Opinion of the European Monetary Institute on a consultation from the Bank of Greece (the “Bank”) 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 law containing provisions relating to the Bank (the “draft law”) (CON/97/15)
Date: 1997-08-28
Institutions: European Monetary Institute
Subjects: European System of Central Banks, Greece, central bank, conversion rate, decision-making, dismissal, euro, paper money, payment system

OPINION OF THE EUROPEAN MONETARY INSTITUTE

on a consultation from the Bank of Greece (the “Bank”) 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 law containing provisions relating to the Bank (the “draft law”)

CON/97/15

1.

The present opinion was requested by the Bank which submitted the draft law together with an

introductory report containing explanatory notes for consultation to the EMI on 11 July 1997. The

present  opinion  is  based  on  the  unofficial  English  translation  of  both  the  draft  law  and  the

explanatory notes thereto.

2.

The main objective of the draft law is to establish the independence of the Bank, as defined in

Article  107  of  the  Treaty,  and  to  ensure  compatibility  of  relevant  national  legislation  with  the

Treaty and the ESCB/ECB Statute (the “statute"), as required by Article 108 of the Treaty. In

addition, the draft law aims at updating the existing legislation relating to the Bank (for instance

on issues concerning payment systems and prudential supervision). The draft law also abolishes

a  number  of  existing  legal  provisions  which  are  either  obsolete  or  contrary  to  more  recent

legislation  or  to  the  draft  law  itself,  in  most  cases  affecting  the  powers  or  status  of  the  Bank.

The  EMI  is  therefore  competent  to  deal  with  this  consultation  under  Article  1.1  of  Council

Decision 93/717/EC of 22 November 1993.

3.

The EMI welcomes the timing and scope of the adaptation of national legislation relating to  the

Bank  and  of  other  legislation.  This  enables  the  EMI  to  fulfil  its  reporting  requirements  under

Article 109j of the Treaty and Article 7 of its Statute in a timely manner for Greece.

In  its  1995  and  1996  Convergence  Reports,  the  EMI  stressed  the  importance  of  timely

adaptation  of  national  legislation  to  the  Treaty  and  Statute  requirements  for  Stage  Three  of

EMU, distinguishing between requirements on:

-

-

central bank independence which would need to become effective at the latest at the date

of the establishment of the ESCB/ECB;

integration  of  NCBs  in  the  ESCB  which  would  need  to  become  effective  at  the  date  of

adoption of the single currency by the Member State concerned; and

- 2 -

-

special features of the transitional period, i.e. the period between the date of adoption of

the  single  currency  and  the  date  of  introduction  of  euro  banknotes  and  subsequent

disappearance of national banknotes in the participating Member States.

The draft law acknowledges and accommodates this distinction.

4.

The  EMI  welc omes  that  the  Greek  authorities  are  using  the  opportunity  for  a  more  general

review  of  relevant  legislation  with  a  view  to  the  requirements  of  Stage  Three.  Indeed,  Article

108 of the Treaty requires, irrespectively for instance of the supremacy of Community law over

national law or of the question whether national statutory provisions become obsolete, to remove

incompatibilities  between  national  legislation  on  the  one  hand  and  the  Treaty  on  the  other,  in

order  to  ensure  legal  clarity  and  certainty.  Again,  the  draft  law  acknowledges  and

accommodates this principle, except as far as provisions concerning the integration of the Bank

within the ESCB are concerned once Greece adopts the single currency (which will be further

examined in point 7 below).

5.

In  the  area  of  central  bank  independence,  the  EMI  notes  with  satisfaction  that  the  draft  law

contains  several  provisions  improving  the  institutional,  personal  and  functional  independence  of

the  Bank.  Price  stability  is  mentioned  as  primary  objective  (Article  1).  The  definition  and

implementation of monetary policy will be a responsibility of the Bank, i.e. the Monetary Policy

Council  which  will  be  established  under  the  law  upon  its  entry  into  force  (Article  2).  A

prohibition of external influence is explicitly provided for (Article 3). Finally, the term of office of

all members of the Monetary Policy Council will be six years, whilst the grounds for dismissal for

the  Governor  and  the  two  Deputy  Governors  are  in  conformity  with  those  mentioned  in

Article 14.2 of the Statute. The above elaboration of the principle of central bank independence

generally  corresponds  in  a  straight-forward  and  transparent  manner  with  features  of  central

bank independence which the EMI has developed in its 1995 and 1996 Convergence Reports.

There are, however, three issues which require further attention. The first two remarks relate to

the security of tenure of members of the Monetary Policy Council other than the Governor and

the two Deputy Governors.

Firstly, the grounds for dismissal for such other members as laid down in Article 6.3 of the draft

law do not fully correspond with those mentioned in Article 14.2 of the Statute. They contain an

addition  (“in  particular  of  violation  of  the  duties  and  obligations  conferred  upon  him  under  the

provisions  in  force,  the  provisions  of  the  present  law  and  the  Statute  of  the  Bank  of  Greece”)

which, also in view of the current wording of Articles 22 and 24 of the statute of the Bank, are

not in line with Article 14.2 of the ESCB Statute. For reasons set out in the EMI's 1995 and 1996

Convergence  Reports  (see,  for  example,  Chapter  II,  paragraph  2.2,  of  the  1996  Convergence

- 3 -

Report), the grounds for dismissal for all members of NCB's decision making bodies involved in

the  performance  of  ESCB-related  tasks  should  be  compatible  with  those  mentioned  in  Article

14.2  of  the  Statute,  unless  the  degree  of  actual  involvement  in  the  performance  of  such  tasks

would justify a certain differentiation.

