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Deutsche Bundesbank

May 04, 2023

The Deutsche Bundesbank (pronounced [ˈdɔʏtʃə ˈbʊndəsˌbaŋk]), literally "German Federal Bank", is the central bank of the Federal Republic of Germany and as such part of the European System of Central Banks (ESCB). Due to its strength and former size, the Bundesbank is the most influential member of the ESCB. Both the Bundesbank and the European Central Bank (ECB) are located in Frankfurt, Germany. It is sometimes referred to as "Buba" for Bundesbank,[2] while its usual abbreviation is BBk in Germany and internationally DBB.

Deutsche Bundesbank
HeadquartersFrankfurt, Hesse, Germany
Established1957
Ownership100% state ownership[1]
PresidentJoachim Nagel
Central bank ofGermany (1990–present)
West Germany (1957–1990)
CurrencyDeutsche Mark (1957–2002)
Reserves€219,86 billion (2021)[1]
Preceded by
Succeeded byEuropean Central Bank (1999)fn
Websitewww.bundesbank.de
fn The Bundesbank still exists but many functions have been taken over by the ECB.

The Bundesbank was established in 1957 and succeeded the Bank deutscher Länder, which introduced the Deutsche Mark on 20 June 1948. Until the euro was physically introduced in 2002, the Bundesbank was the central bank of the former Deutsche Mark ("German Mark", sometimes known in English as the "Deutschmark").[citation needed]

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.[citation needed] Nowadays, the ECB also uses the Bundesbank model, making the concept the foundation of the entire Euro system.

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.

History of the Bundesbank as an organization

For the history of German central banks, see Reichsbank.

1948–1957

 
Headquarters in Frankfurt (since 1972)

The history of the Bundesbank is inextricably linked with the history of the German currency after the Second World War. Following the total destruction after the war, the old Reichsmark was practically worthless, and a currency reform was implemented in the western occupation zones including West Berlin: on 21 June 1948, the D-Mark, or Deutsche Mark, replaced the Reichsmark. The currency reform was based on laws enacted by the Allied military government. In preparation, the Western Powers established a new two-tier central bank system in the occupied zones; in its federal structure, it was modeled on the Federal Reserve System of the US. It comprised the central banks of the states (Länder) of the West German occupation zones and the Bank deutscher Länder in Frankfurt am Main, which was created on 1 March 1948. The central banks of the Länder acted as central banks within their areas of jurisdiction. The Bank deutscher Länder, whose share capital was held by the central banks of the Länder, was responsible for issuing bank notes, co-ordinating policy and various central tasks including management of foreign exchange. The supreme governing body of the two-tier central bank system was the Central Bank Council (Zentralbankrat) set up at the Bank deutscher Länder. It consisted of a president, the presidents of the central banks of the Länder and the president of the directorate (board) of the Bank deutscher Länder. Amongst other things, the Central Bank Council determined policy on bank rate and minimum reserve policy, open-market policy guidelines and granting of credit. After the negative experience with a central bank subject to government orders, the principle of an independent central bank was established. The Bank deutscher Länder was independent of German political bodies from the start, including the federal German government, which was active from September 1949. It achieved independence from the Allies in 1951.

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 open-market dealings. The Directorate was made up of the president and the vice-president of the Bundesbank and up to six additional members.

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 Fall of the Berlin Wall, the Federal Republic of Germany and the German Democratic Republic signed a treaty on 18 May 1990, that created an economic, social and currency union between the two German states; it came into force on 1 July 1990, and made the Deutsche Mark the sole legal tender in both German states. The Bundesbank was made responsible for money and currency policy within the whole of the currency union. A "Provisional Administration Body" was set up for the purpose of implementing the treaty, and this body continued to operate beyond the official date of reunification until 31 October 1990. The Bundesbank Act was amended to adjust the organizational structure of the Bundesbank to better match changed circumstances following German reunification, and at the same time streamline the organisation. The eleven central banks of the Länder and the Provisional Administrative Body were replaced by nine central banks of similar economic size.

