Deutsche Bundesbank
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Headquarters | Frankfurt, Hesse, Germany |
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Established | 1957 |
President | Joachim Nagel |
Central bank of | Germany (1990–present) West Germany (1957–1990) |
Currency | Deutsche Mark (1957–2002) |
Reserves | €219,86 billion (2021)[1] |
Preceded by |
|
Succeeded by | European Central Bank (1999)fn |
Website | www |
fn The Bundesbank still exists but many functions have been taken over by the ECB. |
The Deutsche Bundesbank (pronounced
The Bundesbank was the first central bank to be given full independence, leading this form of central bank to be referred to as the "Bundesbank model", as opposed, for instance, to the "New Zealand model", which has a goal (i.e. inflation target) set by the government. The Bundesbank was greatly respected for its control of inflation through the second half of the 20th century. This made the German Mark one of the most respected currencies, and the Bundesbank gained substantial indirect influence in many European countries.[citation needed]
History
Background (1948–1957)
The history of the Bundesbank is inextricably linked with the history of the German currency after the
1957–1990
The German "Basic Law" (constitution), which had come into force on 23 May 1949, placed an obligation on the German federal legislature to establish a federal bank responsible for the issue of bank notes and currency.[3] The legislature fulfilled this obligation by passing the Bundesbank Act (BBankG) of 26 July 1957, which abolished the two-tier structure of the central bank system.[4] The central banks of the Länder were now no longer independent note-issuing banks, but became regional headquarters of the Bundesbank, nevertheless retaining the title "state central bank" (Landeszentralbank).
The Central Bank Council remained the supreme decision-making body of the Bundesbank. It was now made up of the presidents of the central banks of the Länder and a board of directors based in Frankfurt. The Central Bank Council decided on the currency and credit policy and laid down rules for management. As the central executive body of the Bundesbank, the Directorate (Direktorium) was responsible for implementing the decisions of the Central Bank Council. The Directorate ran the bank and was, in particular, responsible for dealings with the federal government and its "special assets" (Sondervermögen), for transactions with credit institutes operating in the Federal republic of Germany, for currency transactions, and foreign commercial transactions, and for
The central banks of the Länder carried out business falling in their areas independently. The Bundesbank Act explicitly made them responsible for dealings with public bodies and credit institutes. The central Banks of the Länder also controlled the subsidiary bodies (Zweiganstalten), now called branches (Filialen). Overall management of each Land central bank was in the hands of its executive board (Vorstand), which as a rule consisted of the president and the vice-president of the bank.
1990–1993
In the wake of the
1993–2001
The Maastricht Treaty that came into force on 1 November 1993 laid the foundation for the European Economic and Currency Union (EECU). National responsibility for monetary policy was transferred, at the Community level, to the European System of Central Banks (ESCB), comprising the European Central bank (ECB) and the national central banks (NCBs) of the EU states. Until the ECB became fully responsible for currency in 2001, the Bundesbank had three governing bodies. The Central Bank Council (Zentralbankrat) was the supreme body of the Bundesbank. It was made up of:
- the Directorate, which comprised the president, the vice-president and six additional members. These eight people were nominated by the Federal Government (Bundesregierung)
- The nine presidents of the Landeszentralbanken. These were nominated by the Bundesrat.
The Directorate was the executive body of the Bundesbank, while all currency policy decisions were made by the Central Bank Council.
2001–present
In 2001 the ECB took over full control of currency. The Bundesbank Act was last amended in 2002 by the 7th Law Amending the Law on the Bundesbank of 30 April 2002, which gave the Bundesbank its current structure.
The Bundesbank today
This article is part of a series on the |
Politics of Germany |
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After the ECB took over responsibility for currency, the Bundesbank continued to exist. Its duties were redefined by the 7th Law amending the "Law on the German Bundesbank" of 30 April 2002, in Section 3 of the Bundesbank Act:[5]
- The Bundesbank, being the central bank of the Federal Republic of Germany, is an integral part of the European System of Central Banks (ESCB). It shall participate in the performance of the ESCB's tasks with the primary objective of maintaining price stability, and shall arrange for the execution of domestic and international payments. In addition, it shall discharge the duties assigned to it under this Act or other legislation.
Unlike other central banks such as the Bank of England and the U.S. Federal Reserve (but like the ECB), the Bundesbank is not officially responsible for maintaining the stability of the financial system and is not a lender of last resort.[6] For 2022, the Bundesbank recorded its first loss since 1979.[7]
Based on the Bundesbank Act and the ECB Statute, the Bundesbank has four areas of activity, which it mostly handles jointly with the ECB:
The Bundesbank as a note-issuing bank
As a note-issuing bank, the Bundesbank provides the economy with cash, and ensures the physical circulation of cash. It checks the cash delivered by banks and money transport companies, removes counterfeit money from circulation and hands it to the police. It changes D-Mark holdings still in circulation, without any time limit and replaces damaged or mutilated notes (National Analysis Centre for Counterfeit and Damaged Banknotes and Coins). It also issues information on the safety mechanisms for notes and coins and issues a weekly bulletin on the volume of cash in circulation.
