of the two
paragraphs of Section 5 and subject the obligation to cooperate with political bodies tothe prohibition of seeking and taking instructions.
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(e) Under Section 13, first paragraph, indent (2),  of the Act, the Parliamentary Supervisory
Council is entitled to discharge the liability of  the Board. To secure the independence of
the Board on monetary policy decisions, it would be advisable to state that the discharge
of liability of the Board cannot be refused by the Parliamentary Supervisory Council inrelation to the conduct of monetary policy. 
(f) Section 18 of the Act provides for the com pulsory dismissal of Board members, vesting
upon the President of the Republic the authority  for such dismissals. Article 34 of the
Constitution of Finland specifies that th e decisions of the President are adopted  “in the
Council of State on the basis of a pres entation by the competent Minister” , and that such
decisions require the counter signature of the presenting Minister. The institutional
independence of the Bank and the personal independence of the Board members would
be enhanced if such a presentation by the Mi nister either included a formal opinion or if
it could only be effectuated upon an initial moti on of the Board of the Bank of Finland.
Furthermore, it is noted that the Act does not  explicitly recognise the right to have the
dismissal directly reviewed by a domestic cour t, unless this right already arises from the
legislation referred to in Section 18 of the Ac t, or as a result of Section 40 of the Act, or
otherwise due to general legislation rega rding judicial safeguards in the area of
administrative law.
(g) The Act does not define eligibility criteria for members of the Board, nor place any
limitations on other professional activities of Board members. Neither Treaty nor theESCB/ECB Statute specifies such  criteria and limitations, but these may be seen as the
necessary consequence of the Treaty requirement of personal independence, whichimplies the avoidance of possible conflicts of interests between the Bank and other
bodies, and of potential situations of external dependency.
5 The statistical regime is addressed in Sections 3 and 38 of the Act. It would be advisable that
in Section 3, second paragraph, third indent of the Act the word “collection”  is introduced
between “provide for the”  and “compilation and”.
6 The Finnish Currency Act was issued on 16th April 1993. The Amendment Act proposes to
alter Article 4 of the Currency Act with th e expressed purpose according to the Memorandum
of substituting the Board for the Parliamentar y Supervisory Council as the competent body to
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make proposals to the Council of State on the external value  of the markka. The EMI
welcomes this amendment as a provision which will enhance the powers of the Board as a bodywhose decision-making powers are not subject to political control.
7 The EMI would like to draw the attention on the fact that, according to Article 108 of the
Treaty, the compatibility of the statutes of a NCB must be ensured “at the latest at the date of
the establishment of the ESCB”,  and that this compatibility will already be assessed in the EMI
and the European Commission reports dr awn up on the basis of Article 109j(1).
The EMI notes that the Act is exclusively purporte d to adapt the statute of the Bank for Stage
Two of EMU, and that it is recognised that th ere is a need to introduce further adaptations to
allow the Bank in Stage Three  “to become an integral part of the ESCB” . Although at this
stage the EMI has not arrived at final conclusi ons on the scope of these further amendments, it
may be foreseen that Sections 4, 7, 18, 19, 29, 30, 35 and 38 of the Act, as well as themechanism for the determination of the external  value of the Finnish markka and the Currency
Act, might in all likelihood require further adapta tions. In addition, the EMI wishes to make the
following specific comments as regards other stat utory requirements for the integration of the
Bank in the ESCB: 
(a) The second paragraph of Section 5, con cerning the prohibition to seek or take
instructions  related to monetary policy, will have to be amended for Stage Three, to
avoid patent incompatibilities between the national legislation and Treaty provisions, inparticular with Article 14.3 of the ESCB/ECB Statute, and to include within its scope all
ESCB tasks to which Articles 3 to 6 of the ESCB/ECB Statute refers.
(b) Section 9 of the Act permits exceptionally the Bank of Finland to grant credit without
adequate collateral . This provision would be, in Stag e Three, inconsistent with Article
18.1, second indent, of the ESCB Statute, which does not c ontemplate that possibility.
Therefore, and in accordance with Article 108 of the Treaty, this provision would require
to be amended for the Bank of Finland to b ecome an integral part of the ESCB. It is
matter of internal consideration whether th e application of this principle is to be
anticipated in Stage Two. 
8 The EMI has no objection to its opinion being made public .
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