Opinion of the European Monetary Institute at the request of the Portuguese 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 DecreeLaw (the “draft law”) containing amendments to the Organic Law of the Banco de Portugal (the “Bank”) (CON/97/18)
Date: 1997-08-15
Institutions: European Monetary Institute
Subjects: Portugal, central bank, euro, issuing of currency, monetary integration, national law

GS/LD/97/490

OPINION OF THE EUROPEAN MONETARY INSTITUTE

CON/97/18

at the request of the Portuguese 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 Decree-

Law  (the  “draft  law”)  containing  amendments  to  the  Organic  Law  of  the  Banco  de  Portugal  (the

“Bank”)

1.

On 28 July 1997 the EMI received a request for an opinion on the draft law from the Portuguese

Ministry of Finance. An Explanatory Memorandum was also submitted to the EMI. The present

opinion  is  based  on  an  unofficial  English  translation  of  the  official  draft  in  the  Portuguese

language submitted to the EMI by the consulting authority.

2.

The  EMI’s  competence  to  deliver  an  opinion  is  based  on  Article  1.1,  second  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  draft  law  contains  a

complete new set of provisions on the Bank with a view to the implementation of the Treaty and

in particular Article 108 thereof.

3.

The EMI welcomes the timely and accurate adaptation of the statute 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.

4.

The EMI notes with particular satisfaction the comprehensive fashion in which the adaptation of

the Bank’s statute is foreseen in the draft law, whilst at the same time the different situations are

accommodated which may occur dependent on the moment at which Portugal adopts the single

currency. The draft law is basically in line with the EMI’s views on the adaptation of statutes of

the  EU  central  banks  to  the  Treaty  and  the  ESCB/ECB  Statute  as  expressed  in  the  1995  and

1996  Convergence  Reports  and  the  overall  assessment  of  the  present  adaptation  is  therefore

positive.

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5.

Central bank independence needs to be achieved at the latest at the date of establishment of the

ESCB.  The  draft  law  contains  a  number  of  articles  providing  for  central  bank  independence,

which are consistent with the EMI’s views on this topic. These provisions will apply as from the

enactment  of  the  draft  law  and  irrespective  of  whether  Portugal  adopts  the  single  currency  as

from the starting date of Stage Three or at a later stage. This is welcomed by the EMI.

6.

The draft law provides for the integration of the Bank in the ESCB both if Portugal becomes a

fully  participating  Member  State  at  the  starting  date  of  Stage  Three  and  if  Portugal  would  not

adopt the single currency at the starting date of Stage Three. The EMI welcomes this approach.

For  the  situation  in  which  Portugal  becomes  a  fully  participating  Member  State,  the  draft  law

provides  for  a  complete  new  statute  for  the  Bank,  which  in  general  complies  with  the  EMI’s

views on measures required for national central banks to become an integral part of the ESCB,

and therefore deserves a positive appraisal. The EMI would, however, like to raise the following

detailed comments:

(a)  Article  4  of  the  new  statute  states  that  “The  capital  of  the  Bank  shall  be  200  million

escudos”.  If  Portugal  adopts  the  single  currency,  the  Bank  would  have  to  comply  with  the

requirement,  laid  down  in  Article  4  of  the  draft  Council  Regulation  on  the  introduction  of  the

euro,  to  have  its  unit  of  account  in  euro.  Therefore,  the  EMI  would  favour  that  the  Bank’s

statute already anticipates the future denomination of its capital in euro.

(b) Article 6 retains for the Bank “the exclusive right to issue banknotes” and “the exclusive

right to put in circulation metal coins”. The EMI notes that in Stage Three other participating

national central banks and the ECB may also issue euro banknotes with legal tender status within

the  Community  and  thus  also  in  Portugal,  and  that  therefore  the  legal  monopoly  of  banknote

issuance  should  be  adapted  in  all  participating  Member  States  so  as  to  legally  permit  banknote

issuance  by  other  full  ESCB  participants  (but  only  such  participants;  see  Article  105a  of  the

Treaty and Article 16 of the ESCB/ECB Statute) without this being contrary to existing national

law. The legal monopoly for banknote issuance may, however, in the transitional period still  be

restricted  to banknotes in national  currencies note: this should say, “currency units”  and

this  restriction  may  be  retained  until  such  banknotes  loose  their  legal  tender  status.  The  same

would apply,  mutatis mutandis, to the exclusive right granted in the draft law to the Bank with

regard to metal coins.

(c)  The  provisions  in  Articles  8  and  9  of  the  draft  law  concerning  banknotes  should  properly

specify that these apply only to banknotes denominated in Portuguese Escudos; the regime to be

applied to euro banknotes should be common to all participating Member States.

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(d)  Article  21  (a)  suggests  the  possibility  of  exchange  controls  “whenever  required”;  for  the

sake  of  legal  certainty  the  draft  should  make  clear  that  such  exchange  controls  may  only  be

adopted in accordance with the Treaty.

(e) The EMI welcomes in particular Article 32.2 of the new statute of the Bank, which provides

for  the  primacy  of  the  ESCB  responsibilities  of  the  Governor  and  therefore  constitutes  an

effective legal tool to achieve a smooth and complete integration of the Bank in the ESCB.

(f) Article 53 of the new statute does not appear to contemplate monetary income sharing within

the  ESCB;  this  provision  will,  of  course,  have  to  be  applied  in  the  context  of  Article  32  of  the

ESCB Statute on the allocation of monetary income of NCBs.

7.

The EMI has no objection to this opinion being made public.

15 August 1997