The Bundesbank as the banks' banker
In relation to the commercial banking system, the Bundesbank has two functions:
Clearing house for commercial banks
Firstly, the Bundesbank is a refinancing source and clearing house for the commercial banks. The commercial banks can use what are known as "refinancing instruments" to cover their needs for central bank money through the Bundesbank and the ECB. Until the end of 1998, the control of the money supply by this method was one of the main tasks of the Bundesbank. Since 1 January 1999, one of the principal aims of the ECB has been to maintain price stability by means of its monetary strategy. Commercial banks can deposit money that is temporarily surplus to requirements with the Bundesbank/ECB (known as a deposit facility). The Bundesbank supports cross-border payments between domestic and foreign commercial banks, for instance by means of the German real time gross transfer system RTGSplus and TARGET2.
Bank supervision
The bank also helps to regulate commercial banks, in close cooperation with the German financial regulatory agency the
The Bundesbank as the state's banker
As the state's banker, the Bundesbank provides accounts and performs normal banking services for federal, state (Land) and local authorities, as well as for the statutory
The Bundesbank as the keeper of the currency reserves
Structure
The Bundesbank has nine regional headquarters in the
- Frankfurt – federal headquarters, also governing the state of Hesse.
- Stuttgart, governing the state of Baden-Württemberg
- Munich, governing the state of Bavaria
- Berlin, governing federal city Berlin and the state of Brandenburg
- Hanover, governing the states of Bremen, Lower Saxony and Saxony-Anhalt
- Hamburg, governing the states of Hamburg, Mecklenburg-Vorpommern and Schleswig-Holstein
- Düsseldorf, governing the state of North Rhine-Westphalia
- Mainz, governing the states of Rhineland-Palatinate and Saarland
- Leipzig, governing the states of Saxony and Thuringia
Governance
The executive board (Vorstand) is the supreme governing body of the Bundesbank. It comprises:
Presidents of the Bundesbank
Presidents of the predecessors to the Bundesbank
- 1948–1957: Karl Bernard , Chairman of the Central Bank Council (Zentralbankrat) of the Bank deutscher Länder
- 1948–1957: Wilhelm Vocke , President of the Directorate of the Bank deutscher Länder, from 1 August 1957
Presidents of the Bundesbank
- 1958–1969: Karl Blessing
- 1969–1977: Karl Klasen
- 1977–1979: Otmar Emminger
- 1980–1991: Karl Otto Pöhl
- 1991–1993: Helmut Schlesinger
- 1993–1999: Hans Tietmeyer
- 1999–2004: Ernst Welteke
- 2004: Jürgen Stark, interim president
- 2004–2011: Axel A. Weber
- 2011–2021: Jens Weidmann
- Since 2022: Joachim Nagel
Current Executive Board of the Bundesbank
The Bundesbank's decision-making body is the executive board. According to current regulations, it comprises the President, the vice-president and four other members. As of November 2022[update], its membership is as follows:[11]
- Joachim Nagel (President)
- Claudia Buch(vice-president)
- Johannes Beermann
- Joachim Würmeling
- Burkhard Balz
- Sabine Mauderer
Disputes between the Bundesbank and the government
The statutory independence of the central bank guaranteed by the Bundesbank Act does not ensure that there will be no disputes between the central bank and government.
Dispute over currency union with East Germany
One particularly public dispute was in the lead-up to German re-unification. When a customs union was created between the former East Germany (
The Bundesbank in the news
In 2004 the president of the Bundesbank, Ernst Welteke, resigned after the press published allegations that his hotel bills for a New Year celebration had been paid by a commercial bank and he was criticized for his handling of the affair. There were also some allegations that this was part of a political intrigue to remove Welteke from office because he opposed selling Bundesbank gold reserves, as desired by the government. After Pöhl (see above), Welteke was the second Bundesbank president to resign.[13][14]
On Wednesday, 24 February 2016, as part of the
Involvement in the European sovereign debt crisis
In June 2012, it was estimated that the Bundesbank had €644 billion exposure to other central banks in the eurozone under the TARGET2 payment system. Only three other eurozone central banks had net exposure from the system; all others had the offsetting net exposure due to the system. The net exposure finances trade imbalances and capital flight.[16] The Bundesbank is the largest shareholder of the European Central Bank. The ECB has bought up more than €200 billion in sovereign debt from crisis-ridden countries. Some of this would have to be written off in the case of a euro collapse, which would entail corresponding losses for the Bundesbank.[17]
On 27 January 2014, the Bundesbank called for a capital levy on citizens of a nation before that nation applies for relief under the
Publications of the Bundesbank
The Bundesbank produces a number of regular publications and statistics (see Web site)
See also
- Economy of Germany
- German mark
- List of central banks
References
- ^ Weidner, Jan (2017). "The Organisation and Structure of Central Banks" (PDF). Katalog der Deutschen Nationalbibliothek.
