Structure of the Federal Republic of Germany, the Bundesbank and the ECB,Structural Changes

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Structure of the Federal Republic of Germany

federation (Bund) of 16 states (Länder)capital: Berlin82.4 m inhabitantssmallest state:– Free and hanseatic city of

Bremen (0.6 m inhabitants)

biggest state:– North Rhine-Westfalia (18.1

m inhabitants)

EU founding member

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Structure of the Federal Republic of Germany

federal government– elected by the lower

house (Bundestag)

– lead by the chancellor

16 governments of the Länder– elected by parliaments

(Landtag) of the Länder

– lead by 16 prime ministers

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Structure of the Federal Republic of Germany

President of the Federal Republic of Germany– Elected by members of the

lower house and the same number of delegates chosen by the governments of the member states

– Representative tasks, such as appointment of ministers or of the president of the Deutsche Bundesbank

Most legal acts have to be adopted by both houses of parliament (Bundesbank Act)

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Structure of theDeutsche Bundesbank

founded 1957public institutionHistoryIndependent of government and parliament (operational, institutional, financial and personnel)Budgetary auditing by theFederal Court of AuditorsFirst major organisational adjustment after German reunification (1992)

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Central Bank CouncilCentral Bank CouncilCentral Bank Council

Central OfficeCentral OfficeCentral Office

63 sub-branches63 63 subsub--branchesbranches

66 branches66 66 branchesbranches

9 Land Central Banks

9 Land Central 9 Land Central BanksBanks

9 Presidents(executive boards)

9 9 PresidentsPresidents((executiveexecutive boardsboards)) DirectorateDirectorateDirectorate

“Old” Bundesbank

(before 2002)

Structure of the Deutsche Bundesbank

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Central Bank Council

•President of the Deutsche Bundesbank

•Vice-President of the Deutsche Bundesbank

•Remaining members of the directorate

•Presidents of the nine Land Central Banks

Directorate

•President of the Deutsche Bundesbank

•Vice-President of the Deutsche Bundesbank

•4-6 other members

Executive Boards of the Land Central Banks

•Presidents of the 9 Land Central Banks

•Vice-President of the 9 Land Central Banks

•If existing, one more memberof the Executive Board

Structure of the Deutsche BundesbankGoverning bodies until 1 May 2002

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Central Bank Council was (until 1.1.1999) responsible for monetary policy of the D-Mark (DM)

The members of the Directorate were nominated by the Federal Government, whereas the presidents of the Land Central Banks were nominated by the upper or second house (Bundesrat) which represents the Federal States (Länder); all were appointed by the Präsident of the Federal Republic of Germany.

Land Central Banks with autonomous competencies in internal matters (administration, organisation and HRM)

Structure of the Bundesbank

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Stage 1Stage 11 1 JulyJuly 19901990

• Free movement of capital

• Closer co-operation between NCBs

• Statutes of theESCB, ECB and EMI

Stage 2Stage 21 1 JanuaryJanuary 19941994

• Establishment of the European Monetary Institute (EMI)- Co-ordination of

national monetarypolicies

- Preparation of Stage 3

• Statutory indepen-dence of the NCBs

Stage 3Stage 31 1 JanuaryJanuary 19991999

• Conversion rates irrevocably fixed

• Single monetary policy

• Changeover to the euro as sole legal tender from 1.1.2002

The three Stages of European Monetary Union1990 - 1999

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The ESCB and the Eurosystem

European System of CentralBanks

founded in 1999consists of all 27 EU member states

Eurosystemconsists of 16 EU member states, which have introduced the Euro

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The ESCB and the EurosystemESCB’s Governing Council

Governors of the Eurosystem CBs

members of the ECB’s Executive Board

ECB’s Executive BoardPresident

Vice-President

4 additional members

General CouncilGovernors of all EU CBs

members of the ECB’s Executive Board

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•formulates the monetary policy of the euro area

•adopts guidelines and takes decisions necessary to perform the entrusted tasks

•consultative function as laid down in Art. 105(4) of the EC Treaty

•is responsible for the day-to-day business of the ECB

•implements the monetary policy guidelines laid down by the Governing Council

•prepares the meetings of the Governing Council

President and Vice-President

4 other members

According to Art. 107(3) of the EC Treaty, they are:

