Banco de España: Autonomy, Eurosystem Integration & Evolution

Banco de España: Autonomy and Integration

In 1980, the Law on the Governing Bodies of the Banco de España granted the bank significant autonomy in its operations and monetary policy. In 1985, the Treaty of Accession to the European Economic Community was signed, and the Banco de España became a member of the Eurosystem.

The Ley Orgánica de Regulación de las Normas Básicas sobre Órganos Rectores de las Cajas de Ahorro was enacted, and a few years later, savings banks were given full freedom to expand nationally. These measures aimed for more democratic management but led to serious problems, evidenced by the disappearance of most savings banks during the previous financial crisis.

The Ley de Disciplina e Intervención Bancaria (1998) extended the Bank’s supervisory responsibilities to the entire financial system.

In 1992, with the approval of the Treaty on European Union (Maastricht Treaty), the European Union was created, fostering economic integration and paving the way for the European Monetary Union.

The Ley de Autonomía del Banco de España gave the Bank full responsibility for monetary policy, requiring it only to inform the Government about its objectives and results. The terms of office for the Bank’s governor and deputy governor were set at six years, non-renewable. The Banco de España focused on inflation control and informed all economic agents of its measures and results, launching a half-yearly publication titled Informe sobre la inflación.

The integration process was successful, moving closer to its final objectives. On April 28, 1998, the Banco de España joined the European System of Central Banks. On January 1, 1999, the euro became the currency of 11 European Union countries, including Spain. Euro banknotes and coins began circulating on January 1, 2002.

The Banco de España has been consistently active in committees, working groups, and high-level international meetings, both within the European system and at the international level (International Monetary Fund, the Bank for International Settlements, etc.).

The 2008 financial crisis reshaped the Spanish financial sector, leading to the practical disappearance of savings banks.

Banco de España within the Eurosystem (1999-2018)

The Banco de España became a member of the Eurosystem and the European System of Central Banks.

The Treaty on European Union established the European System of Central Banks (ESCB), comprising the European Central Bank (ECB) and the national central banks of all European Union Member States. The Eurosystem consists of the ECB and the national central banks of the states that have adopted the euro as their currency (19 out of 28 European Union members).

The ECB is a supranational body with its own legal personality, subject to international public law regulations. It was created on June 1, 1998, in Frankfurt, initially assuming the functions of the Monetary European Institute. It was established with initial capital contributed by the national central banks. Since its founding, the ECB has made organizational changes and expanded its functions, most notably with the launch of the Banking Union Project.

The financial crisis of 2008 highlighted how problems in the financial sector, especially within the monetary union, directly affect citizens. This was a key factor in launching European initiatives.