Eight European Central Banks (RLE Banking & Finance)

Organization and Activities

Various

• Publisher: Taylor & Francis
• Year: 2012
• Print ISBN: 9780415523332
• eBook ISBN: 9781136297007
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Uniquely written from inside the banking world this book gives a comprehensive account of the organization and activities of the major central European banks during the 1980s. Each of the individually authored chapters has been written to a common pattern in order to facilitate reference and comparison. Each also contains an annex with a specimen return of the bank in question and brief explanatory notes on the various items.

BANQUE DE FRANCE

I
ORIGINS AND LEGAL FRAMEWORK

FOUNDATION, NOTE-ISSUING PRIVILEGE

1. When the Bank of France first opened for business on February 20, 1800, its operations were confined to discounting, deposit business and the issuing of notes payable to bearer or promissory notes; it had no legal status or privileges. Even in the capital city itself there were several other institutions performing similar operations.

Three years later, under the law of 24th Germinal of the year XI (April 14, 1803), the Bank was granted its first official charter and a note-issuing monopoly in Paris. In its basic statutes, dated January 16, 1808, provision was made for the creation of discount offices ‘in such towns in the départements where they are deemed to be necessary in the interests of business’, and by the decree of September 8, 1810, the Bank was empowered to exercise its note-issuing privilege in these towns ‘in the same way’ as in Paris. Some forty years elapsed, however, before, as a result of the gradual elimination or absorption of the various institutions which issued notes payable to bearer, the privilege conferred upon the Bank became in effect a monopoly extending over the whole country. This situation was not legally ratified until 1936 (see Article 98 of the Codified Statutes).

In the meantime, the Bank's privilege, which was granted on a temporary basis for periods of varying length, was several times renewed by means of legislation. Under the law of December 20, 1918, it was due to expire on December 31, 1945, but in the law of December 2, 1945, nationalizing the Bank provision was made for it to continue indefinitely to be ‘the sole institution responsible for issuing bank-notes in the entire metropolitan area’ (Article 1, paragraph 2).

In addition to its Head Office, the Bank of France at present has 159 provincial branches (succursales), 3 Parisian branch offices (bureaux de quartier) and 97 sub-offices (bureaux auxiliaries).

CAPITAL

2. During the first half of the nineteenth century the Bank's capital, which was initially fixed at 30 million francs¹ in ‘metallic currency’, was increased several times, in particular following upon the absorption of the banks of issue in the départements. Since then it has been raised twice, the first time, pursuant to the law of June 9, 1857, to 182,500,000 francs, and subsequently, by the decree of August 26, 1959,² approving a resolution, dated July 9, 1959, of the General Council of the Bank, to 15 milliard old francs, i.e. 150 million in terms of the new monetary unit. The latter increase was effected by means of an appropriation from the Bank's free reserves.

The capital is divided into 300,000 shares of a nominal value of F500 each; since January 1, 1946 (under the law of December 2, 1945, Article 1), these have been held by the state.³

The responsibility for determining the dividend to be paid on the shares rests, as it always has done, with the General Council.⁴

RELATIONS WITH THE STATE

3. Apart from transferring ownership of the shares to the state, the nationalization of the Bank has not affected its position in relation to the public authorities. There is no legislation providing for government intervention, in any form whatsoever, in the conduct of the Bank's business or empowering the government to issue general policy directives to be complied with by the Bank.

The absence of any such legislation has enabled the Bank to retain complete independence in its current day-to-day management. In effect, the very close relations that exist between the public authorities and the Bank are founded on tradition and involve constant contact between the Minister of Finance and the Governor of the Bank. Whenever matters of importance affecting the Bank's activity or requiring its intervention are concerned, no important decision is taken by the one without previous consultation with the other.

LEGAL STATUS

4. As the Bank's rôle and operations grew in scope, the basic statutes of 1808 were supplemented and amended by laws, decree-laws, conventions or treaties concluded between the Minister of Finance and the Bank and sanctioned by legislation.¹ This new legislation was merely additional to the basic statutes, the original wording of which remained unaltered. The Bank's charter was thus made up of a very complex structure of legal and statutory provisions, the most recent of which merely referred back to earlier legislation.

