Understanding Central Banks’ Role in Enlargement – Governance Issues

The EU’s enlargement policy is enshrined in the Treaty on European Union, which lays down the requirements for the accession of any European state. It is against this background that Southeastern European (SEE) national central banks (NCBs) strive to prepare for the challenges of enlargement. This paper relies on the practical experience with three EU accession support projects of the European System of Central Banks (ESCB) to draw a general EU accession road map for applicant countries on which the accession framework for an NCB should be based. During preaccession, an NCB would be well advised to develop governance to improve its decisionmaking capacity. In this paper, we have defined three forms of governance: First, good governance to ensure the fulfillment of economic, legal and institutional requirements; second, external governance for an NCB to participate in accession coordination at the national and EU level; and third, internal governance comprising operational and institutional changes inside an NCB. If NCBs do not pursue a consistent path toward good governance, they might – in the medium to long run – be affected by risks of a strategic, economic, operational and institutional nature. Thus, successful acceding NCBs make EU accession a top priority of their strategy. An NCB’s policy of coordination should be the key policy for effective central bank governance. We therefore recommend that an NCB establish an EU coordination mechanism, an EU coordinator, coordination guidelines and an EU Scenario Process to continuously implement the changes necessary for successful ESCB/EU membership. This process will be more effective if NCBs cooperate in technical projects and draw on the experience of other NCBs.