Executive BoardGoverning CouncilExecutive Board

Governors of the participating NCBs(16 at present) Tasks

(examples)

Delegation of powerspossible

Decision Making Bodies of the ECB

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1 January 1999: Bundesbank‘s tasks and activities in the field of monetary policy changed radically with start of stage three of Economic and Monetary Union

Integral part of the European System of Central Banks (ESCB)

Joint responsibility for ensuring the stability of the euro within the Eurosystem

Necessity to change the Bundesbank‘s organisation structure

Necessity for changes in the Bundesbank ?

Reasons for structural Reform?

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Entry into force on 30 April 2002

Logical consequence of the transfer of monetary policy responsibility to the ESCB/Eurosystem

Introducing changes in the Bank‘s management and decision-making structure

Seventh Act amending the Bundesbank ActNew Law

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First strategic cycle 2002-2007 “structural reform”- Key Elements of Reorganisation -

Reorganisationof the

management levels

Organisational streamlining and restructuring of tasks

Consolidationof the range of services

Branch Strategy Streamlining the branch network

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Replacement of the former governing bodies (Central Bank Council, Directorate and executive boards of the Land Central Banks) by the eight-member Executive Board

Abolishment of decision-making prerogatives of the Land Central Banks

The existing organisational units - nine Land Central Banks and the Central Office - were merged to form a single entity

Replacement of the „Land Central Banks“ by „Regional Offices“

Reporting line via the central office departments

Important Changes

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Executive Board(8 members)

ExecutiveExecutive BoardBoard(8 (8 membersmembers))

Central Office with14 departments

Central Office Central Office withwith14 14 departmentsdepartments

9 Regional Offices9 Regional Offices9 Regional Offices

34 operating units34 34 operatingoperating unitsunits

66 branches66 66 branchesbranches

21 Service Centres21 Service 21 Service CentresCentres

Structure of the new Bundesbank

“New” Bundesbank (2003)

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Executive Board (Vorstand) in 2003:

The governing body of the Deutsche Bundesbank

Consists of eight members: the President, the Vice-President and six other members

The President, the Vice-President and two other members are nominated by the Federal Government

The other four members are nominated by the Bundesrat in agreement with the Federal Government

Members are appointed by the President of the Federal Republic of Germany

Bundesbank´s new “Management Board”

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Structure of the new Bundesbank

Executive Board(6 members)

Executive BoardExecutive Board(6 members) (6 members)

Central Office with14 departments *

Central Office withCentral Office with14 departments *14 departments *

47 Branches**+ 1 operating unit47 47 BranchesBranches****

+ 1 + 1 operatingoperating unitunit

18 Service Centres18 Service 18 Service CentresCentres9 Regional Offices9 Regional Offices9 Regional Offices

* restructuring of Departments and Divisions has started** Since end of September 2007

Current organisation chart Bundesbank (2010)

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Central Office, eg Regional Offices

Management of the Bank

Principle tasks

Regional tasks, eg

Banking supervision

Operational tasks, eg

Cash/cashlesspayments

Account keeping

Branches

Distribution of tasks between ...

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OrgaplanZentrale__Englisch,property=publicationFile.pdf

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Uniformly structured Regional Offices

Set up of Service Centres which concentrate at a single locationthe execution of specific Bank-wide tasks. (e.g. securities

settlement and deposit account management; procurement)

Regional Offices

Präsident of the Regional Office

In-house operations

Banking Supervision

Banking Operations

Servicecentre

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Service Centres

Service Center Regional Office Responsible Central Department

External Sector Audits and Reporting Queries Düsseldorf, Hannover, Mainz, München

Statistics

External Sector Statistics Mainz Statistics

Automation of Banknote and Coin Processing München Cash

Cash Management Logistics Mainz Cash

Health Care Subsidies Berlin HR

Damaged Banknotes and Coins Mainz Cash

Procurement Frankfurt Since 5.2010 integral part of department ‘Administration + Premises’

