Opinion of the European Monetary Institute on a consultation from the Ministry of Finance of Portugal 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 decree-law introducing amendments to the Organic Law of Banco de Portugal (“the Draft”) (CON/95/11)
Date: 1995-07-27
Institutions: European Monetary Institute
Subjects: European Monetary System, Portugal, central bank, institutional reform, national law, statistics

OPINION OF THE EUROPEAN MONETARY INSTITUTE

on  a  consultation  from  the  Ministry  of  Finance  of  Portugal  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  decree-law  introducing  amendments  to  the  Organic  Law  of  Banco  de  Portugal  (“the

Draft”).

CON/95/11

1

The present consultation was initiated on 12th July 1995 by the Ministry of Finance of Portugal

and  transmitted  to  the  EMI  through  the  Permanent  Representation  of  Portugal  before  the

European Union. Both the original Portuguese Draft and an English translation were received by

the EMI. Pursuant to Article 4 of the Council Decision of 22nd November 1993 (93/717/EC) on

consultation  of  the  European  Monetary  Institute  by  authorities  of  the  Member  States  on  draft

legislative provisions, the EMI has been asked to deliver its opinion by the end of July 1995.

2

The main purpose of the Draft is to introduce into the Organic Law of Banco de Portugal some

amendments  in  order  to  adapt  it  to  several  provisions  of  the  Treaty,  namely  concerning  the

objective  of  the  Bank,  its  independence  from  Government,  its  payment  systems  and  statistical

functions and the prohibition of monetary financing. The reform provides for other amendments

which do not relate to provisions of the Treaty. The present opinion focuses on those provisions

which are purported to be adaptations of the Statute of the Banco de Portugal to the Treaty and

their compatibility with the Treaty. However, at this juncture it cannot be excluded that further

adaptations may be necessary in the future to fully comply with Treaty requirements relating to

Stage Three of EMU.

3

The  EMI’s  competence  to  give  an  opinion  in  this  consultation  procedure  is  based  on  Article  1,

paragraph 1, of Council Decision 93/717/EC, as the Draft deals with the adaptation of the statute

of a national central bank of a Member State.

4

The  Draft  rewrites  the  definition  of  the  objective  of  the  Banco  de  Portugal  in  Article  3  of  the

Organic Law, basically following the content of Articles 105.1 of the Treaty and 2 of the Statute

of  the  ESCB/ECB.  The  EMI  welcomes  such  a  reform,  as  it  emphasises  that  priority  is  to  be

given to price stability. The wording of the Draft (“to maintain price stability, taking into account

- 2 -

the overall economic policy of the Government”) leaves some ambiguity as to the primacy and

autonomy of price stability as primary objective of the Bank. Although it may be understood as

reflecting  other  objectives  which  are  of  secondary  nature,  in  the  line  of  Articles  105.1  of  the

Treaty and 2 of the Statute of the ESCB/ECB, the EMI would suggest a language that avoids

any ambiguity on this essential matter.

5

The Draft enhances the independence of the Banco de Portugal with respect to Government in

the “conduct” of monetary policy by deleting the sentence “taking into account guidelines of the

Government” from Article 18 of the current Organic Law, which defines such monetary policy

competence of the Bank. This is a reform subsequent to the Constitutional Law no. 1/92 of 25th

November  1992  amending  Article  105  of  the  Portuguese  Constitution.  The  EMI  welcomes  the

new  draft  of  Article  18,  although  it  might  be  appropriate  to  clarify  with  whom  the  Banco  de

Portugal  needs  to  cooperate  (presumably  the  Government).  In  addition,  central  bank

independence  required  for  Stage  Three  of  the  EMU  may  necessitate  further  adaptations  of

Portuguese law before the establishment of the ESCB in the light of the interpretation which will

be given to Articles 107 and 108 of the Treaty.