1993–2001

 
A 10 DM note issued by the Bundesbank

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:

  1. the Directorate, which comprised the president, the vice-president and six additional members. These eight people were nominated by the Federal Government (Bundesregierung)
  2. 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

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]

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 Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).[7]

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 social security organizations. All such accounts are required to have a positive balance, i.e. the Bundesbank is not allowed to grant credits to the public sector. This is due to negative historical precedents in connection with the financing of two world wars by the Deutsche Reichsbank. It also carries out securities transactions for the federal government (Bundesfinanzagentur).

The Bundesbank as the keeper of the currency reserves

Currency reserves are all assets of the Bundesbank that are not specified in EUR, including gold reserves, securities in foreign currency, credit with foreign banks, foreign exchange, etc. Currency reserves can be invested for profit and also provide a possibility of intervening in the market if the exchange rate fluctuates strongly. The gold reserves of the Bundesbank are the second largest in the world (after the U.S. Federal Reserve). As of late 2011, the Bundesbank has over 3,000 tonnes of gold reserves.[citation needed]

Structure

 
Map of the regional headquarters of the Bundesbank

The Bundesbank has nine regional headquarters in the Länder, the former central banks of the Länder and 35 branches (Filiale). As of 30 June 2006, the Bundesbank had a total of 12,474 employees.[8] These are available to banks, public authorities and money transport enterprises for the provision of cash and the clearing of credit transfer. The nine regional headquarters are:

Governance

The executive board (Vorstand) is the supreme governing body of the Bundesbank. It comprises:[9] the president, the vice president and one additional board member, nominated by the German government, plus three additional members of the executive board, nominated by the Bundesrat. All members of the executive board are appointed by the President of Germany, normally for eight years, but at least for five years.

Presidents of the Bundesbank

Presidents of the predecessors to the Bundesbank

  • 1948–1957: Karl Bernard [de], Chairman of the Central Bank Council (Zentralbankrat) of the Bank deutscher Länder
  • 1948–1957: Wilhelm Vocke [de], President of the Directorate of the Bank deutscher Länder, from 1 August 1957

Presidents of the Bundesbank

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, its membership is as follows:[10]

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 (German Democratic Republic) and West Germany (the "old" Federal Republic of Germany), there was a dispute over the rate of exchange for conversion of East German money to Deutschmarks. The Chancellor (Helmut Kohl) decided to ignore the advice of the Bundesbank, and chose an exchange rate of 1:1. The Bundesbank feared that this would be excessively inflationary as well as very significantly impairing the economic prospects of the area of the former East Germany. This dispute was particularly public because of the Bundesbank policy of communicating openly on such matters. Although public opinion normally supported the Bundesbank in matters of combating inflation, in this case Helmut Kohl prevailed, and the President of the Bundesbank, Pöhl, resigned. The Bundesbank had to use monetary measures to offset the inflationary effect.[11]

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.[12][13]

On Wednesday, 24 February 2016, as part of the Bundesbank's annual news conference, Bundesbank president and European Central Bank Governing Council member, Jens Weidmann, dismissed deflation in light of the ECB's current stimulus program, pointing out the healthy condition of the German economy and that the euro area isn't that bad off, on the eve of the 9–10 March 2016 meetings.[14]

Involvement in the European sovereign debt crisis

Main article: 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.[15] 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.[16]

On 27 January 2014, the Bundesbank called for a capital levy on citizens of a nation before that nation applies for relief under the European Financial Stability Facility. The levy "corresponds to the principle of national responsibility, according to which tax payers are responsible for their government's obligations before solidarity of other states is required".[17] This followed an IMF report from October 2013 which proposed a similar wealth tax.[17]

Publications of the Bundesbank

The Bundesbank produces a number of regular publications and statistics (see Web site)

