OPINION OF THE EUROPEAN MONETARY INSTITUTE
at the request of the Swedish Ministry of Finance under Article 109f (6) of the Treaty
establishing the European Community (the “Treaty”) and Article 5.3 of the Statute of the
EMI on a draft legislative proposal to amend certain legal provisions regarding the status of
Sveriges Riksbank
CON/97/26
1. On 8 October 1997 the EMI received a request from the Swedish Ministry of Finance for an
opinion on a draft legislative proposal to amend certain legal provisions regarding the status of
Sveriges Riksbank (the “legislative proposals”). The legislative proposals are set out in a report
submitted to the Swedish Council on Legislation by the Swedish Government on 2 October 1997
and entitled “The status of the Riksbank” (“Lagrådsremiss - Riksbankens ställning”) (the
“Report”). On 13 October 1997 the EMI received an unofficial English translation of the Report
from the Swedish Ministry of Finance.
2. The EMI’s competence to deliver an opinion is based on Article 1.1, se cond indent, of the
Council Decision (93/717/EC) of 22 November 1993 on the consultation of the EMI by the
authorities of the Member States on draft legislative provisions, as the legislative proposals
contain new provisions concerning the status of Sveriges Riksbank (the “Bank”), inter alia, in
view of the need to implement provisions of the Treaty and in particular Article 108 thereof.
3. The EMI welcomes the timely adaptation of the legal provisions governing the status of the
Bank. As mentioned in the EMI’s 1995 and 1996 reports on “Progress towards convergence”
(the “1995 and 1996 Convergence Reports”), timely adaptation is necessary to enable the EMI
and other Community institutions to assess, in accordance with their reporting obligations under
the Treaty, progress made towards the fulfilment of the legal requirements for Stage Three of
EMU. A reference is also made to the EMI report on “Legal convergence in the Member States
of the European Union as at August 1997”, which was published on 27 October 1997 (the “1997
Report”).
4. The EMI notes with satisfaction the comprehensive fashion in which the adaptation of the
Sveriges Riksbank Act (1988:1385) (the “Act”) and other relevant legal provisions, including
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articles of the Constitution, is addressed in the Report. However, the EMI would like to comment
on certain aspects of central bank independence. In addition, the Report indicates in Chapter 3
that the legislative proposals are limited to Treaty obligations “with respect to the second stage of
[...] EMU” and the EMI would like to make some comments arising from the need to ensure the
integration of the Bank into the European System of Central Banks (the “ESCB”) in Stage
Three of EMU upon Sweden’s adoption of the single currency, as required, inter alia, by Article
14.3 of the Statute of the European System of Central Banks and of the European Central Bank
(the “ESCB Statute”), which will entail further amendments to Swedish law.
5. Central bank independence needs to be achieved at the latest by the date of the establishment of
the ESCB. The timetable for the adaptation of national legislation regarding the independence of
national central banks (“NCBs”) in view of Articles 107 and 108 of the Treaty is addressed in
the 1995 Convergence Report (pages 89-90):
“[...] NCBs should become effectively independent by the date of the establishment of
the ESCB. Clear support for this view can be found in Article 109e (5) [of the Treaty],
which expressly states that the process leading to NCB independence should be
commenced during the second stage. [...] Before the start of Stage Three, the ECB’s
Governing Council will have to decide upon the policy framework of the ESCB. At this
crucial stage, it is important that  the Governors, who will sit on the Governing Council
[of the ECB], come from fully independent NCBs.”
This requirement is not reflected in the date of entry into force of the legislative proposals, which
is set for 1 January 1999. In Sweden there is a need to amend not only the statutory provisions
regarding the Bank which are contained in the Act, but also the Swedish Constitution. In this
respect, the EMI has taken note that “[a]mendments to the Constitution cannot enter into force
before 1 January 1999 as such amendments require the endorsement of two consecutive
Parliaments” (page 140 of the 1996 Convergence Report).
