Tasks

The Deutsche Bundesbank's tasks in the Eurosystem/European System of Central Banks

Implementation of the single monetary policy

Section 3 of the Bundesbank Act defines the Bundesbank's mandate as follows: "The Deutsche 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 of objective of maintaining price stability, shall hold and manage the foreign reserves of the Federal Republic of Germany, shall arrange for the execution of domestic and international payments and shall contribute to the stability of payment and clearing systems." Through its President, the Bundesbank participates in the monetary policy decisions of the Governing Council of the ECB. It implements the Eurosystem's single monetary policy in Germany. This includes the refinancing of the German banking system through the Eurosystem's monetary policy instruments.

Parliament has granted the Bundesbank a large degree of independence to enable it to fulfil this mandate without political pressure. In exercising the powers conferred on it by law, the Bundesbank is independent of and not subject to instructions from the Federal Government. The Bank is required to support the general economic policy of the Federal Government only "as far as possible without prejudice to its tasks as part of the European System of Central Banks" (section 12 of the Bundesbank Act). Pursuant to Article 108 of the Amsterdam Treaty, when exercising the powers and carrying out the tasks and duties conferred upon them, "neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body".

Currency supply

The ECB has the sole right to approve the issuance of euro banknotes within the euro area. Banknotes may be issued by the ECB and the national central banks.

The issuance of banknotes, regular culling of unfit banknotes, counterfeit control and replacing damaged notes are all part of the task of providing individuals and businesses with payment media.

The Eurosystem issues seven different banknote denominations: €5, €10, €20, €50, €100, €200 and €500. The banknote most frequently used for payments in Germany is the €50 banknote, which has assumed the leading role previously enjoyed by the DM100 banknote. In terms of volume, it has a share of around 26% and, in terms of value, of around one-third. At the end of October 2007 there were some €642 billion banknotes in circulation in the Eurosystem, of which €272 billion were in Germany.

The custodian of the foreign reserves

The Bundesbank holds and manages the official foreign reserves of the Federal Republic of Germany and invests them at interest. These reserves are mainly balances and securities held in US dollars with banks or central banks abroad (foreign reserves). In addition, there are gold holdings and reserve positions in, and special drawing rights with, the International Monetary Fund (IMF) as well as other receivables. At the end of 2002 the foreign reserves amounted to around €90 billion.

At the beginning of the third stage of European economic and monetary union, the national central banks transferred some 40 billion worth of foreign reserves to the ECB. The Bundesbank’s share of these reserves amounts to 12.2 billion, 15% of which is gold and 85% of which is foreign currency. However, the foreign reserves will continue to be held and managed by the national central banks. Transactions by the national central banks with their remaining foreign reserves above a certain volume require the approval of the ECB; this is intended to ensure consistency with the single monetary and exchange rate policy.

Payment systems

The Bundesbank provides a competitively neutral giro network for all credit institutions in the various groups of banks. This network is made available to the credit institutions and their giro account holders through the Bundesbank's 47 branches, two high-availability computer centres and six payment systems computer centres. The Bundesbank is responsible for issuing the bank sort codes which facilitate cashless payments.

A new era for payment systems began with the establishment of a single currency area in Europe. In order to ensure the smooth distribution of liquidity in the money market, the Bundesbank and the other national central banks (NCBs) in the EU operate the European gross settlement system known as TARGET. This system is used by the ECB, the NCBs and credit institutions to transfer cross-border payments as quickly and as safely from one participant to another as domestic payments in their national systems.

RTGS^plus is the Bundesbank's modern, liquidity-saving payment system. It is used by banks for the settlement of gross payments and is the German access point to the European gross settlement system TARGET.

Information and PR work

Providing detailed up-to-date information about monetary policy is a task common to all the central banks in the Eurosystem. In Germany the Bundesbank is responsible for providing information about the single monetary policy.

The President and the members of the Executive Board of the Deutsche Bundesbank give speeches and interviews and write articles to explain the Eurosystem's monetary policy and to express their views on current monetary policy issues.