Administrative Accounting, Asset Accounting and Master Data Administration

Hamburg Controlling

Employees Loans Berlin HR

Cost Accounting Data Processing Hamburg Controlling

Housing Administration Stuttgart Administration

Organisational Analysis *) Düsseldorf Since 5.2010 integral part of department ‘Controlling, Accounting …)

Travel and Relocation Expenses Berlin HR

Monetary Policy Procedure Projects Hannover Markets

Credit Operations *) Frankfurt Since 5.2010 integral part of department ‘Markets’

Financial Sanctions München Legal

Securities Settlements and Safe Custody Frankfurt Payment Systems

Computer Center and Retail Payment Systems Operations Düsseldorf Payment Systems

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Branches of the Deutsche Bundesbank

The branches are subordinate to the Regional Office responsible for their region.

They supply banks and public authorities with euro banknotes and coins. They also process their cashless payments and provide local credit institutions with direct access to central bank credit.

The Branches offer private customers the opportunity to exchange D-Mark banknotes and coins free-of-charge and with no fixed deadline.

Branches

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Adjustment of the Branch NetworkSome Facts

Switch to a single-tier branch structure

Examination for each location whether continued operation as a branch was commercially viable

Further streamlining of the branch network

Nationwide provision of central bank services (mainly cash) ensured by remaining 47 branches

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Results of structural reform:consolidation process of branches

Number of branches and operating units127

10086 78 71

48

118

0

30

60

90

120

end2001

end2002

end2003

end2004

end2005

end2006

end2007

since Sept. 2007:47 branches +

1 operating unit

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Bundesbank locations before the structural reform in 2002

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Bundesbank locations today

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Backgrounds:Increasing involvement of the Bundesbank in cash handling and processing operations for the last years

Review of the Bundesbank‘s role in cash operations

Result:Reorientation of business policy in the field of cash-related transactions (wholesaler not retailer)

General principle: free of charge supply of those cash operations which are defined as standard service portfolio in the Eurosystem

Ongoing participation in banknote-processing for the sake of assuring the present quality standard

Streamlining the Range of Cash Operation ServicesReaction of Changes in the Cash Cycle

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Close of 12 Branchesuntil 2015Planning and building a new Branch (Cash Centre) in the Rhein-Ruhr-Region which should replaceanother 5 existingBranches

SchwenningenVillingen-

Berlin

Leipzig

Hannover

Frankfurt

Mainz

Stuttgart

MünchenReutlingen

Freiburg

Regensburg

Nürnberg

Würzburg

Karlsruhe

Koblenz

Göttingen

Osnabrück

Saarbrücken

Ludwigshafen

Ulm

ErfurtChemnitz

Magdeburg

Oldenburg

Neubrandenburg

Rostock

Köln

EssenHagen

BochumDortmund

Bielefeld

Hamburg

Düsseldorf

Augsburg

Branch Strategy 2012/ 2015

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Branch Strategy 2012/ 2015

Branches at the end of 2015

118

48 41 35

86

0

30

60

90

120

Ende 2002 Ende 2004 Ende 2007 Ende 2012 Ende 2015

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• change of branch network

• change of employees

• cost reduction per year

- 63 %

- rd. 60%

- rd. 30%

end 2007

rd.

300 Mio. €

Results of structural reform 2002 - 2007

Consolidation process of the Bundesbank:

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Number of core staff (excluding trainees)

12.133 11.50210.391 9.800

14.346

10.97213.194

14.817

9.000

0

5.000

10.000

15.000

20.000

End of2001

End of2002

End of2003

End of2004

End of2005

End of2006

End of2007

Target2008

... Target end of2012

Results of structural reformand continuing the consolidation process

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Restructuring processImpact on Staff

Staff was facing increased demand for geografical and professionalflexibility and mobility

HR Adjustment procedures in times of change:• Early retirement-schemes for employees: Age-limit 55• Partial retirement for civil servants: Age-limit 55• Redundancy agreement offered to younger staff• Outplacement activities (efforts to place staff with other employers)

• Promotion of part-time work of employees• Mobility assistance

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Thank you for your attention.