Biggest Banks in Europe

One can only refer to the European banking industry as highly diverse and competitive, being a pluralistic system comprising large and small financial institutions, which are of great importance in the regional economy. The largest banks in Europe enjoy a leading position in most economies and, simultaneously, are important factors in the global financial system. Measured by assets, in trillions of euros, branch networks stretched across many countries.

Biggest Banks in Europe

HSBC Holdings plc

London-based HSBC ranks among the biggest and most famous banking and financial services organizations globally. The bank’s services range from retail and corporate banking to personal financial services, asset management, and investment banking, making it one of the biggest players in Europe and on the international scene.

BNP Paribas

Headquartered in Paris, France, BNP Paribas is among the leading banks in Europe providing an extensive variety of financial services for private and corporate clients. It has leading positions in retail banking, corporate and investment services, and asset management.

Deutsche Bank AG

Headquartered in Frankfurt, Germany, Deutsche Bank is a leading global banking conglomerate. Its services include corporate and investment banking, retail banking, and asset management and private banking.

Barclays PLC

Headquartered in London, United Kingdom, Barclays is an international financial conglomerate with leading positions in investment banking, credit cards, retail, and commercial banking. Barclays is widely recognized for its innovative approaches to the delivery of banking and other financial services.

Société Générale

Paris-based Société Générale has operations in several banking business areas: retail banking in France and internationally, corporate and investment banking, and asset management.

UniCredit S.p.A.

UniCredit is one of the largest banking groups in Europe and has its headquarters in Milan, Italy. The bank’s operations run a broad spectrum of financial services, from corporate and investment banking, retail banking to asset management, covering many European countries and beyond.

ING Group

Headquartered in Amsterdam, the Netherlands, ING is an innovator in retail banking and among the leaders of online banking services in Europe and worldwide. Other than retail banking, ING is involved in corporate finance and asset management.

Overview of Largest Banks in Europe

The largest banking institutions in Europe are important not only to the economies of the continent but also to the global financial system, providing various services that facilitate international trade and investment for economic development. These financial institutions continue to adjust their service platforms to relevant market demand and technology advancement for easy and affordable access to financial services by their customers anywhere around the globe.

Biggest Investment Banks in Europe

Investment banks stand at the hub of European finance, offering an incredibly diverse range of services in anything from corporate finance to M&A, asset management, and brokerage. The biggest investment banks in Europe contribute significantly to regional economies and to the world financial market. They also create new and all-inclusive solutions for corporate clients, governments, and individuals.

Overview of Europe’s Largest Investment Banks

Large European investment banks are essential in sustaining economic growth and development through the vital financial services they provide and their advice on strategic issues to corporate, institutional, and private clients. Investment banking assists the integration of European markets with the global financial system, allowing access to capital, liquidity, and investment opportunities. These institutions, in the ever-pressing economic environment, continue to adapt to new challenges by offering innovative solutions to meet the needs of their clients.

Within Europe, many of the most extensive and most famous banks in the world have been able to provide a wide range of financial products and services for individuals, corporations, and governments alike. In this article, the employees of Regulated United Europe would like to indicate which European banks are included in the largest on the continent in 2023, what their total assets are, what their history is, and their contribution to the global financial system. Description of the top 5 banks in Europe by volume of total assets is given below.

HSBC

As of the beginning of the year, the balance sheet of British financial institution HSBC Holdings PLC was 2.6 trillion euros, making it the biggest bank in Europe under the asset criterion. HSBC is a British multinational bank and financial services organization that serves customers throughout the world. The full name of the bank is HSBC Holdings PLC. The provided service list is rather long: from commercial and investment banking to asset management.

Until 1865, a Scottish by the name of Thomas Sutherland founded HSBC in Hong Kong. Thus, the Bank played a critical role in facilitating trade between Europe and Asia and thus soon became one of the largest banks in the world. This structure began to expand its operations to Europe and North America in the early twentieth century. In the 1960s and the 1970s, HSBC was among the first to provide electronic banking services.

Nowadays, HSBC is famous for its international spread and expertise in international banking. It is a big player in the Asian market, though the volume of its operations in Europe, America, and the Middle East is also considerable. The group is dedicated to the issue of sustainable development and has become one of the trendsetters in green finance, investing in renewable energy and supporting business processes on sustainable grounds.

