Structure of the Federal Republic of Germany, the Bundesbank and ...

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

Structure of the Federal
Republic of Germany
� federation (Bund) of
16 states (Länder)
� capital: Berlin
� 82.4 m inhabitants
� smallest state:
– Free and hanseatic city of
Bremen (0.6 m inhabitants)
� biggest state:
– North Rhine-Westfalia (18.1
m inhabitants)
� EU founding member
2

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
3

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)
4

Structure of the
Deutsche Bundesbank
� founded 1957
� public institution
� History
� Independent of government
and parliament (operational,
institutional, financial and
personnel)
� Budgetary auditing by the
Federal Court of Auditors
� First major organisational
adjustment after German
reunification (1992)
5

Structure of the Deutsche
Bundesbank
“Old”
Bundesbank
(before 2002)
9 Presidents
(executive executive (executiveboards) boards boards)
9 Land Land Central
Banks
Banks
66 66 branches
63 63 sub-branches
sub sub-branches branches
Central Bank Bank Council
Directorate
Central Office
Office
6

Structure of the Deutsche Bundesbank
Governing bodies until 1 May 2002
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 member
of the Executive Board
7

Structure of the Bundesbank
� 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)
8

The three Stages of European Monetary Union
1990 - 1999
Stage 1
1 July 1990
• Free movement of
capital
• Closer co-operation
between NCBs
• Statutes of the
ESCB, ECB and EMI
Stage 2
1 January 1994
• Establishment of the
European Monetary
Institute (EMI)
- Co-ordination of
national monetary
policies
- Preparation of
Stage 3
• Statutory independence
of the NCBs
Stage 3
1 January 1999
• Conversion rates
irrevocably fixed
• Single monetary
policy
• Changeover to the
euro as sole legal
tender from 1.1.2002
9

The ESCB and the Eurosystem
European System of Central
Banks
� founded in 1999
� consists of all 27 EU
member states
Eurosystem
� consists of 16 EU member
states, which have
introduced the Euro
10

The ESCB and the Eurosystem
ESCB’s Governing Council
� Governors of the Eurosystem CBs
� members of the ECB’s Executive
Board
ECB’s Executive Board
� President
� Vice-President
� 4 additional members
General Council
� Governors of all EU CBs
� members of the ECB’s Executive
Board
11

Decision Making Bodies of the ECB
According to Art. 107(3) of the EC Treaty, they are:
Governing Council
Executive Board
Governors of the
participating NCBs
(16 at present) Tasks
•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
(examples)
Delegation of
powers
possible
Executive Board
President and Vice-
President
4 other members
•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
12

Necessity for changes in the Bundesbank ?
Reasons for structural Reform?
� 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
13

Seventh Act amending the Bundesbank Act
New Law
� 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
14

First strategic cycle 2002-2007
“structural reform”
- Key Elements of Reorganisation -
Consolidation
of the range of services
Reorganisation
of the
management levels
Organisational streamlining and
restructuring of tasks
Branch Strategy
Streamlining the
branch network
15

Important Changes
� 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
16

Structure of the new Bundesbank
“New” Bundesbank
(2003)
Executive Board
Board
(8 (8 members) members members)
Central Office Office with
with
14 14 departments
9 Regional Offices
66 66 branches
34 34 operating units
units
21 21 Service Centres
17

Bundesbank´s new “Management Board”
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
18

Structure of the new Bundesbank
Current
organisation chart
Bundesbank
(2010)
Executive Board
Board
(6 (6 members)
Central Office Office with
with
14 14 departments *
*
9 Regional Offices
47 47 Branches**
Branches Branches** **
+ 1 operating unit
unit
* restructuring of Departments and Divisions has started
** Since end of September 2007
18 18 Service Centres
19

Distribution of tasks between ...
Central Office, eg Regional Offices
� Management of the
Bank
� Principle tasks
� Regional tasks, eg
� Banking supervision
Branches
� Operational tasks, eg
� Cash/cashless
payments
� Account keeping
20

� OrgaplanZentrale__Englisch,property=publicationFile.pdf
21

Regional Offices
� Uniformly structured Regional Offices
In-house operations
Banking Supervision
Banking Operations
Präsident of the Regional
Office
Servicecentre
� Set up of Service Centres which concentrate at a single location
the execution of specific Bank-wide tasks. (e.g. securities
settlement and deposit account management; procurement)
22

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
23

Branches
� 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.
24

Adjustment of the Branch Network
Some 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
25

Results of structural reform:
consolidation process of branches
120
90
60
30
0
Number of branches and operating units
127
end
2001
118
end
2002
100
end
2003
86
end
2004
78
end
2005
71
end
2006
since Sept. 2007:
47 branches +
1 operating unit
48
end
2007
26

Bundesbank locations before the structural reform in 2002
27

Bundesbank locations today
28

Streamlining the Range of Cash Operation Services
Reaction of Changes in the Cash Cycle
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
29

Branch Strategy 2012/ 2015
�Close of 12 Branches
until 2015
�Planning and building a
new Branch (Cash Centre)
in the Rhein-Ruhr-Region
which should replace
another 5 existing
Branches
�
Oldenburg
� Osnabrück
Bielefeld
�
Hannover
�
Berlin
�
Göttingen
Dortmund
Essen
� �Bochum Hagen
� � Leipzig
�Köln
�
Erfurt
�
Chemnitz
�
�
�
Düsseldorf
Koblenz
�
Frankfurt
Mainz�
�
Ludwigshafen�
�
Saarbrücken
�
Karlsruhe Stuttgart
�
�
Reutlingen �
Villingen-
Ulm
Schwenningen�
�
Freiburg
Hamburg
�
Würzburg
�
�
Augsburg
Magdeburg
�
Nürnberg
�
�Rostock
�
Neubrandenburg
München
�
�
Regensburg
30

Branch Strategy 2012/ 2015
120
90
60
30
0
118
Branches at the end of 2015
86
48
Ende 2002 Ende 2004 Ende 2007 Ende 2012 Ende 2015
41
35
31

Results of structural reform 2002 - 2007
Consolidation process of the Bundesbank:
• change of branch network
• change of employees
• cost reduction per year
-63 %
end 2007
-rd. 60%
-rd. 30%
rd.
300 Mio. €
32

Results of structural reform
and continuing the consolidation process
20.000
15.000
10.000
5.000
0
14.817
End of
2001
14.346
End of
2002
13.194
End of
2003
Number of core staff
(excluding trainees)
12.133 11.502
End of
2004
End of
2005
10.972
End of
2006
10.391 9.800
End of
2007
Target
2008
9.000
... Target
end of
2012
33

Restructuring process
Impact on Staff
�Staff was facing increased demand for geografical and professional
flexibility 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
34

Thank you for your attention.
35