See also

References

  1. ^ a b Weidner, Jan (2017). "The Organisation and Structure of Central Banks" (PDF). Katalog der Deutschen Nationalbibliothek.
  2. ^ Buba: Blowing the Whistle on Big Bubba's Gold Manipulators?
  3. ^ Article 88 of the Grundgesetz, translation of the version as amended to take account of the European Union
  4. ^ Bundesbank Act 5 October 2006 at the Wayback Machine (in English)
  5. ^ Bundesbank Act (6th amendment) 5 October 2006 at the Wayback Machine ISBN 3-932002-96-2(in English)
  6. ^ 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]
  7. ^ Memorandum of Understanding relating to Cooperation between the Bundesanstalt für Finanzdienstleistungsaufsicht and the Bundesbank regarding the supervision of credit and financial services institutions 26 October 2006 at the Wayback Machine
  8. ^ . Bundesbank. Archived from the original on 29 September 2007.
  9. ^ . Deutsche Bundesbank. Archived from the original on 21 May 2011. Retrieved 4 August 2010.
  10. ^ "Executive Board of the Deutsche Bundesbank". Deutsche Bundesbank. Retrieved 5 November 2022.
  11. ^ 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]
  12. ^ "Welteke eckt mit "der Welt" an". Rhetorik.ch. Knill+Knill Kommunikationsberatung. 9 April 2004. Retrieved 9 December 2006.
  13. ^ "2004 – Das war's". DIE ZEIT online (in German). DIE ZEIT. 31 December 2004. Retrieved 9 December 2006.
  14. ^ "Bundesbank President Dismisses Deflation, Increases Tension at ECB". Fast Company. 24 February 2016.
  15. ^ Das, Satyajit, "Germany and France can’t afford euro-zone bailout", Commentary, MarketWatch, 7 June 2012. Retrieved 2012-06-07.
  16. ^ 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. from the original on 28 June 2012. Retrieved 26 June 2012.
  17. ^ 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 () (in German)

External links

 
Wikimedia Commons has media related to German Federal Bank.
  • Official website   (in German, English, and French)