- ^ Buba: Blowing the Whistle on Big Bubba's Gold Manipulators?
- ^ Article 88 of the Grundgesetz, translation of the version as amended to take account of the European Union
- ^ Bundesbank Act Archived 5 October 2006 at the Wayback Machine (in English)
- ISBN 3-932002-96-2(in English)
- ^ Alessandro Prati and Garry J. Schinasi: Ensuring Financial Stability in the Euro Area, in IMF quarterly publication Finance & Development, December 1998, Volume 35, Number 4 [1]
- ^ Balazs Koranyi and Franceso Canepa (1 March 2023), Bundesbank posts first loss in over four decades as higher rates bite Reuters.
- ^ Memorandum of Understanding relating to Cooperation between the Bundesanstalt für Finanzdienstleistungsaufsicht and the Bundesbank regarding the supervision of credit and financial services institutions Archived 26 October 2006 at the Wayback Machine
- ^ "Jobs and careers – Staff statistics". Bundesbank. Archived from the original on 29 September 2007.
- ^ "Organisation of the Deutsche Bundesbank". Deutsche Bundesbank. Archived from the original on 21 May 2011. Retrieved 4 August 2010.
- ^ "Executive Board of the Deutsche Bundesbank". Deutsche Bundesbank. Retrieved 5 November 2022.
- ^ Pierre L. Siklos: Department of Economics and Viessmann Research Centre, Wilfrid Laurier University, Waterloo, ON: Frameworks for the Resolution of Government–Central Bank Conflicts: Issues and Assessment[permanent dead link]
- ^ "Welteke eckt mit "der Welt" an". Rhetorik.ch. Knill+Knill Kommunikationsberatung. 9 April 2004. Retrieved 9 December 2006.
- ^ "2004 – Das war's". DIE ZEIT online (in German). DIE ZEIT. 31 December 2004. Retrieved 9 December 2006.
- Fast Company. 24 February 2016.
- ^ Das, Satyajit, "Germany and France can’t afford euro-zone bailout", Commentary, MarketWatch, 7 June 2012. Retrieved 2012-06-07.
- ^ Böll, Sven; Hawranek, Dietmar; Hesse, Martin; Jung, Alexander; Neubacher, Alexander; Reiermann, Christian; Sauga, Michael; Schult, Christoph; Seith, Anne (25 June 2012). "Imagining the Unthinkable. The Disastrous Consequences of a Euro Crash". Der Spiegel. Translated by Sultan, Christopher. Archived from the original on 28 June 2012. Retrieved 26 June 2012.
- ^ a b Reuters: "Bundesbank calls for capital levy to avert government bankruptcies" 27 Jan 2014
Further reading
- Deutsche Bundesbank, ed. (1998). Fifty years of the Deutsche Mark: Central Bank and the currency in Germany since 1948 / with contributions by Ernst Baltensperger ... [et al.]; with a preface by Hans Tietmeyer ; and a foreword by Otmar Issing(Fünfzig Jahre Deutsche Mark. English.). Oxford: Oxford University Press. ISBN 0-19-829254-6.
- Frowen, Stephen F.; Pringle, Robert, eds. (1998). Inside the Bundesbank. foreword by Hans Tietmeyer. Basingstoke: Macmillan in association with Central Banking. ISBN 978-0-333-69988-1.
- Gailhofer, Sunna, ed. (2020), The Past Becomes the Future: The Deutsche Bundesbank's Central Office in Frankfurt am Main (PDF), Frankfurt am Main: Deutsche Bundesbank, ISBN 978-3-95729-768-6
- Marsh, David (1992). The Bundesbank: The Bank That Rules Europe. London: Heinemann. ISBN 0-434-45116-9.
- Die Deutsche Bundesbank. Aufgabenfelder, Rechtlicher Rahmen, Geschichte, Selbstverlag der Deutschen Bundesbank: Frankfurt am Main, April 2006, ISBN 3-86558-151-X (PDF) (in German)
External links
- Official website (in German, English, and French)