BNP Paribas

The largest bank in Europe, this French multinational banking company’s total asset as of the end of 2022 was around €2.5 trillion. BNP Paribas is one of the largest banks in the world and is operating in 72 countries. The bank has three large business units: retail banking, corporate banking and investment banking.

BNP Paribas was formed in the year 2000 when Banque Nationale de Paris BNP and Paribas came into one. BNP was formed in 1966 and Paribas operated it in 1872. Paribas’s main business was banking investment. Today, BNP Paribas is the market leader in Europe, with a strong presence in France, Italy and Belgium, North Africa, and the Middle East.

BNP Paribas is committed to financing sustainable projects. For example, the institution has invested millions of pounds in renewable energy and other ecologically viable projects.

The bank has also established itself as a European social finance leader by offering multi-million-pound investment funds to projects focused on communal amenity and social inclusion.

Crédit Agricole Group

The third largest bank in Europe per early 2023 – French

Crédit Agricole Group is an international bank with a total asset of about €2.35 trillion. Crédit Agricole represents a cooperative banking group working in a decentralized network of regional banks. The bank offers such financial services as retail and corporate banking, as well as asset management.

Crédit Agricole was established as a cooperative bank in 1894 to extend financial services to farmers in rural France. The bank presently features among the largest banks in the world and operates in more than 50 countries. Crédit Agricole has come to the fore in the field of sustainable financing, wherein it has made heavy investments in renewable energy, green bonds, and other eco-friendly projects.

Barclays PLC

Barclays PLC is an international banking and financial services firm based in London. By market capitalization, it is regarded as one of the largest banks in the world, operating in over 40 countries. It employs approximately 83,500 staff. Total assets of Barclays PLC at the end of 2022 totaled 1.65 trillion euros.

Barclays provides a wide array of services, including financial products: banking service provisions for both natural persons and legal entities, investment banking services, and asset management. It also provides digital banking through its Barclays Digital Banking business.

Founded in 1690, Barclays has a long history of mergers and acquisitions. It faced a number of litigation in recent years, such as the accusations over currency manipulation or engaging in the Libor scandal, but the bank has taken some measures to mitigate those issues and regain better reputation.

Banco Santander

Banco Santander is the fifth largest bank in Europe and is a Spanish multinational financial service and banking company. In the year 2022, at its end, its total assets reached around €1.6 trillion. The service area of Banco Santander covers 10 major markets, such as the UK, Spain, and Brazil, among others, with various standard financial services provided.

It was founded in the year 1857 in a town called Santander, Spain, for commercial banking services to the people. These days, it conducts its businesses all over the world and has become a leading banking group in Europe. Furthermore, Banco Santander is among the largest financial institutions in Latin America.

The Bank committed itself to sustainable development and had invested heavily in renewable energy and other green projects. It also aimed at the promotion of financial inclusion, developing programmes that would help low-income people to access and use financial services.

The Situation in Europe’s Largest Banks in 2023

Now, Europe’s five largest banks are under pressure once again. They are being asked to cease financing the fossil fuel industry-oil, natural gas, and hard coal-in an investor campaign that controls $1.5 trillion.

The investments of Barclays, BNP Paribas, Crédit Agricole, Deutsche Bank, and Société Générale in fossil fuels are under heavy fire.

These banks represent the largest lenders to the major oil and gas companies in Europe, after the release of a study by the ShareAction Group, since the setting by HSBC between 2016 and 2021.

Letters have now been sent to each of them from a group of institutional investors urging them to stop direct financing of new oil and gas fields by the end of this year. In all, 30 investors wrote the letters, which were coordinated by ShareAction: Candriam, La Française Asset Management and Brunel Pension Partnership.

Renewed investor pressure on European banks is sparked by NatWest (Scotland)’s February 9 announcement that it will not provide new customers funding oil and gas exploration and production with loans based on reserves, though it will continue to do so for existing clients during the next three years.

The letter warns that new oil and gas fields would undermine the zero CO2 yield pathway for the whole globe and run counter to the banks’ own objectives.

A similar investor campaign against HSBC has led the biggest bank in Europe and the chief financier of major oil and gas companies to say, in December 2022, that it no longer will be funding new oil and gas fields directly after months of incessant pressure from shareholder activists coordinated through ShareAction.

Investors threatened Barclays, BNP Paribas, Crédit Agricole, Deutsche Bank and Société Générale in their latest letter that their activities were holding back the revolution in renewable energy in Europe.