Coordinates: 50°08′02″N 08°39′35″E / 50.13389°N 8.65972°E / 50.13389; 8.65972

May 04, 2023
deutsche, bundesbank, this, article, needs, additional, citations, verification, please, help, improve, this, article, adding, citations, reliable, sources, unsourced, material, challenged, removed, find, sources, news, newspapers, books, scholar, jstor, janua. This article needs additional citations for verification Please help improve this article by adding citations to reliable sources Unsourced material may be challenged and removed Find sources Deutsche Bundesbank news newspapers books scholar JSTOR January 2022 Learn how and when to remove this template message The Deutsche Bundesbank pronounced ˈdɔʏtʃe ˈbʊndesˌbaŋk literally German Federal Bank is the central bank of the Federal Republic of Germany and as such part of the European System of Central Banks ESCB Due to its strength and former size the Bundesbank is the most influential member of the ESCB Both the Bundesbank and the European Central Bank ECB are located in Frankfurt Germany It is sometimes referred to as Buba for Bundesbank 2 while its usual abbreviation is BBk in Germany and internationally DBB Deutsche BundesbankHeadquartersFrankfurt Hesse GermanyEstablished1957Ownership100 state ownership 1 PresidentJoachim NagelCentral bank ofGermany 1990 present West Germany 1957 1990 CurrencyDeutsche Mark 1957 2002 Reserves 219 86 billion 2021 1 Preceded byBank deutscher Lander West Germany 1948 1957 Deutsche Notenbank East Germany 1948 1968 Staatsbank der DDR East Germany 1968 1990 Succeeded byEuropean Central Bank 1999 fnWebsitewww wbr bundesbank wbr defn The Bundesbank still exists but many functions have been taken over by the ECB The Bundesbank was established in 1957 and succeeded the Bank deutscher Lander which introduced the Deutsche Mark on 20 June 1948 Until the euro was physically introduced in 2002 the Bundesbank was the central bank of the former Deutsche Mark German Mark sometimes known in English as the Deutschmark citation needed 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 citation needed Nowadays the ECB also uses the Bundesbank model making the concept the foundation of the entire Euro system 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 Contents 1 History of the Bundesbank as an organization 1 1 1948 1957 1 2 1957 1990 1 3 1990 1993 1 4 1993 2001 1 5 2001 present 2 The Bundesbank today 2 1 The Bundesbank as a note issuing bank 2 2 The Bundesbank as the banks banker 2 2 1 Clearing house for commercial banks 2 2 2 Bank supervision 2 3 The Bundesbank as the state s banker 2 4 The Bundesbank as the keeper of the currency reserves 2 4 1 Structure 2 4 2 Governance 3 Presidents of the Bundesbank 3 1 Presidents of the predecessors to the Bundesbank 3 2 Presidents of the Bundesbank 4 Current Executive Board of the Bundesbank 5 Disputes between the Bundesbank and the government 5 1 Dispute over currency union with East Germany 6 The Bundesbank in the news 7 Involvement in the European sovereign debt crisis 8 Publications of the Bundesbank 9 See also 10 References 11 Further reading 12 External linksHistory of the Bundesbank as an organization EditFor the history of German central banks see Reichsbank 1948 1957 Edit Headquarters in Frankfurt since 1972 The history of the Bundesbank is inextricably linked with the history of the German currency after the Second World War Following the total destruction after the war the old Reichsmark was practically worthless and a currency reform was implemented in the western occupation zones including West Berlin on 21 June 1948 the D Mark or Deutsche Mark replaced the Reichsmark The currency reform was based on laws enacted by the Allied military government In preparation the Western Powers established a new two tier central bank system in the occupied zones in its federal structure it was modeled on the Federal Reserve System of the US It comprised the central banks of the states Lander of the West German occupation zones and the Bank deutscher Lander in Frankfurt am Main which was created on 1 March 1948 The central banks of the Lander acted as central banks within their areas of jurisdiction The Bank deutscher Lander whose share capital was held by the central banks of the Lander was responsible for issuing bank notes co ordinating policy and various central tasks including management of foreign exchange The supreme governing body of the two tier central bank system was the Central Bank Council Zentralbankrat set up at the Bank deutscher Lander It consisted of a president the presidents of the central banks of the Lander and the president of the directorate board of the Bank deutscher Lander Amongst other things the Central Bank Council determined policy on bank rate and minimum reserve policy open market policy guidelines and granting of credit After the negative experience with a central bank subject to government orders the principle of an independent central bank was established The Bank deutscher Lander was independent of German political bodies from the start including the federal German government which was active from September 1949 It achieved independence from the Allies in 1951 1957 1990 Edit 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 Lander 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 Lander 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 Sondervermogen for transactions with credit institutes operating in the Federal republic of Germany for currency transactions and foreign commercial transactions and for open market dealings The Directorate was made up of the president and the vice president of the Bundesbank and up to six additional members The central banks of the Lander 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 Lander 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 Edit In the wake of the Fall of the Berlin Wall the Federal Republic of Germany and the German Democratic Republic signed a treaty on 18 May 1990 that created an economic social and currency union between the two German states it came into force on 1 July 1990 and made the Deutsche Mark the sole legal tender in both German states The Bundesbank was made responsible for money and currency policy within the whole of the currency union A Provisional Administration Body was set up for the purpose of implementing the treaty and this body continued to operate beyond the official date of reunification until 31 October 1990 The Bundesbank Act was amended to adjust the organizational structure of the Bundesbank to better match changed circumstances following German reunification and at the same time streamline the organisation The eleven central banks of the Lander and the Provisional Administrative Body were replaced by nine central banks of similar economic size 1993 2001 Edit A 10 DM note issued by the Bundesbank 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 Edit 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 EditAfter 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 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 