The Deutsche Bundesbank (, lit. 'German Federal Bank', colloquially Buba,[2] sometimes alternatively abbreviated as BBk or DBB) is the national central bank for Germany within the Eurosystem. It was the German central bank from 1957 to 1998, issuing the Deutsche Mark (DM). It succeeded the Bank deutscher Länder, which had introduced the DM on 20 June 1948.
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.[3] 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. As of 2023, its balance sheet total was €2.516 trillion,[4][5] making it the 4th largest central bank in the world.[6]
The Bundesbank is not itself a financial supervisory authority, but participates in European banking supervision as a member of the Supervisory Board of the European Central Bank, alongside the Federal Financial Supervisory Authority.[7] It is also a member of the European Systemic Risk Board (ESRB).[8]
History
Background (1948–1957)
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.
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:[11]
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.[12] For 2022, the Bundesbank recorded its first loss since 1979.[13]
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, 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.
Presidents of the Bundesbank
Presidents of the predecessors to the Bundesbank
- 1948–1957:, Chairman of the Central Bank Council (Zentralbankrat) of the Bank deutscher Länder
- 1948–1957:, President of the Directorate of the Bank deutscher Länder, from 1 August 1957
Presidents of the Bundesbank
- 1958–1969: Karl Blessing
- 1969–1977: Karl Klasen
- 1977–1979: Otmar Emminger
- 1980–1991: Karl Otto Pöhl
- 1991–1993: Helmut Schlesinger
- 1993–1999: Hans Tietmeyer
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 September 2024, its membership is as follows:[18]
- Joachim Nagel (President)
- Sabine Mauderer (vice-president)
- Burkhard Balz
- Lutz Lienenkämper
- Michael Theurer
- Friederike "Fritzi" Köhler-Geib
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.[19]
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.[20][21]
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.[22]
Involvement in the Euro area 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.[23] 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.[24]
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".[25] This followed an IMF report from October 2013 which proposed a similar wealth tax.[25]
Publications of the Bundesbank
The Bundesbank produces a number of regular publications and statistics (see Web site)
See also
- Economy of Germany
- German mark
- List of banks in Germany
- List of central banks
Further reading
- Die Deutsche Bundesbank. Aufgabenfelder, Rechtlicher Rahmen, Geschichte, Selbstverlag der Deutschen Bundesbank: Frankfurt am Main, April 2006, ISBN 3-86558-151-X (PDF)
External links
- Official website bundesbank.de/en
References
- Jan Weidner. The Organisation and Structure of Central Banks Katalog der Deutschen Nationalbibliothek, 2017^
- Buba: Blowing the Whistle on Big Bubba's Gold Manipulators?^
- Bertold Wahlig. 15C. The Model of the Deutsche Bundesbank IMF, 3 August 1995, retrieved 31 August 2024