Europe’s banks are neck and neck with Wall Street when it comes to bond trading For the fifth quarter in a row, Europe’s banks match Wall Street’s debt-trading rivals in increasing their earnings by almost 30%.

This means that six of Europe’s biggest investment banks, particularly Barclays Plc and Deutsche Bank AG, are expected to show an average 29% rise in bond and currency dealings over the last quarter of 2022, marginally better, according to estimates compiled by Bloomberg from analysts forecasts than in US banks.

Averages exclude Credit Suisse Group AG, whose trading revenue is expected to tumble sharply since that bank is winding down significant chunks of its business as part of a broader overhaul.

Rapid increases in interest rates by central banks in their fight against inflation are particularly advantageous to both bond trading and the traditional savings and credit business of Europe’s largest banks. Indeed, 2022 was to have been an opportunity for fixed-income European traders to catch one’s breath, or even a turning point, after years of losing market share to larger American competitors.

History of banking

History of banking has originated in the 7th century BC. It is considered that already then in Babylon there were usurers. And even the first bank notes, so-called hudu (hudu), which had the same circulation as gold.

It is known that in Ancient Greece there existed money changers-trapezites. They exchanged coins and accepted money for safekeeping. Also, the first non-cash payments were made there by charging and debiting customers’ accounts. That is, the first cash and settlement service was carried out. In addition, ancient Greek temples provided loans from the savings that were stored in them.

Already in the 2nd century BC, royal banks existed in a number of metropolises, including such as Thebes, Hermontis, Memphis, and Siena, where funds from tax collection and income from state enterprises were accumulated. Then, the money was spent to satisfy the public needs, including paying the salaries to soldiers.

In Ancient Rome, banking activities were undertaken by mensarii and argentarii. The former had specialized in the exchange of coins. The latter had specializing in raising funds and issuing loans, as well as money transfers between cities.

In the Middle Ages, there was a sharp increase in the demand for bankers’ services: there were too many coins available that needed to be changed for trading purposes. The word “bank” was derived from the name of the bench where the changers sat. Banco in Italian means “bench”, “bench”. Already at that time, bankers were engaged not only in exchange but also in maintaining customer accounts and non-cash payments.

Since the Catholic Church was known to be against charging interest, banking in the Middle Ages became the prerogative of mostly Jews. In 1179, Pope Alexander III declared at the Third Lateran Council that people charging interest were to be deprived of communion and Christian burial. Bankers were persecuted under Louis the Saint and Philip the Beautiful in France and under Henry III in England. Interesting in this respect is the fact that sometimes exiled bankers bought the right to return back to the country, and this became a source of income for governments. Already in Italy in the 1460s, the so-called montes pietatis appeared – specialized institutions that collected donations and issued small loans to needy at an interest rate which was supposed to be enough only to cover their own expenses.

A partnership constituted in the Republic of Genoa is considered one of the first banks, to which was entrusted the function of collecting certain taxes in order to finance the wars in Algeria and Tunisia in 1147. It lasted until 1816 and, among other functions, it accepted private deposits. The first public bank was the Vapso della Piaza de Rialto, created by the Senate of the Republic of Venice in 1584.

In 1609, the Amsterdam Bank opened. It is famous for introducing such a concept as “bank florin”-a monetary unit equal to a certain weight of pure silver-into which all accepted coins were converted. The Englishman William Peterson, studying the activities of the Amsterdam Bank, came to a discovery: a bank is not obliged to have real 100 per cent reserves of precious metal to cover its own liabilities. In accordance with Peterson’s project in 1694, the first emission bank in the modern sense of the word, responsible for the issue of paper money, was created – the Bank of England. It invested its capital in government securities that then became collateral for the issued banknotes.

History of European banking

The word “bank” is derived from the Italian word “banco”, which describes the table on which medieval moneychangers laid out coins. The monetary system of Ancient Rome was mainly built by people from Greece. Therefore they basically developed the Greek monetary system. In Ancient Rome argentarii – people performing monetary transactions formed associations in which the entrepreneurial risk used to be shared by all participants. The associations imposed taxes, received deposits, took part in the selling of goods at public auction, dealt with inheritance cases, and witnessed marriage contracts. The number of money shops was strictly corresponding to the number of argentarii. Other specialists were not authorized to perform credit operations and were engaged in bartering.