6. The overall assessment of the legislative proposals on the general position of the Bank, the
primary objective of the Bank and the new proposed structure of the Bank and its decision-
making bodies, in order to achieve central bank independence, is positive (and the EMI notes the
references in the Report, inter alia, to Articles  107 and 108 of the Treaty and Articles 7 and 14.2
of the ESCB Statute, as well as to the 1995 and 1996 Convergence Reports). In this context, the
EMI welcomes the division of responsibilities between the Bank’s Governing Council and its
new Executive Board, as set out in the proposed amended wording of Section  41 of the Act, and
the legislative proposal on personal independence for members of the Bank’s Executive Board,
as contained in the proposed new Section 33a of the Act. The EMI notes that the area of
responsibility of the Bank’s Executive Board shall cover all matters which are not to be decided
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by its Governing Council (whereby the proposed amended wording of Section 41 of the Act
provides an enumeration of matters to be decided by the Governing Council) and that a member
of the Executive Board of the Bank (as opposed to a member of the Governing Council) may not
be a member of Parliament. In view of the restricted area of responsibility of the Bank’s
Governing Council, the legislative proposals address satisfactorily the inconsistency with the
Treaty and the ESCB Statute concerning the possibility of having members of Parliament as
members of the Bank’s Governing Board, to which reference was made in the 1996
Convergence Report and the 1997 Report (page 140 and page 56 respectively).
7. The proposed provisions on the personal independence of members of d ecision-making bodies of
the Bank, including the legislative proposals concerning the term of office and grounds for
dismissal of members of the Bank’s Executive Board, receive the EMI’s general support.
However, the transitional provisions to the proposed amendments to the Act provide that the first
group of appointees to the Executive Board will include one member whose first term of office
will be four years, and that three other members will be appointed for three years, two years and
one year respectively. Moreover, the proposed second paragraph of Section 32 of the Act raises
the possibility that terms of office of members of the Executive Board replacing a resigning
member will also be below the minimum term of office of five years stated in Article 14.2 of the
ESCB Statute and the 1995 and 1996 Convergence Reports. The EMI appreciates the fact that
the initial term of office may be influenced by the wish to create a staggered appointment
scheme and that the replacement arrangement envisaged for use in the event of resignations is
designed not to upset such a scheme. At the same time, the EMI would like to emphasise that
each individual member of a decision-making body involved in the performance of the tasks and
duties conferred upon the ESCB by the Treaty and the ESCB Statute (“ESCB-related tasks”)
should have the same security of tenure in accordance with Article 14.2 of the ESCB Statute as
stated in the 1995 and 1996 Convergence Reports.
8. The EMI also notes the arrangement referred to in the propo sed amended wording of the third
paragraph of Article 12 of Chapter 9 of the Constitution Act, according to which a member of
the Bank’s Executive Board is severed from his appointment before his term of office has
expired if the Riksdag does not grant him discharge from liability. Whilst the suggested wording
of the legislative proposal regarding the grounds on which a member of the Executive Board of
the Bank can be dismissed by the Bank’s Governing Council (in the same paragraph of the
Constitution Act) is compatible with the ESCB Statute, the grounds on which the Riksdag can
deny such a member discharge from liability, as contained in the legislative proposal for
Section  49 of the Act, do not conform with Article 14.2 of the ESCB Statute.
9. The propos ed amended wording of Article 12 of Chapter 9 of the Constitution Act also states
that the Bank is an authority under the Riksdag, and the EMI notes that the Report indicates that
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the independence granted to the Bank through the prohibition against instructions in the said
Article of the Constitution Act and the proposed new Section 41a of the Act, as read against the
background of Articles 2 and 7 of Chapter 11 of the Constitution Act, would ensure the
protection of the Bank against instructions from the Riksdag and public authorities, including the
Government, with respect to the Bank’s exercise of monetary policy. The substantive area
where independence is required, however, is formulated in Article  107 of the Treaty to cover all
ESCB-related tasks, and not only “issues relating to monetary policy” (as in the proposed Article
12 of Chapter 9 of the Constitution Act) or “monetary policy duties” (as in the proposed Section
41a of the Act). This distinction is noted in Chapter 7.9 of the Report and the ESCB-related
tasks are indicated in Chapter 7.6 of the Report, but the scope of Article  107 of the Treaty is not
fully reflected in the suggested wording for the legislative proposals on the prohibition against
instructions.
