Enlargement of the euro area: adjustment of voting arrangements in the Governing Council of the ECB

Outline of the Community (European Union) legislation about Enlargement of the euro area: adjustment of voting arrangements in the Governing Council of the ECB

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Enlargement of the euro area: adjustment of voting arrangements in the Governing Council of the ECB

Document or Iniciative

Decision 2003/223/EC of the Council, meeting in the composition of the Heads of State or Government of 21 March 2003 on an amendment to Article 10.2 of the Statute of the European System of Central Banks and of the European Central Bank [Official Journal L 83 of 1.4.2003].

Summary

This Decision establishes the voting rules for the Governing Council of the European Central Bank (ECB). It introduces a voting rotation system in order to ensure fair and effective decision-making.

Governing Council

The Governing Council is one of the three decision-making bodies of the ECB. The other two bodies are the Executive Board and the General Council.

The Governing Council is the main decision-making body. In particular, it defines the monetary policy for the euro area.

Furthermore, the Governing Council is composed of six members from the Executive Board and governors of the central banks of Member States in the euro area. The number of governors therefore increases each time a new Member State adopts the euro.

A voting rotation system by groups

As from the date on which the number of members of the Governing Council exceeds 21, the voting arrangements will be adjusted.

The total number of voting rights is thus limited to 21. The six members of the Executive Board will continue to have permanent voting rights. The governors will share the remaining 15 voting rights, which will rotate among them.

Governors are therefore allocated to groups which will differ with respect to the frequency with which their members have voting rights. The groups will be formed in accordance with a ranking of Member States and national central banks. This ranking will be based on:

• the share in the aggregate gross domestic product at market prices (GDP mp) of the Member States in the euro area;
• the share in the total aggregated balance sheet of the monetary financial institutions of the Member States in the euro area.

These indicators will ensure objectivity since they are the most objective reflection of the size of the overall economy and recognise the specific relevance of the financial sector of the participating Member States.

Furthermore, this Decision provides for the voting rotation system to be implemented in two stages.

Stage one: Voting rights when the number of governors exceeds 15

As from the date on which the number of governors exceeds 15, and until it reaches 22, the governors will be allocated to two groups. The first group will be composed of the five governors of the national central banks of the Member States with the biggest shares in the euro area total according to the indicators described above. The second group will be composed of all the other governors.

The five governors in the first group will share four voting rights and the remaining governors in the second group will share 11. The governors in the first group cannot have lower voting frequencies than those in the second group.

Stage two: Voting rights when the number of governors exceeds 22

As from the date on which the number of governors exceeds 22, the governors will be allocated to three groups. The first group will be composed of the five governors of the national central banks of the Member States with the biggest shares in the euro area total. The second group will be composed of half the total number of governors. Governors in this group will come from the national central banks of the Member States holding the subsequent positions in the country ranking based on the above criteria. The third group will be composed of all the other governors.

Four voting rights will then be assigned to the first group, eight to the second and three to the third. When there are 27 euro area Member States, the voting frequency of the first group will be 80 %, that of the second 57 % and that of the third 38 %.

Within each group, the governors will have their voting rights for equal amounts of time. The Governing Council will take the operational measures necessary for the implementation of this principle.

Adjustment to economic developments and future changes

Whenever the number of governors increases, or at each adjustment of aggregate GDP mp (required every five years), the composition of the groups will be adjusted in line with any changes. Any such adjustments will apply as from the day on which the governor(s) join the Governing Council.

Any decision which is necessary to implement the operational details of the rotation system will, with the exception of the new voting arrangements, be adopted by all members of the Governing Council, irrespective of whether or not they hold a voting right at the time of the decision, by a two-thirds majority.

Context

Before being able to introduce the euro, Member States must fulfil a number of economic and financial conditions known as ‘convergence criteria’.

Currently, only 17 of the 27 Member States have met these criteria and have therefore been able to adopt the euro as a single currency. The other Member States are subject to derogations until they too meet the criteria. Denmark and the United Kingdom are subject to exemptions as they do not currently intend to adopt the euro.

References

Act	Entry into force	Deadline for transposition in the Member States	Official Journal
Decision No 2003/223/EC	After ratification by the Member States	–	OJ L 83, 1.4.2003