Commission Opinion ECB recommendation ECB/2003/1 of 3 February 2003 for a Council Decision on an amendment to Article 10.2 of the Statute of the ESCB/ECB (based on Article 10.6 of the Statute)
Date: 2003-02-19
Institutions: European Commission
Subjects: European Central Bank, European System of Central Banks, central bank, decision-making body (EU), governance, vote

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 19.2.2003
COM(2003) 81 final

COMMISSION OPINION

ECB recommendation ECB/2003/1 of 3 February 2003
for a Council Decision
on an amendment to Article 10.2 of the Statute of the ESCB/ECB
(based on Article 10.6 of the Statute)

EXPLANATORY MEMORANDUM

A.

General

The  European  Council  in  Helsinki  (10  and  11  December  1999)  decided  to  convene  an
Intergovernmental  Conference  (IGC)  in  order  to  resolve  the  institutional  issues  left  open  in
Amsterdam  and  which  needed  to  be  settled  prior  to  enlargement.  The  IGC  started  its
proceedings in February 2000 and was concluded in Nice in December 2000.

As far as the European Central Bank (ECB) is concerned, the IGC concluded in Nice inserted
an  “enabling  clause”,  in  the  form  of  a  new  Article  10.6,  into  the  Statute  of  the  ESCB/ECB
(hereinafter referred to as 'the Statute'), allowing the Council, in the composition of the Heads
of  State  or  Government,  to  amend  Article  10.2  of  the  Statute  by  unanimity.  This  Article
defines the voting rules applying within the Governing Council. The IGC moreover indicated
(cf. Declaration No 19) that it expected a Recommendation within the meaning of Article 10.6
to be presented as soon as possible. The Nice Treaty  entered  into force on 1 February 2003
and, on 3 February 2003, the ECB tabled a formal Recommendation for a Council Decision
based on Article 10.6 of the Statute. This Article provides that both the European Parliament
and the Commission should provide an Opinion on the Recommendation.

The  reform  of  the  ECB’s  governance,  and  of  the  voting  rules  in  the  Governing  Council  in
particular, is of crucial importance in the light of enlargement, both for the future of the ECB
and for the euro area in general. The Governing Council is composed of the 6 members of the
Executive  Board,  together  with  the  governors  of  the  national  central  banks  of  the  Member
States  belonging  to  the  euro  area  (12  governors  at  present).  In  the  absence  of  reform,  each
successive enlargement of the euro area would result in an increase of the number of members
of  the  Governing  Council  with  a  voting  right,  accompanied  by  a  gradual  but  eventual
significant  weakening  of  the  efficiency  of  decision-making  within  the  ECB’s  highest  ruling
organ.

B.

The enabling clause (Art. 10.6 ECB): characteristics and limitations

As a general rule, and in accordance with Article 10.2 of the Statute, the Governing Council
takes its decisions by simple majority. Each member attending the meeting is allowed to vote
(“one member, one vote”) and the President has  a  casting  vote  in  the  event of  a tie.  Article
10.3 ECB describes the procedure for decisions taken on the basis of weighted votes, which
mostly relate to shareholding issues.

Article 10.6 of the Statute enables the Council only to amend the voting procedure described
in Article 10.2 of the Statute, while Art. 10.3 remains outside the scope of the enabling clause.
Similarly, the composition of the Governing Council and of the Executive Board, which are
defined in Article 10.1  and 11.1 respectively, cannot be amended on this  basis.  Neither  can
the responsibilities of both decision-making  bodies  be modified or  redistributed, since these
are defined in Article 12 of the Statute.

The  procedural  requirements  imposed  by  the  enabling  clause  are  stringent.  A  unanimous
decision by the Council, meeting in the composition of the Heads of State or Government, is
required. When based on a recommendation from the ECB, prior unanimous approval by the
ECB’s Governing Council is mandatory. Once a decision has been reached at Council level,
the text is sent to all Member States for ratification before it can enter into force.

2

C.