Edit 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 Edit In relation to the commercial banking system the Bundesbank has two functions Clearing house for commercial banks Edit 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 Edit The bank also helps to regulate commercial banks in close cooperation with the German financial regulatory agency the Bundesanstalt fur Finanzdienstleistungsaufsicht BaFin 7 The Bundesbank as the state s banker Edit 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 social security organizations All such accounts are required to have a positive balance i e the Bundesbank is not allowed to grant credits to the public sector This is due to negative historical precedents in connection with the financing of two world wars by the Deutsche Reichsbank It also carries out securities transactions for the federal government Bundesfinanzagentur The Bundesbank as the keeper of the currency reserves Edit Currency reserves are all assets of the Bundesbank that are not specified in EUR including gold reserves securities in foreign currency credit with foreign banks foreign exchange etc Currency reserves can be invested for profit and also provide a possibility of intervening in the market if the exchange rate fluctuates strongly The gold reserves of the Bundesbank are the second largest in the world after the U S Federal Reserve As of late 2011 the Bundesbank has over 3 000 tonnes of gold reserves citation needed Structure Edit Map of the regional headquarters of the Bundesbank The Bundesbank has nine regional headquarters in the Lander the former central banks of the Lander and 35 branches Filiale As of 30 June 2006 the Bundesbank had a total of 12 474 employees 8 These are available to banks public authorities and money transport enterprises for the provision of cash and the clearing of credit transfer The nine regional headquarters are Frankfurt federal headquarters also governing the state of Hesse Stuttgart governing the state of Baden Wurttemberg 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 Dusseldorf governing the state of North Rhine Westphalia Mainz governing the states of Rhineland Palatinate and Saarland Leipzig governing the states of Saxony and ThuringiaGovernance Edit The executive board Vorstand is the supreme governing body of the Bundesbank It comprises 9 the president the vice president and one additional board member nominated by the German government plus three additional members of the executive board nominated by the Bundesrat All members of the executive board are appointed by the President of Germany normally for eight years but at least for five years Presidents of the Bundesbank EditPresidents of the predecessors to the Bundesbank Edit 1948 1957 Karl Bernard de Chairman of the Central Bank Council Zentralbankrat of the Bank deutscher Lander 1948 1957 Wilhelm Vocke de President of the Directorate of the Bank deutscher Lander from 1 August 1957Presidents of the Bundesbank Edit 1958 1969 Karl Blessing 1969 1977 Karl Klasen 1977 1979 Otmar Emminger 1980 1991 Karl Otto Pohl 1991 1993 Helmut Schlesinger 1993 1999 Hans Tietmeyer 1999 2004 Ernst Welteke 2004 Jurgen Stark interim president 2004 2011 Axel A Weber 2011 2021 Jens Weidmann Since 2022 Joachim NagelCurrent Executive Board of the Bundesbank EditThe 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 10 Joachim Nagel President Claudia Buch vice president Johannes Beermann Joachim Wurmeling Burkhard Balz Sabine MaudererDisputes between the Bundesbank and the government EditThe 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 Edit One particularly public dispute was in the lead up to German re unification When a customs union was created between the former East Germany German Democratic Republic and West Germany the old Federal Republic of Germany there was a dispute over the rate of exchange for conversion of East German money to Deutschmarks The Chancellor Helmut Kohl decided to ignore the advice of the Bundesbank and chose an exchange rate of 1 1 The Bundesbank feared that this would be excessively inflationary as well as very significantly impairing the economic prospects of the area of the former East Germany This dispute was particularly public because of the Bundesbank policy of communicating openly on such matters Although public opinion normally supported the Bundesbank in matters of combating inflation in this case Helmut Kohl prevailed and the President of the Bundesbank Pohl resigned The Bundesbank had to use monetary measures to offset the inflationary effect 11 The Bundesbank in the news EditIn 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 Pohl see above Welteke was the second Bundesbank president to resign 12 13 On Wednesday 24 February 2016 as part of the Bundesbank s annual news conference Bundesbank president and European Central Bank Governing Council member Jens Weidmann dismissed deflation in light of the ECB s current stimulus program pointing out the healthy condition of the German economy and that the euro area isn t that bad off on the eve of the 9 10 March 2016 meetings 14 Involvement in the European sovereign debt crisis EditMain article 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 15 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 16 On 27 January 2014 the Bundesbank called for a capital levy on citizens of a nation before that nation applies for relief under the European Financial Stability Facility The levy corresponds to the principle of national responsibility according to which tax payers are responsible for their government s obligations before solidarity of other states is required 17 This followed an IMF report from October 2013 which proposed a similar wealth tax 17 Publications of the Bundesbank EditThe Bundesbank produces a number of regular publications and statistics see Web site English publications of the Bundesbank Financial Stability ReviewSee also Edit Banks portalEconomy of Germany German markReferences Edit a b 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 Bundesbank Act 6th amendment Archived 5 October 2006 at the Wayback Machine 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 amp Development December 1998 Volume 35 Number 4 1 Memorandum of Understanding relating to Cooperation between the Bundesanstalt fur 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 Bundesbank President Dismisses Deflation Increases Tension at ECB 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 Boll 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 2014Further reading EditDeutsche 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 Funfzig 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 Edit Wikimedia Commons has media related to German Federal Bank Official website in German English and French Coordinates 50 08 02 N 08 39 35 E 50 13389 N 8 65972 E 50 13389 8 65972 Retrieved from https en wikipedia org w index php title Deutsche Bundesbank amp oldid 1147578881, wikipedia, wiki, book, books, library,

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