The beginning of stage three of Economic and Monetary Union (EMU) on 1 January 1999 meant that some of the functions previously carried out until then by the national central banks of the euro area were redefined.
In the case of Spain, the Law of Autonomy of the Banco de España had to be amended to include the authority of the European Central Bank (ECB) to define the monetary policy of the euro area and its powers in respect of exchange rate policy. Also, it was necessary to adapt the aformentioned Law to the provisions of the Treaty on European Union (TEU), the Statute of the European System of Central Banks (ESCB ) and ECB guidelines and instructions.
Functions as a member of the ESCB
Since 1 January 1999, the Banco de España has been performing the following basic functions attributed to the ESCB:
- Defining and implementing the Eurosystem's monetary policy, with the principal aim of maintaining price stability across the euro area.
- Carrying out foreign exchange transactions consistent with the provisions of article 111 of the TEU, and holding and managing the State's official currency reserves.
- Promoting the proper working of payment systems in the euro area. Against this backdrop, reference should be made to emergency liquidity assistance (ELA) operations.
- Issuing legal tender banknotes.
Functions as a national central bank
Recognising the functions resulting from membership of the ESCB, the Law of Autonomy stipulates the following functions for the Banco de España:
- Holding and managing currency and precious metal reserves not transferred to the ECB.
- Promoting the proper working and stability of the financial system and, without prejudice to the functions of the ECB, of national payment systems. Against this backdrop, reference should be made to emergency liquidity assistance (ELA) operations
- Supervising solvency and compliance with the specific rules of credit institutions, other entities and financial markets, for which it has been assigned supervisory responsibility.
- Placing coins in circulation and performing, on behalf of the State, all such other functions entrusted to it in this connection.
- Preparing and publishing statistics relating to its functions and assisting the ECB in the compilation of statistical information
- Providing treasury services and acting as financial agent for government debt.
- Advising the Government, and preparing the appropriate reports and studies.