10. According to the proposed amende d wording of Section 41 of the Act, the Governing Council of
the Bank shall make proposals to the Riksdag and the Auditors of the Riksdag for the
appropriation of the Bank’s profit in accordance with Section 48 of the Act. The EMI stated in
its 1996 Convergence Report that in situations “where third parties and, particularly, the
government and/or parliament are in a position, directly or indirectly, to exercise influence on the
determination of an NCB’s budget or the distribution of profit, the relevant statutory provisions
should contain a safeguard clause to ensure that this does not impede the proper performance of
the NCB’s ESCB-related tasks” (page  103 of the 1996 Convergence Report). To the extent that
the above legislative proposals would provide a means of exercising influence on the
determination of the Bank’s budget or the distribution of its profit, such a statutory safeguard
clause should be considered in respect of the Bank’s ESCB-related tasks.
11. The EMI welcomes the introduction of price st ability as the objective of the Bank and its
formulation in the proposed amendment to Section 4 of the Act. The EMI notes the discussion
on other tasks in Chapter 7.3 of the Report and would stress the primacy of the objective of
price stability as required by the Treaty and the ESCB Statute; any other objective, such as the
inclusion of the promotion of “a safe and efficient payment system” suggested in the legislative
proposal for Section 4 of the Act, must be without prejudice to the objective of price stability (as
indicated by the wording of Article 105(1) of the Treaty and Article 2 of the ESCB Statute).
Incidentally, such an aim may also be achieved by drawing a clear distinction between objectives
and tasks in accordance with Chapter II of the ESCB Statute, and this aspect is noted in
Chapter  7.3 of the Report (which states that the promotion of a safe and efficient payment
system “is a basic duty for the [Bank] and is not a real operational objective”). Moreover, a
national definition of the Bank’s duties in the field of payment systems may create uncertainty
since this is an area in which the ESCB is also competent (Article 105(2), fourth indent, of the
Treaty and Article 3.1, fourth indent, of the ESCB Statute). Upon Sweden’s full participation in
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Stage Three of EMU, the objectives and tasks of the Bank should reflect all elements of the
objectives and tasks of the ESCB in Chapter II of the ESCB Statute, and not only the promotion
of the smooth operation of payment systems.
12. The EMI also notes th e proposed new regime on foreign exchange policy with its distinction
between general foreign exchange rate policy issues and decision-making on the exchange rate
system, on the one hand, and responsibility for the application of the exchange rate system, on
the other; the legislative proposals would place policy aspects under Government control in line
with arrangements in other Member States, whereas the application thereof would fall under the
authority of the Bank. The EMI has no objection to such a regime provided that the primary
objective of price stability is maintained. To enable Sweden to participate fully in Stage Three of
EMU, however, the legislative proposals for Article 11 of Chapter 9 of the Constitution Act and
for a Foreign Exchange Rate Policy Act (whereby “[t]he Government bears responsibility for
general foreign exchange rate policy issues”) will need to acknowledge the competences at the
European Community level and of the ECB in Stage Three of EMU in the field of exchange rate
policy under Articles 3a and 109 of the Treaty.
13. Moreover, the proposed amended wording of Article 12 of Chapter 9 of the Constitution Act that
“[n]o authority may determine the decisions made by the Riksbank on issues relating to monetary
policy” does not seem to provide for the necessary integration of the Bank into the ESCB in
Stage Three, whereby the Bank shall act in accordance with the guidelines and instructions of
the ECB upon Sweden’s full participation in EMU (as stated in Article 14.3 of the ESCB
Statute). Unless it is clear, or made clear, that the reference in the proposed provision to
“authority” (“myndighet” in Swedish) does not affect the ECB’s authority vis-à-vis the Bank
following Sweden’s adoption of the single currency, it will be necessary to review again the
proposed constitutional provision on the prohibition against instructions (which could take place at
the same time as the further review of the new Section 41a of the Act and other legal provisions
which will require amendments to enable the Bank to be integrated into the ESCB). As a general
remark, any subsequent legislative adjustments needed with a view to fulfilling the requirements
of the Treaty and the ESCB Statute for full participation in EMU by a Member State would be
facilitated insofar as the relevant legal provisions would be covered by the more flexible form of
statutory law rather than by the Constitution.