The state, as a counterbalance to the temples, actively supported the associations, creating its own money funds for this purpose. The secular and spiritual authorities, supported by public opinion, constantly opposed high interest rates and favoured their restriction or prohibition. The Roman Pope Leo the Great (V century) extended the canonical prohibition of interest to all Christians. In the 6th century, the Byzantine emperor Justinian set a ceiling on the maximum rate: 8 per cent for merchants and 6 per cent for the rest. State and church carried out commission and settlement operations on domestic and international payments, trade and commission operations (buying and selling foreign coins and precious metals), issue of sureties, guarantees, giving of consultations, trust operations, including accounting services.

As the Roman Empire fell, so the role of associations grew within the cities of Northern Italy. Yet they were also overshadowed by usurers-people disgusting to society-whose goal was not to develop the economy but just to increase money.

The difference between usurious and credit operations took place with the emergence of credit money,- the bills of exchange, and accounting of bills of exchange operations on their basis. In Italy bills of exchange were legal for a comparatively small period of time. In Venice transfer inscription on a bill of exchange was prohibited in 1593.

So that, in 1171, there was organised in Venice the first private partnership of a closed type, similar to a deposit bank, on the basis of a mutual partnership. Later on, private partnerships would be created and operate in competition with trading houses.

Since the 13th century, activities of a partnership – bank were strictly regulated by the city authorities. It was obliged to make a deposit, restricted in operations and the amount of money. The partnership was fully under the supervision of the city institutions. Members of partnerships were thoroughly checked by the Senate.

This close proximity to the city authorities led to the ruin of many partnerships which were forced to finance Venice’s costly wars. The strongest among them survived, spreading their branches across Europe.

The public partnership, called in 1619 Venice girobank was named from Latin giro – “turnover”. The main operations of it were the settlements in coin and securities of the partnership. The latter provided for the restriction of the circle of clients, the personal presence of the client at the order of the girobank and the appearance of the cash register to meet the demands of depositors.

Gradually, the influence of Italian comradeships and their working methods spread throughout Europe.

Netherlands. The most intensive process of the banking sphere formation passed in Amsterdam, the capital of Netherlands, the centre of international trade of the XVII-XVIII centuries.

The monetary system of the Netherlands developed in the competitive conditions with the institution of private cashiers and a state exchange bank of the city. With the need to serve international trade, cashiers were established in Amsterdam to replace money changers. Cashiers also took part in lending to merchants on a fee basis, as well as in the money changers’ business. In 1609 the city authorities set up a change bank to separate the lending and changing functions. It was involved in the coins exchange and controlled money quality, dividing all coins into full and spoiled (erased, lower weight).

The action of the change bank and its competition with the cashiers made possible minting one’s own city coin, guilder since 1681. The change bank was reorganized into a deposit and transfer bank whose main job was to select good coins. However, even good money did not have a solid metal content and their rate was kept on the authority of a bank. The exchange rate of the bank’s securities-receipts (rezepiss), which were issued in exchange for the deposits stored in coin, was also maintained in the same way.

With the purpose of strengthening money and securities’ reliability, the bank began a practice of securing loans with precious metals. It also was an active participant in operations with its receipts by buying and selling securities in periods of their price hikes. The same activity using such securities in bill circulation made the bank the centre of bill circulation.

Germany. The experience gained in Amsterdam’s banking system was transferred to other major European cities, such as the German cities of Lübeck and Hamburg.

The prototypes of the banks in other German towns were established on the basis of branches of Italian trading houses. These were general partnerships or in-trust partnerships. The activity of the German trading houses was less regulated than in Italy and had limited freedom, attracting money from feudal lords and merchants and lending it to them.

France. The Huguenots-professionals of bill and cashless circulation, were invited from France for the organization of money circulation and banks to some German principalities. Their help was used to establish the first artisan bank.

