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National central banks and the governance of the European system of central banks

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  • Martin F. Hellwig

    (Max Planck Institute for Research on Collective Goods, Bonn)

Abstract

The paper analyses the role of national central banks (NCBs) in the governance of the European System of Central Banks (ESCB). NCBs are the owners of the European Central Bank (ECB), and their governors dominate the ECB’s Governing Council, but in monetary policy operations, NCBs are subordinated to the ECB. The dominance of NCB governors has materially affected Governing Council decisions on relations between NCBs and the ECB, allowing the NCBs to maintain some of their erstwhile glory, sometimes in contradiction to the primary law. Examples involve the monetary funding of investments declared as non-monetary, violations of Treaty provisions for the allocation of income from monetary policy operations, and accounting rules that obfuscate the boundary between ECB-subordinate and independent activities of NCBs. The net effect of these developments is to enlarge the domain of NCB activities.

Suggested Citation

  • Martin F. Hellwig, 2024. "National central banks and the governance of the European system of central banks," Discussion Paper Series of the Max Planck Institute for Behavioral Economics 2024_07, Max Planck Institute for Behavioral Economics.
    • Handle: RePEc:mpg:wpaper:2024_07
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    References listed on IDEAS

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    1. repec:ucp:bkecon:9780226519999 is not listed on IDEAS
    2. Peter Conti-Brown, 2016. "The Power and Independence of the Federal Reserve," Economics Books, Princeton University Press, edition 1, number 10576, December.
    3. Martin Hellwig, 2015. "Financial Stability and Monetary Policy," Discussion Paper Series of the Max Planck Institute for Behavioral Economics 2015_10, Max Planck Institute for Behavioral Economics.
    4. Martin F. Hellwig, 2014. "Yes Virginia, There is a European Banking Union! But It May Not Make Your Wishes Come True," Discussion Paper Series of the Max Planck Institute for Behavioral Economics 2014_12, Max Planck Institute for Behavioral Economics.
    5. Acharya, Viral V. & Steffen, Sascha, 2015. "The “greatest” carry trade ever? Understanding eurozone bank risks," Journal of Financial Economics, Elsevier, vol. 115(2), pages 215-236.
    6. Martin Hellwig, 2007. "Switzerland and Euroland: European Monetary Union, Monetary Stability and Financial Stability," Discussion Paper Series of the Max Planck Institute for Behavioral Economics 2007_9, Max Planck Institute for Behavioral Economics.
    7. Sinn, Hans-Werner, 2017. "The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs," OUP Catalogue, Oxford University Press, number 9780198791447.
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    Cited by:

    1. Paul Dermine & Menelaos Markakis, 2025. "Hybrid Governance Structures and Monetary Policy: The Legal and Institutional Position of National Central Banks in the Eurosystem," Politics and Governance, Cogitatio Press, vol. 13.

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    Keywords

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    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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