14. The Report proposes that Section 42 of the Act be reformulated to provide that “[t]he Riksbank
shall prior to every monetary policy decision of importance inform the Minister appointed by the
Government”. This legislative proposal would not seem to be fully appropriate in Stage Three,
when, following Sweden’s adoption of the single currency, monetary policy decisions of
importance will not be taken by the Bank, but instead by the Governing Council of the ECB,
which will be composed of the Governors of the NCBs of the participating Member States
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(including the Governor of the Bank) and the members of the Executive Board of the ECB. The
topic of consultation and dialogue between NCBs and their respective political authorities is
addressed in the 1996 Convergence Report (page 101):
“The crucial issue is whether a national institution has any formal mechanism at its
disposal to ensure that its views influence the final decision. An explicit statutory
obligation for an NCB to consult political authorities provides for such a mechanism
and is therefore incompatible with the Treaty and the [ESCB] Statute.
A dialogue between NCBs and their respective political authorities, even when based
on statutory obligations to provide information and exchange views, is not
incompatible with the Treaty and the [ESCB] Statute, provided that:
-this does not result in interference with the in dependence of the members of
decision-making bodies of NCBs;
-the ECB’s competences and accountability at the Community level as well as the
special status of a Governor in his/her capacity as a member of its decision-making
bodies are respected; and
-confidentiality requirements resulting from [ESCB] Statute provisions are
observed .”
The arrangements envisaged in the legislative proposal for Section 42 of the Act should be
critically assessed in the light of the above considerations since the obligation to inform the
Minister ex ante may in practice have effects similar to a consultation.
15. For Sweden’s full participation in Stage Three of EMU, and as indicated above, the integration
of the Bank into the ESCB will require further legislative amendments. The provision on the
Bank’s exclusive right to issue banknotes contained in Article 13 of Chapter 9 of the Constitution
Act and the related provisions laid down in Section 5 of the Act (as well as Section  41, first
paragraph, item 9, of the Act) will need to be amended in Stage Three. First, and in accordance
with the 1995 and 1996 Convergence Reports and the 1997 Report, national provisions on
banknote issuance should not prejudice the ECB’s exclusive right to authorise the issue of
banknotes in Stage Three under Article  105a (1) of the Treaty and Article 16 of the ESCB
Statute. Moreover, in Stage Three, the ECB and the NCBs of participating Member States may
also issue euro banknotes with legal tender status within other participating Member States than
their own, and thus also in Sweden following Sweden’s adoption of the single currency. The
legal monopoly over banknote issuance should be adapted in all participating Member States so
as to permit banknote issuance by the ECB and other NCBs of Member States without a
derogation (but only such members of the ESCB), without such banknote issuance being
contrary to existing national law (see Article 105a of the Treaty and Article 16 of the ESCB
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Statute). The legal monopoly over banknote issuance may, however, still be restricted to
banknotes in national currency units during the transitional period and such a restriction may be
retained until national banknotes lose their legal tender status. The same would apply, mutatis
mutandis, to the exclusive right granted to the Bank in the said Article of the Swedish
Constitution with regard to coins.
16. The EMI would also like to mention that the Act could make it clear that, from the start of Stage
Three of EMU (or, should Sweden be a Member State with a derogation at first, from the time
that Sweden adopts the single currency), the Bank will form an integral part of the ESCB (as
proposed for the central bank legislation of other Member States; for example, the
Bundesbankgesetz  in Germany and the Bankwet  in the Netherlands).
17. Finally, Section 20 of the Act deals with the imposition of minimum reserves on credit institutions
and, in view of, inter alia, its specific wording, further amendments can be envisaged for Stage
Three of EMU (cf. Article 19 of the ESCB Statute and the proposed draft EU Council
Regulation on minimum reserves).
18. The EMI has no objection to this opinion being made public.
7 November 1997