History of the European Central Bank

The European Central Bank (ECB) is the financial institution of the European Union entrusted with the regulation of monetary policy of the euro zone member states. It is headquartered in Frankfurt am Main in Germany. The ECB was finally created in 1998 based on the Amsterdam Agreement of 1997. However, this creation process had begun far in advance. Immediately after the Second World War, a culmination of efforts to unify Europe and build a common market space started. In 1947-1957 integration of the region’s states took place and the European Payments Union appeared. Large European states formed the European Economic Community in 1957. In 1979, in mutual settlements, an ordinary monetary unit of account ECU was introduced, pegging its exchange rate against a basket of European currencies. In 1988, it was signed-a memorandum “On the Establishment of a European Monetary Area and a European Central Bank”. In 1992, the international treaty establishing the European Union was concluded in Maahstricht. In January 1994, according to that agreement, the European Monetary Institute was established in Frankfurt am Main to prepare the transition to the euro single currency. In 1998 it was transformed into the European Central Bank. Nowadays the ECB is a special legal entity operating under international agreements. Its authorized capital at its establishment came to over 5 billion euros; the shareholders are the central banks of European countries. The largest contributions have come from Deutsche Bundesbank – 18.9 per cent, Bank of France – 14.2 per cent, Bank of Italy – 12.5 per cent and Bank of Spain – 8.3 per cent. The shares of other Eurozone central banks range from 0.1 to 3.9 percent each.

The highest body of the ECB is the Governing Council, which consists of the Executive Board members and the heads of the central banks of the euro area member states. The management in day-to-day activities of the bank’s affairs is vested with the executive board of six members comprising the chairman and his deputy. They are proposed by the board of governors but must be endorsed by the European Parliament and the heads of the euro area member states.

The principal tasks of the European Central Bank are:

• economic stability in the eurozone, with an inflation rate no higher than 2 per cent. Aiming for a broad-based and sustainable increase in the growth rate leading to a high level of employment;
• formulating and implementing monetary policy in the euro area;
• managing foreign exchange reserves;
• issuing euros;
• setting interest rates;

To perform the aforementioned duties, in practice the ECB issues stabilisation loans, conducts collateral auctions for leading banks, carries out foreign exchange operations and performs other open market operations. During its operation, the European Central Bank is an officially independent body. At the same time, however, it is bound to report annually to the European Parliament, the European Commission, the Council of the European Union and the Council of Europe.

European Central Bank functions

The functions of the European Central Bank are: Since 1999, eleven EU Member States have started switching over to the third stage of the Economic and Monetary Union within the European Union. Establishment of EMU implies not only close coordination and, to a certain extent, harmonization of budgetary and economic policies of the Member States, but also the introduction of single monetary unit – euro, as well as definition and implementation of common monetary policy of such Member States. It is not accidental that many scholars consider EMU as “the highest stage of economic integration”. During this stage of integration, Member States would transfer their competences to the European Community authorities with regard to some of the most sensitive issues – the implementation and regulation of monetary issuance and the implementation of monetary policy. It includes the transfer of national competencies, which, as such, results in the limitation of national sovereignty of the member states and therefore a fundamental change in the role and powers of the EU. Moreover, the whole procedure of such transfer of national competencies of the Member-States leads to de facto loss of their competence for monetary and emission policies fixed in constitutions of almost all the EU Member-States.

As is well known, the central framework in which all the “monetary” aspects of the Economic and Monetary Union operate, and which performs and carries out the common monetary policy of the European Community, as provided by the Treaty establishing the European Community, is the European System of Central Banks, which was established in accordance with Article 8 of the said Treaty. Below, we shall examine what the ECCB is and how it operates.

Conforming to Article 107 of the said Treaty, the composition of ECB consists of the European Central Bank (ECB), along with the national central banks of the Member States. Article 14(3) of the Statute of the European System of Central Banks and the European Central Bank supplements the said Article by stating that the national central banks shall be an integral part of the ECB. By Art. 8 of the Statute, the basic principle of the organisation of the ESCB is that its functioning is ensured by the decision-making bodies of the ECB. Generally speaking, some scholars underline that “the European Central Bank is the backbone of the European System of Central Banks”. The key highlights include that the ECB shall be governed by the governing bodies of the ECB; the powers of the ECB are also exercised by the ECB, and this differentiates it from the ECB and the national central banks of the member states, because the ECB is not a legal entity.

While it has no legal status whatsoever, separate independent governing bodies, or possibilities for exercising independent powers, there have been a number of different points of view expressed regarding the legal nature of an ESCB. According to one such point of view, the ESCB represents the system of legally separate entities – central banks unified by common goals, tasks, and norms of activity. Closely related is the view of Dominique Servais, who thinks that the word “System” in the concept of the European System of Central Banks should be understood “not as a designation of a legal entity, but as an expression denoting the ECB and the national central banks as constituent parts of a certain entity which is governed by a collection of goals, objectives and rules”. In the opinion of Servais, this interpretation does not result in his mind in the apparent contradiction between the principles of centralisation and decentralisation, which he ascribes to the ECB. The reason is that such a system, on the one hand, provides for the centralisation of the decision-making process necessary for the implementation of a common monetary policy and, on the other hand, allows for decentralisation of operations that are carried out in pursuance of a common monetary policy either by the ECB or by national central banks.