In order to put an end to this situation, a law was enacted on July 24, 1936, prescribing that all legislative and statutory provisions governing the Bank of France should be codified by decree. This codification is dated December 31, 1936, and incorporates the texts of 53 laws, decrees and conventions.

Since 1936, however, the former practice has been reverted to; the Codified Statutes have not been brought up to date,² although a large number of clauses have been explicitly amended or abrogated, have lapsed as a result of the adoption of new legislation, particularly the Nationalization Law, or are no longer operative.

To avoid undue detail in the sections relating to the Bank's organization and operations, the references will henceforth do no more than indicate the texts which should be consulted in each instance. The codification of 1936 will be referred to by the letters C.S. (Codified Statutes).

¹ In this chapter the term ‘franc’ designates both the monetary unit in circulation prior to January 1, 1960, and the new unit introduced on that date (see section 38), which is equal in value to 100 of the former units. To avoid con-fusion, however, the term ‘old franc’ has been used when the figures refer to dates close to the time of the changeover.

² Whereas until 1958 the Bank's statutes could be amended only by legislation, under Article 34 of the 1958 Constitution only the regulations concerning the currency issue now remain within the legislative sphere and other matters concerning the Bank are to be regulated by decrees issued after consulting the Council of State.

³ The Bank's shareholders were compensated by the allotment of registered negotiable bonds of a nominal value of 7,000 old francs, bearing interest at 3 per cent and redeemable over twenty years by drawings. The interest is paid by the Bank and guaranteed by the Treasury; the latter is responsible for the redemption of the bonds.

⁴ The General Council's powers in this matter are, however, subject to two limitations: 25 per cent of the profits resulting from the raising of the discount rate above the level of 5 per cent is placed to reserve and the remainder is paid to the Treasury; all the profits resulting from the raising of the rate for advances above the level of 6 per cent are placed to reserve (Articles 161 and 162 of the Codified Statutes).

¹ Up to 1958. See footnote 2 on page 125.

² Article 3 of the law of December 2, 1945, provided for a revision of the Bank's statutes, but this has not yet taken place.

II
FUNCTIONS AND OBJECTIVES

5. The Bank of France, which at the outset was simply a Parisian discount, deposit and issuing bank, has only gradually and, in the main, over the last three decades become a Central bank’ in the present-day sense of the term. It has developed in this way without there ever having been any legal definition, in general terms, of its duties and objectives. In order, therefore, to list the main functions which now devolve upon the Bank, reference must be made to the various legal and statutory provisions and the traditional practices which govern its activity:

(a) The Bank has the sole right to issue bank-notes in the entire metropolitan area. It is responsible for creating the necessary note reserves, maintaining the note circulation and regulating its volume and composition in accordance with the country's requirements. It also has to facilitate book transfers and settlements of funds.

(b) It is the banks’ lender of last resort.

(c) It supervises the trend of bank credit and tries to adjust its overall volume to the needs of the economy and to ensure a sound and judicious distribution of short and medium-term credits. For this purpose it makes use of the powers which it is assigned by its statutes and those which it exercises on behalf of the National Credit Council. Its supervision in this field is supplemented by action in the money market with the same objects in view.

(d) Acting on behalf of the National Credit Council, it takes the decisions required to regulate the banking profession and banking practice and ensures their implementation.

(e) In its capacity as administrator of the Exchange Stabilization Fund for the Treasury it watches the gold and foreign exchange markets and intervenes, when necessary, to regulate the rates.

(f) It is the sole bank to handle cash in-payments and out-payments to and from the Treasury and transfers of Treasury funds. It also receives on behalf of the Treasury subscriptions to all types of government issues.

(g) It gives the government technical assistance in all matters falling within its competence. This co-operation takes place at all levels: the Governor is in constant touch with the Minister of Finance; the departments of the Bank have frequent dealings with the government departments concerned with economic and financial affairs and, where expedient, take part in their research work and other activities.

III
STRUCTURE AN D ADMINISTRATION

ADMINISTRATIVE ORGANS

6. The administration of the Bank and its affairs comes under the authority of the Governor and the General Council (assisted by the Discount Board). Before nationalization there...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Foreword
• Contents
• Banque Nationale de Belgique
• Deutsche Bundesbank
• Bank of England
• Banque de France
• Banca d'Italia
• Nederlandsche Bank
• Schweizerische Nationalbank
• Sveriges Riksbank