Presentation of the Commission’s Opinion

C.1. Requirements for good governance

In  preparing  its  Opinion,  the  Commission  has  been  guided  by  a  number  of  key
principles for a successful reform of the ECB’s internal governance:

– 

– 

– 

– 

decisions should continue to be taken in a swift and efficient manner;

the decision-making bodies should act with the interests of the whole euro area
in mind;

the  system  must  be  considered  as  neutral  and  unbiased  by  both  existing  and
future Member States;

the markets and the general public should be able to understand the logic and
the functioning of the new voting system.

C.2. Possible enhancements to the proposed 3-group model

At  the  present  stage,  the  total  number  of  voting  rights  in  the  Governing  Council
amounts to 18 (6 + 12). The proposed 3-group rotation model introduces a ceiling on
the  total  number  of  voting  rights  which  corresponds  to  21  (6  +  15),  possibly
increasing to 24 (6 + 18) during a transitional period. In view of the objectives of the
model, it might be useful to consider  a lower figure, as this could contribute to the
speed  and  efficiency  of  decision-making  within  the  ECB  and  hence  further
strengthen the model.

In  the  recommended  rotation  model,  the  allocation  of  governors  to  groups  will  be
based  on  a  new  indicator  with  two  components:  the  share  in  the  aggregate  gross
domestic product at market prices of the Member States without a derogation and the
share  in the total aggregated  balance sheet  of  the  monetary  financial  institutions  of
the  Member  States  without  a  derogation.  The  selection  of  the  first  component  is
uncontested. In the context of an enlarged European Union covering a large variety
of  countries,  “population”  could  have  been  a  second  component.  The  Commission
recommended  the  “population”  criterion  as  particularly  relevant  for  reforming  the
voting rules in other institutions (notably the Council) in its opinion COM(2000)341
which it issued on 26 January 2000, in accordance with Article 48 EC, convening an
IGC  for  the  preparation  of  the  Treaty  of  Nice.  As  such,  the  ECB’s  key  for  capital
subscription  as  defined  in  Article  29.1  of  the  Statute  could  be  used.  The  latter  is
based on a GDP component and a population component, each having an equal 50%
weight, and ensures a representative allocation of the euro area Member States to the
different groups.

Furthermore,  on  a  number  of  points,  the  drafting  of  the  new  Article  10.2  of  the
Statute could be further clarified and be made more explicit:

1 

"Adapting the Institutions to make a success of enlargement" - Commission opinion in accordance with
Article 48 of the Treaty on the European Union on the calling of a Conference of Representatives of the
Governments of the Member States to amend the Treaties (COM(2000)34 final).

3

                                                
– 

– 

– 

– 

rotation  frequency:  Whilst  the  recommendation  indicates  that  within  each
group,  the  governors  will  have  their  voting  rights  for  equal  amounts  of  time,
the  duration  is  not  explicitly  specified.  In  addition,  it  is  not  ensured  that  the
rotation frequency will be identical for each of the three groups.

allocation  of  voting  rights  to  governors  within  each  group:  Given  that  each
group will have less voting rights  than  governors,  the voting sequence  within
each  group  will  need  to  be  decided.  It  would  be  inappropriate  to  settle  every
detail  in  the  new  Article  10.2 of  the  Statute;  a  certain  degree  of  discretion
should be left to the Governing Council. However, certain principles could be
formalised  for  transparency  reasons.  For  instance,  voting  priority  could  be
given  within  each  group  to  governors  who  have  not  voted  for  the  longest
amount of time or to the countries with the highest rank.

clarity  and  transparency  vis-à-vis  markets  and  the  general  public:  Full  and
timely information on the identity of the decision-makers at different moments
in  time  will  be  important  for  many  outside  parties,  notably  financial  market
operators  and  the  media.  In  view  of  the  relative  complexity  of  the  3-group
model, it will be important that decisions on rotation are  taken and announced
well in advance and in a transparent manner.

effective  start  of  the  rotation  system:  At  the  present  stage,  it  is  not  yet  fully
clear when rotation will effectively start. While the number of governors with a
voting  right  is  in  principle  limited  to  15,  it  appears  that  this  limit  will  not
necessarily  apply  as  soon  as  the  number  of  governors  exceeds  15,  since  the
start  of  the  rotation  system  might  be  delayed  until  there  are  more  than  18
governors.  The  clarity  of  the  model  would  definitely  improve  if  the  effective
start of rotation and/or the existence of a possible transitional regime would be
defined in an explicit manner, rather than postponed and left to the discretion
of the Governing Council.