Peisa and Vehmas have written that “the concept of the ESCB is that of a single community, comprising the ECB and national central banks, working together to achieve its goals and objectives”. Commentaire Campbell-edited authoritative commentary on the Treaty on European Community says that: “The European System of Central Banks is a combination of the ECB and national central banks. But only the ECB is a legal entity. The ECB is governed by the organs of the ECB. In other words, the ESCB is nothing more than a cloak thrown over the ECB, carrying no meaning other than semantic disguise of the hierarchy established between the ECB and the national central banks.”

Thus, we can notice that the majority of scholars do not recognize any independent and only one inherent essence or function for the ECB. In my opinion, we can speak about the ECB as a name of the system of certain relations between the ECB and national central banks in the framework of achieving their goals and objectives set for the ECB. Simultaneously, the leading role in these relations is performed by the ECB, while national central banks of the member-states play in it a rather subordinate role. Thus, it has allowed some scholars to say that “Existing national central banks become branches of the ECB with a status similar to individual federal reserve banks within the Federal Reserve System”. At the same time, a specific feature of legal relations between the EU member states and institutions of the EU is a subordinate role of national bodies in general in relation to EU bodies. Thus V.V. Maklakov noticed that “it is impossible not to see that the bodies of the member states are in a subordinate position in relation to the EU bodies.”. Such an understanding of the ECB gives us an opportunity not to single out it from the ECB and national central banks, without which the latter represents nothing, and emphasize what the name ECB was created for: a uniform and coherent system of relations between the ECB and the national central banks of the member states.

What is the purpose of the establishment of the ESCB? These are laid down in Art. 105(1) of the Treaty and likewise, word for word, in Art. 2 of the Statute. The most important aim is price stability. In pursuing all the other aims and carrying out all its functions, the ESCB must be oriented in the first instance towards the objective of price stability. The ESCB shall support the general economic policies of the Community with a view to achieving the objectives set out in Article 2 of the Treaty, only insofar as doing so does not conflict with its objective under Article 105. The ESCB shall pursue these objectives in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources, and in compliance with the principles laid down in Article 4 of the Treaty.

In pursuit of the foregoing tasks, the ESCB shall perform the following functions: determine and implement the Community’s foreign exchange policy, including setting guidelines for the negotiations conducted pursuant to Article 111 of the Treaty; conduct international exchange operations in accordance with the provisions of Article 111 of the Treaty; hold and administer the official foreign exchange reserves of the Member States; promote the proper functioning of the payments system; assist the competent authorities in pursuing a policy of prudent supervision of credit institutions and the stability of the financial system.

As underlined above, besides common aims and objectives, the members of the ECB are united through a strict hierarchical structure of legal relations between the national central banks of the Member States and the ECB. Their role as national central banks within the ECB is perfectly reflected by Articles 9.2, 12.1, 14.3 and 34 of the Statute according to which they are obliged to act within the framework of regulations adopted by the ECB. Yet, more significant are internal regulations of the ECB. Such regulations include the guidelines adopted by the Governing Council, the guidelines adopted exclusively by the Executive Committee and the internal decisions adopted by both bodies. In so far as these legal acts are binding only on the ECB and the national central banks which have entered the third phase of EMU, they do not confer any rights or impose any obligations on other third parties. Conversely, the inability or failure on the part of national central banks of Member States that have proceeded to the third stage of EMU to act in accordance with the core principles and guidelines may make such inability or failure subject to review by the Court of Justice of the EU. The difference between the principles and orientations concerns not only the authorities which adopt them but also the matters they cover. Core principles are legal instruments that have the purpose of defining and spelling out the ESCB policy. They include the main framework principles and rules that should be followed both by the ECB as well as national central banks. As a sample of the basic regulations adopted by the Governing Council, let’s mention the Basic Guidelines of 1 December 1998 of the European Central Bank regarding statistical reporting requirements for the European Central Bank in the field of balance of payments and international investment position statistics (EEU/1998/17).

