Following in-depth discussions, the Executive Board of the Bundesbank has decided on its overall operational strategy from 2008 onwards. The aim is to build on the comprehensive structural reform that was initiated in 2002 – which will be completed on schedule by the end of 2007 – and to raise the Bundesbank’s profile as a stability-oriented, independent institution both in Germany and within the European System of Central Banks (ESCB). To this end, the Executive Board has adopted a set of specific benchmarks and parameters for the Bank’s five core business areas and has also defined the requisite framework conditions. Detailed measures for achieving the strategic objectives are now to be drawn up by the relevant business units.

By the end of 2007, the Bundesbank will have implemented a structural reform of unparalleled scope, pace and depth in the public sector. In the next strategic cycle from 2008 to 2012, the Bundesbank – in line with its mandate to safeguard stability – will gear its operational policy to focusing, integrating and selectively expanding its operational and analytical activities in all five core areas. This will enable the Bundesbank to mobilise its expertise in such a way that it will be able to support and assist the ESCB even more effectively in the future, thereby contributing to the stability of the euro and of the financial system.

The Bundesbank’s core business areas are monetary policy, the financial and monetary system, banking supervision, cash management and cashless payments. The following objectives have been defined for these business areas.

The Bundesbank’s Executive Board has decided that central-bank-oriented economic research activities focused on monetary policy are to be intensified. The aim is to make a profound contribution to the theoretical debate on monetary and economic policy issues. In this context, the Bank is to step up strategic research in the field of real economic and monetary analyses and their interaction within monetary policy, and will disseminate the findings in the ESCB. Given its leading role in the implementation of European monetary policy, the Bundesbank has also set itself the aim of taking on more joint operational tasks in the ESCB.

The main objective in cashless payments will be to strengthen the Bundesbank’s role as a catalyst and a driving force for innovation in the European integration process. This includes the project to put in place a Single Euro Payments Area (SEPA). The aim is to achieve a leading position, both operationally and strategically, in the provision and transfer of liquidity, working in tandem with the Bank’s Eurosystem partners, especially through the joint operation of the single shared platform Target2. Key objectives in banking supervision are the integration of inspection and ongoing monitoring in line with the new Basel II standards, a greater demarcation of activities in operational supervision and regulation vis-à-vis BaFin, and an expansion of the analytical instruments applied in, say, rating and stress testing. One of the requirements defined by the Executive Board for the core operational field of financial stability is to step up research. The aim of this is to strengthen the Bank’s presence in the international academic debate and to enhance the quality of its input into national, international and supranational bodies.

In cash payments , the Bundesbank must retain an appropriate degree of involvement in the processing and provision of cash in order to fulfil its statutory mandate to safeguard the quality and security of the supply of banknotes and to maintain sufficient contingency reserves. Furthermore, the Bank will push ahead with implementing the framework agreed in the Eurosystem. The Bank will also facilitate increasingly privatised banknote processing. The Executive Board considers an appropriate benchmark to be a market share of around 50% of the recycling volume, which, at present, corresponds to roughly 10 billion banknotes to be processed at the Bundesbank. Recycling means the processing of banknotes, ie checking their authenticity and fitness for circulation, by the central bank, the credit institutions and other professional cash-handling parties. Whether the planned market share can be achieved depends in part on factors that lie outside the Bank’s sphere of influence.

Given a share in banknote processing of 50% of the recycling volume and in view of the prevailing age structure, the number of core staff can be reduced to just over 9,500 by 2012, which corresponds to some 9,000 full-time equivalent jobs. As before, no compulsory redundancies are envisaged. In line with the Executive Board’s decision, there will be no further branch closures before 2010. The implications of the recent closure of 56 sites and the impending closure of 14 branches and nine operating units will have to be digested first. Then, in 2009 the branch network will be evaluated on the basis of business criteria, such as capacity utilisation and customer structure. Following this, ie between 2010 to 2012, the branch network will be consolidated in line with the established requirements.

In order to further enhance quality, effectiveness and cost-efficiency at the Bundesbank, the Executive Board also considers that it will be necessary to streamline the organisational structure at Central Office – which currently consists of 14 departments – by 2012. The expected downsizing of the Executive Board will create an opportunity to review the number and structure of the departments and thereby underpin the focusing of the Bank's activities. Furthermore, efficiency gains are to be achieved through interdisciplinary cooperation among the regional offices under the existing statutory arrangements.

One of the major framework conditions which the Executive Board believes has to be safeguarded is that the Bundesbank should remain an attractive employer and ensure employment conditions which promote performance, personal initiative and individual responsibility. For a bank which is in the process of transforming, it is especially important that it makes a concerted effort to recruit highly qualified staff and train, develop and motivate them. In many areas, greater staff mobility will be called for in future.

(updated 21 December 2006)