D.

Further considerations on ECB governance

The Nice Treaty aimed at preparing the Community for enlargement, notably by anticipating
the institutional consequences of the accession of 12 new Member States. As far as the ECB
is  concerned,  the  IGC  preferred  to  introduce  an  “enabling  clause”,  rather  than  to  agree  on
detailed arrangements during the Conference. This has allowed for more time to  prepare  the
ECB’s governance reform. Conversely, it has reduced the scope for possible  modifications.

The 3-group rotation model recommended by the ECB fully responds to the mandate received
in  Nice.  It  prepares  the  ECB  for  a  substantially  enlarged  euro  area.  Despite  the  limitations
imposed  by  the  enabling  clause,  both  in  terms  of  procedure  and  of  substance,  the  ECB  has
come up with a model which effectively reduces the total number of voting  rights  exercised
within the Governing Council. This model has been judged acceptable by all the members of
the Governing Council.

The Nice Treaty, and the preceding Amsterdam Treaty, are steps in a wider process leading to
the preparation of the European Union, and of its Institutions, for the future. Already in Nice
(see  Declaration  No  23),  the  Heads  of  State  or  Government  declared  that  “…  a  deeper  and
wider debate was necessary …”, and announced a new IGC in 2004. The European Council in
Brussels (14-15 December 2001) decided to establish a Convention on the Future of Europe
(Laeken  Declaration).  As  far  as  the ECB is  concerned,  this  opens  the  possibility  for  further

4

reflection  on  the  voting  modalities  in  the  Governing  Council  and  possible  changes  going
beyond Article  10.2  of  the  Statute.  More  generally,  the  model  proposed  by  the  ECB  should
not be seen as a possible precedent for the future composition and decision-making process of
other Community institutions.

In  particular,  the  Commission  considers  that  further  attention  should  usefully  be  paid  to
decision-making on monetary policy.  In this context, thought could usefully  be  given to  the
creation  of  a  “monetary  policy  board”.  It  would  operate  under  the  overall  guidance  of  the
Governing Council but no longer would all the members of the Governing Council have the
right to be present during the meetings of the “monetary policy board”. The Executive Board,
possibly enlarged, would be assigned a core responsibility in the monetary policy decisions. It
would  furthermore  be  appropriate  to  modify  the  current  rules  for  appointment  of  the
Executive Board  (Article  112  (2)(b)  EC) and to  replace  unanimity  by  qualified  majority.  In
both cases, the necessary amendments to the Treaty can only be implemented through an IGC.

5

COMMISSION OPINION

on ECB recommendation ECB/2003/1 of 3 February 2003 for a Council Decision
on an amendment to Article 10.2 of the Statute of the ESCB/ECB
(based on Article 10.6 of the Statute)

The European Central Bank (ECB) adopted a Recommendation for a Council Decision on an
amendment to Article 10.2 of the Statute of the ESCB and the ECB (hereinafter referred to as
'the  Statute')  on  3  February  2003,  based  on  Article  10.6  of  the  Statute.  In  a  letter  dated  11
February  2003, 
this
Recommendation. The Commission has adopted the following opinion.

the  Council  requested 

the  Commission  on 

the  Opinion  of 

1. 