In particular, the principles enlisted by the Executive Committee supplement the Core Guidelines through elaborating their implementation together with the decisions of the Governing Council and setting forth detailed guidelines at an adequate level for national central banks.

These two organs also adopt internal decisions in the fields of their respective competencies, which have legal force within the ESCB for matters concerning its staff, organization, and administration. A very good example of such an internal decision is the European Central Bank Decision of 3 November 1998 on public access to the records and archives of the European Central Bank (ECB/1998/12).

Besides, under Art. 31 it is stated that the national central banks, while carrying out their functions, should act within the limit of foreign currency reserve assets predefined by the ECB or obtain permission from the ECB regarding the amendment to such a norm.

It should be underlined that the ECB’s and of the legal relations developed in the framework of the ESCB’s dominatus is also reflected in the fact that, with a view to accession to the euro area, Member States had to bring their central banks’ legal position into line with the Statute of the ESCB to the extent that the latter guarantees a sufficient degree of independence to central banks and allows them to carry out their duties within the ESCB. This has enabled some scholars to speak of a “direct harmonisation” of the legal position of central banks. Almost all Member States have adopted new central bank laws or amended their existing ones: Belgium in March 1999, Finland in March 1998, the Netherlands in 1998, Germany in 1997, Ireland in 1998, France in May 1998, Greece in 1998, Portugal in 1998, Spain in 1994 and Sweden in 1998. Such a change in the legal position of national central banks could only be brought about, and the legality of the discharge of such commitments within the EMU framework ensured, through an amendment of constitutional documents accordingly by several member states; France, Germany, the United Kingdom – the European Communities Act, as amended and the Bank of England Act, Finland, Portugal, Sweden. Even those Member States who have not yet decided whether to enter the third stage of the Economic and Monetary Union have enacted regulations supporting further independence of their central banks correspondingly (Bank of England Act 1997). Last but not least, with the view to joining the third stage of EMU successfully, by the law dated 23 December 1998, Luxembourg established for the first time in its history a central bank.

The Statute of the ECB also introduces the supremacy of the latter over the national central banks in the sphere of international relations. Thus, whereas, under Article 6.1 of the Statute, it is for the ECB itself to determine how the ECB shall be represented on the international plane, under Article 6.2, national central banks have a right to participate in international monetary institutions only with the assent of the ECB. While this is so, according to Article 6.2 of the Statute, national central banks may participate in international monetary bodies only with the consent of the ECB. The latter itself does not need anyone’s consent. National banks cannot independently go beyond the powers granted to them by the Statute. Any other functions are to be performed by them only if the Governing Council of the ECB, by a two-thirds vote, decides that they are not incompatible with the aims and objectives of the ECB. Even such functions are performed by them under their own responsibility and are not regarded as part of the functions of the ECB.

To fill in the gap, the ECB has the option to make national central banks fulfill their obligations. This, quite easily follows from the Statute, Art. 35.6, enabling the ECB to refer such actions to the Court of Justice of the EU. However, some scholars indicate the analogy of this right of the ECB with the rights of the EU Commission vis-à-vis the EU Member States by virtue of Article 226 of the Treaty.

I would like to reiterate that the European System of Central Banks does not and cannot exist on its own, without the ECB and the national central banks of the Member States. Consequently, the aims and objectives of the ECB are no more than the aims and objectives of the relationship between the ECB and the national central banks of the Member States. The fact that it is the governing bodies of the ECB – the Governing Council and the Executive Committee – which, in pursuance of Article 8 of the Statute and of Article 107(3) of the Treaty, govern the whole of the European System of Central Banks means that the aims and objectives of the ECB are realised by the ECB and the national central banks under the direction of the ECB bodies and it is the ECB, through its governing bodies, that plays the leading role in this relationship. However, the members of the Governing Council are governors of national central banks, representing themselves at least de jure, and not their national central banks.

Above we have considered the composition and functions of the ESCB and the role played by national central banks and the ECB in the ESCB. The experience of the ESCB during the two past years has shown that, notwithstanding the complexity of the system, the ESCB proved to be quite workable. However, such a period is rather short. Only time will show the degree to which the institutional features of the ECB would be able to make the European Community capable to adapt to the process of change in the economic circumstances and to effectively apply the common monetary policy of the Community and at least partly harmonize the economic cycles of the member states.

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