6

The  Draft  amends  Article  19  with  the  twofold  purpose  of  defining  the  compulsory  statistical

functions  of  the  Bank,  relating  to  “the  collection  and  compilation  of  monetary,  financial  and

exchange  statistics”,  and  of  explicitly  stating  the  principle  of  statistical  secrecy.  Whereas  the

latter is welcomed as a prerequisite for the collection of reliable statistical data, the former gives

rise to the following caveat. The definition of the compulsory tasks of the Banco de Portugal in

the  statistical  field  should  not  lead  to  a  limitation  of  its  competences  in  this  area,  particularly

keeping in mind the preparation of Stage Three of EMU. In particular, it should be recalled that

in Stage Three of EMU the Banco de Portugal will be involved under Articles 5.1 and 5.2 of the

Statute  of  the  ESCB/ECB  in  the  collection  of  statistical  data  required  by  the  ECB  in  the

framework  of  the  execution  of  tasks  of  the  ESCB.  For  this  purpose,  Portuguese  legislative

authorities may already wish to modify the draft in such a way as to facilitate the fulfilment of

the Banco de Portugal’s obligations in the statistical field within the framework of the ESCB in

Stage Three of EMU and the preparation thereof. More specifically, the EMI

would

suggest, firstly, to further  enhance  the  accuracy  of  the  definition  of  the  statistical  tasks  of  the

Banco  de  Portugal  by  replacing  in  the  first  paragraph  the  words  “exchange  statistics”  with

“exchange  rate  and  balance  of  payments  statistics”;  secondly,  to  bring  Article  19  in  line  with

Article 5.1 of the ESCB/ECB Statute by replacing in the second paragraph the words “whatever

information  is  deemed  necessary  for  compliance  with  the  provisions  of  the  foregoing  number”

with “the necessary statistical information in order to undertake its tasks”.

7

The  Draft  amends  the  definition  of  the  payment  systems  function  of  the  Bank,  contained  in

Article 20 of the Organic Law, with the purpose of having its language in line with Article 105.2,

fourth indent, of the Treaty, and Article 3.1, fourth indent, of the Statute of the ESCB/ECB. The

EMI welcomes such technical adaptation.

8

The  prohibition  of  monetary  financing,  contained  in  Article  104  of  the  Treaty,  motivates  the

amendment of several articles of the current Organic Law. Articles 25 and 26, which presently

permit  credit  facilities  from  the  Bank  to  the  State,  are  substituted  by  new  articles  which  (i)

prohibit any overdrafts, credit facilities and direct debt purchases with a language similar to the

one  of  Article  104.1  of  the  Treaty,  and  whereby  central  bank  guarantees  to  the  State  are  also

forbidden,  and  (ii)  contain  the  exceptions  to  the  general  prohibition,  in  accordance  with  Article

104.2  of  the  Treaty  and  Articles  6  and  7  of  Council  Regulation  3603/93/EC  of  13  December

1993.  Article  35  of  the  Organic  Law  is  also  amended  to  exclude  from  the  securities  trading

activities of the Bank the direct acquisition of public debt, which might only be done henceforth

in  the  secondary  markets.  Furthermore,  Article  17  of  the  Organic  Law  is  amended,  with  a

twofold  purpose:  (i)  to  limit  public  debt  acquisitions  to  the  secondary  market,  and  (ii)  to  permit

maintenance  of  existing  claims  over  the  Regional  Governments  of  Madeira  and  Azores,  in

accordance  with  Protocol  n.  9  of  the  Treaty.  The  EMI  welcomes  the  proposed  amendments,

which  correctly  adapt  the  statute  of  Banco  de  Portugal  to  provisions  of  the  Treaty  applying  as

from the starting date of Stage Two of EMU. Particularly, the wording of Article 26, paragraph

1, of the Draft is in line with the EMI’s interpretation of Article 104, paragraph 2, of the Treaty.

With  regard  to  Article  35,  it  is  noted  that  the  choice  of  eligible  collateral  in  the  framework  of

operations  under  Article  18  of  the  Statute  of  the  ESCB/ECB  might  require  an  adjustment  of

Article 35 in the future.

9

The  Draft  also  provides  for  amendments  to  other  articles  of  the  Organic  Law,  which  are  not

purported  to  implement  Treaty  provisions  and  do  not  need  to  be  addressed  in  this  opinion  from

the EMI’s point of view.

10

The EMI agrees that this opinion may be made public by the competent Portuguese authorities at

their discretion.

27th July 1995