The  Commission  notes  that  the  Recommendation  is  aimed  at  allowing    the  ECB’s
decision-making structures to cope with a future significant enlargement of the euro
area. In this respect, the Commission considers that the following conditions need to
be met in order to provide for a successful reform of the ECB’s governance structure:

– 

– 

– 

– 

decisions should continue to be taken in a swift and efficient manner;

the decision-making bodies should act with the interests of the whole euro area
in mind;

the  system  must  be  considered  as  neutral  and  unbiased  by  both  existing  and
future Member States;

the  markets  and  the  media  should  be  able  to  understand  the  logic  and  the
functioning of the new voting system.

The  proposed  3-group  rotation  model  is  intended  to  ensure  that  the  Governing
Council, which constitutes the ECB’s highest ruling organ,  can continue to  take  its
decisions swiftly and efficiently, in the perspective of a  significant expansion of the
euro  area  in  the  years  to  come.  As  from  the  moment  on  which  the  number  of
governors from the different national central banks of the euro area exceeds a certain
number,  the  number  of  voting  rights  in  the  Governing  Council  will  no  longer  be
allowed  to  rise  but  will  be  limited  to  a  maximum  number  (21  voting  rights,  and
possibly 24 during a transitional  period).  In this  respect,  the Commission  considers
that it might be advisable to reduce the maximum number of voting rights in order to
further strengthen the speed and efficiency of decision-making.

The  Commission  notes  that  in  the  recommended  rotation  model  the  allocation  of
governors to groups will be based on a new indicator with two components: the share
in  the  aggregate  gross  domestic  product  at  market  prices  of  the  Member  States
without  a  derogation  and  the  share  in  the  total  aggregated  balance  sheet  of  the
monetary financial institutions of the Member States without a derogation. Whilst the
selection  of  the  first  component  is  justified,  the  Commission  remarks  that  it  has

2. 

3. 

6

recommended2  to  the  Intergovernmental  Conference  leading  to  the  Treaty  of  Nice,
the  population  criterion  as  particularly  relevant  for  reforming  the  voting  rules  in
other  Institutions  (notably  the  Council).  As  such,  the  ECB’s  key  for  capital
subscription  as  defined  in  Article  29.1  of  the  Statute  could  be  used.  The  latter  is
based on a GDP component and a population component, each having an equal 50%
weight.  In  the  Commission’s  view,  this  indicator  would  lead  to  an  allocation  of
Member States to the different groups more in line with the third criterion presented
in paragraph 1.

The  Recommendation  concerning  Article  10.2  of  the  Statute  should  be  further
clarified  on  some  key  points.  This  concerns  in  particular  the  frequency  of  rotation
and  the  sequence  to  be  followed  for  assigning  voting  rights  to  governors  within  a
group. Furthermore, given that these amendments still provide for a certain degree of
discretion  for  the  Governing  Council,  it  will  be  important  that  its  decisions  on
rotation  are  taken  and  announced  well  in  advance  and  in  a  transparent  manner.
Similarly, the starting time of the rotation system should be explicitly mentioned in
the  text.  The  Commission  considers  that  these  additions  would  help  to  clarify  the
operational content of the model.

The  Commission  notes  that  the  “enabling  clause”  Article  10.6  of  the  Statute
exclusively  allows  for  the  amendment  of  Article  10.2  and  requires  unanimous
approval by the Council, which constitutes an important limitation to the reform of
the ECB’s governing structures. This prevents the consideration of broader changes
going beyond Article 10.2 at this stage.

The model presented by the ECB constitutes an important step in the adjustment of
its  decision-making  capacity  in  view  of  enlargement  even  though  it  does  not  fully
meet the different criteria laid down in paragraph 1. At the same time, it should be
recognised  that  more  comprehensive  adaptations,  for  example  as  regards  decision-
making in the area  of monetary policy,  and the role  of the  Executive  Board  in  this
respect,  cannot  be  undertaken  on  the  basis  of  the  enabling  clause,  but  can  only  be
realised in the wider framework of the Convention and the IGC.

4. 

5. 

6. 

2 

"Adapting the Institutions to make a success of enlargement" - Commission opinion in accordance with
Article 48 of the Treaty on the European Union on the calling of a Conference of Representatives of the
Governments of the Member States to amend the Treaties (COM(2000)34 final).

7