Text B. Success of ECB critical for banking industry

The ECB is run by a six-member executive board headed by the ECB President and Vice-president. The four other members are in charge of payment systems, banking supervision, international relations, organisation, statistics, banknotes and information systems. The ECB took over from national central banks in setting interest rates from January 1999. Interest rates are now set by the ECB’s governing council which consists of the six-member executive board and the presidents of the national central banks of the participant countries.

The all-powerful council will ensure the continued influence of national central banks in the decision-making process. The majority of the presidents of the NCBs versus the six ECB “insiders” will ensure that national interests will not be ignored under EMU.

Some critics have argued that this could give rise to a potentially destabili-sing situation. The ECB’s legal mandate is to pursue monetary policy with a view to the whole of the EMU area and without favouring one country over another. Yet if several national central bank presidents were to form voting pacts, they could in theory outmanoeuvre the six executives.

Compared to the national central banks, the ECB will be relatively small. While the Bank of France and the Bundesbank each employ more than 10,000 staff, the ECB will have to do with only 500 employees. The comparison is not entirely fair because the ECB’s staff will be primarily engaged in research, security and payments systems, while most of the staff at NCBs are involved in areas such as logistics and administration.

Because the national central banks will remain large and important, the transition to the new regime will not mark a sudden shift. The Bundesbank will continue to exist and fulfil all its current functions except setting interest rates.

from Financial Times

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