Governing Council prepares for enlargement
At its meeting on 19 December 2002, the Governing Council of the European Central Bank (ECB) decided unanimously on the contents of its proposal on the future adjustment of its voting modalities. Such an adjustment will become necessary in the wake of future expansions of the euro area in an enlarged European Union (EU). The Governing Council's proposal is made in accordance with the ECB "enabling clause" contained in the Treaty of Nice.
According to the current institutional arrangements, the Governing Council consists of six Executive Board members and up to 15 national central bank (NCB) Governors. In order to maintain the Governing Council's capacity for efficient and timely decision-making as its membership increases substantially, the Governing Council agreed that the number of NCB Governors exercising a voting right should not exceed 15.
When the number of NCB Governors exceeds 15 they will exercise a voting right on the basis of a rotation system. Each member of the Executive Board will maintain a permanent voting right. The rotation system is designed to ensure that the NCB Governors with the right to vote are from Member States which, taken together, are representative of the euro area economy as a whole. Consequently, the NCB Governors will exercise a voting right with different frequencies depending on an indicator of the relative size of the economies of their Member States within the euro area. Based on this indicator, NCB Governors will be allocated to different groups. This allocation determines how often they can exercise a voting right. Initially, there will be two groups and, once there are 22 euro area Member States, there will be three groups.
All NCB Governors will continue to participate in the discussions of the Governing Council and attend the meetings in a personal and independent capacity. All members of the Governing Council exercising a voting right will do so on the basis of the "one member, one vote" principle.
The final decision of the Governing Council will be formally adopted in the form of an ECB Recommendation as soon as the Treaty of Nice enters into force and will be submitted to the EU Council. The EU Council, meeting in the composition of Heads of State or Government, shall then decide unanimously on an adjustment of the voting modalities in the Governing Council, on the basis of the ECB Recommendation and after taking account of the opinions of the European Commission and the European Parliament. The agreed amendment will then be recommended to the Member States for ratification in accordance with their respective constitutional requirements. It does not change the weighted voting procedure for those issues on which all the NCB Governors vote as shareholders of the ECB.
NOTES FOR THE EDITOR
According to the proposal, the number of NCB Governors with voting rights will not exceed 15 at any point in time. As soon as the number of euro area Member States exceeds 15, a system of rotating voting rights based on groupings of NCB Governors will start operating. Each member of the ECB's Executive Board will retain a permanent voting right.
The agreed rotation system respects a number of key principles which have guided the Governing Council's discussions.
1. "One member, one vote" and ad personam participation
All members of the Governing Council will continue to attend meetings in a personal and independent capacity, and the "one member, one vote" principle will continue to apply to NCB Governors exercising a voting right.
At any moment in time the NCB Governors with the right to vote will have to be from Member States which, taken together, are representative of the euro area economy as a whole. As a consequence, NCB Governors will not be able to exercise a voting right with the same frequency.
NCB Governors will, therefore, be allocated to different groups. The allocation of NCB Governors to the groups will be based on a ranking of their respective Member States resulting from their share in the euro area total according to a composite indicator of "representativeness". The principal component of this composite indicator will be the Member State's gross domestic product (GDP). The second component will be the total assets of the aggregated balance sheet of monetary financial institutions (TABS-MFI) within the territory of the Member State concerned, in recognition of the specific relevance of the financial sector for central banking decisions.
The relative weights of the two components are 5/6 for GDP and 1/6 for TABS-MFI.
3. Robustness and automaticity
The rotation system will be such that the size of the groups and the NCB Governors' voting frequencies will be adjusted over time so as to accommodate any sequencing of euro area enlargement up to 27 Member States, i.e. the current EU Member States and the 12 accession countries listed in the Protocol on enlargement annexed to the Treaty of Nice.
In the light of these requirements, a rotation system with two groups will start operating once there are more than 15 euro area Member States. While there are fewer than 22 euro area Member States the rotation will take place in accordance with the following rules:
- The first group will be composed of the five NCB Governors from the euro area Member States which occupy the highest positions in the country ranking on the basis of the composite indicator. They will share four voting rights.
- The second group will be composed of all other NCB Governors. They will share 11 voting rights.
This allocation of voting rights among the two groups may have to be adapted initially, depending on the number of Member States entering the euro area, in order to ensure that the voting frequency of the first group is not lower than that of the second group.
Once the number of euro area Member States exceeds 21, a rotation system based on three groups will start operating in accordance with the following rules:
- As before, the first group will be composed of the five NCB Governors from the euro area Member States which occupy the highest positions in the country ranking on the basis of the composite indicator. They will share four voting rights.
- The second group will be composed of half of all NCB Governors, rounded up to the nearest whole number where necessary, selected from the subsequent positions of the country ranking. They will share eight voting rights.
- The third group will be composed of the remaining NCB Governors. They will share three voting rights.
It is proposed that the decision relating to the initial adaptation of the allocation of voting rights in the two-group system be adopted by the Governing Council, deciding by a two-thirds majority of all its members. The same procedure should apply to the definition of the precise implementing provisions for the rotation of voting rights within each group (such as the time interval between the rotation of voting rights).
The data for the calculation of the shares in GDP at market prices will be provided by the European Commission. The rules adopted by the EU Council on the basis of Article 29.2 of the Statute of the ESCB for the calculation of the key for subscription of the ECB's capital will apply. The data for the calculation of the shares in the TABS-MFI will be defined on the basis of Council Regulation (EC) No. 2533/98 of 23 November 1998 concerning the collection of statistical information by the ECB. The data will be updated every five years.
Once the Treaty of Nice has entered into force, which is expected for 1 February 2003, the ECB will adopt and present a formal Recommendation to give legal form to the adjustment of its voting modalities. It will then be for the EU Council, meeting in the composition of Heads of State or Government, to decide unanimously on an adjustment of the voting modalities in the Governing Council, on the basis of the ECB Recommendation and after taking account of the opinions of the European Commission and the European Parliament. The agreed amendment will then be recommended to the Member States for ratification in accordance with their respective constitutional requirements.