Secondly, Article 6.3 provides that the initial and replacement terms of office of members of the

Monetary  Policy  Council  other  than  the  Governor  and  the  Deputy  Governors  are  below  the

minimum  term  of  office  of  five  years  referred  to  in  Article  14.2  of  the  Statute.  The  EMI

appreciates that the initial term of office may be inspired by the wish to create a rotation scheme

in order to strengthen independence from political authorities. At the same time, the EMI would

like  to  emphasise  that  each  individual  member  of  a  decision-making  body  involved  in  the

performance of ESCB-related tasks implies should have the same security of tenure.

Thirdly, it is noted that the competence of the Monetary Policy Council is restricted to monetary

policy and exchange rate policy matters and does not extend to all ESCB-related tasks as listed

in Article 3 of the Statute. The EMI understands from Article 5.3, second paragraph, of the draft

law that the remaining ESCB tasks will be executed by the Governor which does not encounter

any legal difficulties. However, the Greek legislative authorities may nevertheless wish to make

this more explicit in the draft law as the sentence “... the Governor shall retain the responsibilities

conferred upon him by the Statute of the Bank and the legislation in force” in Article 5.3 may not

be precise enough to avoid misunderstandings, particularly where the division of powers between

the Monetary Policy Council, the Governor and the General Council is concerned.

6.

As far as the integration of the Bank in the ESCB is concerned, the EMI notes that the draft law

attempts, through a general provision in Article 2.3, to eliminate any incompatibilities which may

in this area exist between the draft law on the one hand and the Treaty and the Statute on the

other  once  Greece  adopts  the  single  currency  in  accordance  with  the  Treaty.  The  EMI

acknowledges,  as  it  did  in  its  1995  and  1996  Convergence  Reports,  that  there  is  no  standard

method for adaptation, particularly not in the area of legal integration of NCBs in the ESCB. The

EMI  also  appreciates  that  there  may  be  practical  or  political  considerations  for  the  Greek

authorities  to  postpone  a  more  detailed  elaboration  of  statutory  integration  provisions  until  the

moment  arrives  that  Greece  adopts  the  single  currency.  However,  Article  108  of  the  Treaty

requires for reasons of legal clarity and certainty, the removal of incompatibilities and this, in the

view  of  the  EMI,  cannot  be  accomplished  through  a  general  provision  abolishing  incompatible

provisions without at the same time identifying them. The draft law contains various examples of

provisions which would need to be reviewed from a perspective of full integration of the Bank in

the ESCB, in spite of the general provision of Article  2 (3) of the draft law, for instance:

- 4 -

- The  reference  to  the  general  economic  policy  of  the  Greek  Government  (Article  1)  would

need to take account of Article 2 of the Statute.

- Paragraphs  (a),  (b)  and  (f)  of  Article  2  on  the  Bank’s  tasks  should  recognise  the  ECB’s

powers;  likewise,  the  power  of  the  Monetary  Policy  Council  to  define  and  implement

monetary  policy  (Article  6)  would  need  to  be  adapted  to  be  compatible  with  ECB’s

competences in this field.

- The need to produce an annual report on the monetary policy of the previous and the current

year (Article 4.1) would need to be reviewed in the light of the ECB's reporting obligations.

- Article  7.4  of  the  draft  law  contains  a  definition  of  monetary  financial  institutions  which

intends  to  be  in  line  with  definitions  at  a  Community  level  as  they  have,  inter  alia,  been

developed within the EMI. However, a uniform definition has not been developed yet as far

as institutions subject to minimum reserve requirements are concerned, whilst such definition

may  also  change  overtime.  In  order  to  avoid  the  need  to  amend  the  definition  in  the  future,

the Greek legislative authorities may therefore wish to refer to monetary financial institutions

“as defined by the EMI/ECB or in Community law”.

- The  provision  that  the  exchange  rate  policy  framework  shall  be  determined  by  the  Greek

Government  after  consultation  with  the  Bank  (Article  12.2)  will  have  to  be  adapted  once

Greece adopts the single currency in order to reflect the competence of Community bodies in

this field.

The EMI recognises that there may be various methods to accommodate the full integration of

the Bank in the ESCB in the process towards adoption of the single currency: a revision of the

Bank’s statute, amendments through Presidential Decrees or a combination thereof.

7.

Finally, the EMI notes with satisfaction that the draft law reflects the current state of thinking in

relation to issues such as the Statute requirement on lending against adequate collateral and the

abolition  of  the  zero  hour  rule  (retro-active  effect  of  insolvencies)  for  payment  systems.

Incidentally,  it  is  noted  that  the  abolition  of  the  zero  hour  rule  should,  under  the  Directive  on

Settlement  Finality  and  Collateral  Security  as  it  is  expected  to  be  adopted,  also  extend  to

payment  systems  other  than  the  one  operated  by  the  Bank  as  well  as  to  securities  settlement

systems, but this may of course also be accomplished through legislation other than the draft law,

particularly if the Bank is at this juncture the only relevant party in these areas.

8.

The EMI has not objections to this opinion being made public.

28 August 1997