European Central Bank

“ The central bank not only carries a reserve which is far in excess of immediate requirements in ordinary times, but also uses this reserve boldly in times of stress, presenting in both these respects a marked contrast to the policy of American banks. As a result, European business men need not fear either a refusal to lend or a restriction of payments by the banks on which they depend. And panic has small chance to develop where the depositor can get his money at need and the solvent business man can borrow. ”

“ That crises still degenerate on occasion into panics in America, but not in England, France, or Germany, arises primarily from differences in banking organization and practice. In each of the three European countries, the banking system as a whole is so organized by the prevalence of branch banking and the existence of a central bank that reserves which bear a small proportion to the aggregate demand liabilities of all the offices can be applied when and where they are most needed. ”

“ The amount of each national central bank's monetary income shall be equal to its annual income derived from its assets held against notes in circulation and deposit liabilities to credit institutions. These assets shall be earmarked by national central banks in accordance with guidelines to be established by the Governing Council. ”

“ The objective of crisis management is to protect the stability of the financial system in all countries involved and in the EU as a whole and to minimise potential harmful economic impacts at the lowest overall collective cost. The objective is not to prevent bank failures. ”

“ Where a liquidity crisis could affect a cross-border financial group with a potential for systemic implications, the Central Bank in the home country will coordinate actions among relevant Central Banks. The ECB and the Eurosystem will be involved in accordance with their responsibilities. The Central Banks involved will cooperate closely with the banking supervisory authorities and are expected to inform the Finance Ministries in the case of provision of Emergency Liquidity Assistance at the national level in line with the existing national legal framework. ”

“ The sum to be contributed shall be determined by multiplying the amount of the reserves, as defined above and as stated in the approved balance sheet of the ECB, by the ratio between the number of shares subscribed by the central bank concerned and the number of shares already paid up by the other central banks. ”

“ Subject to Article 2, the ECB may require credit institutions established in Member States to hold minimum reserves on accounts with the ECB and national central banks in pursuance of monetary policy objectives. ”

“ Where a bank group has significant cross-border activities in different Member States, authorities in these countries will carefully cooperate and prepare in normal times as much as possible for sharing a potential fiscal burden. If public resources are involved, direct budgetary net costs are shared among affected Member States on the basis of equitable and balanced criteria, which take into account the economic impact of the crisis in the countries affected and the framework of home and host countries’ supervisory powers. ”

“ Since at that time the entire country was dependent upon Wall Street because its surplus money was there, there is no escaping the fact that the whole financial situation of the country was at the mercy of one man. A 200 per cent. rate for loans would be inconceivable in one of the European financial centres because the central banks of Europe are the [Pg 619] guarantors of the stability of the money market. The central banks of Europe depend upon no man, selfish or altruistic. They are the public financial regulators of the whole nation. ”

“ If new sources of revenue are found, then the Central Bank within our covenants with IMF can ease the restrictions it now places on both public and private borrowing, and will be in a much better position to improve the structure of our external debt. ”

“ In countries where the Money Market is neither so highly developed nor, in relation to foreign countries, so self-supporting, the Central Bank, if it is to be secure, must take the matter in hand itself and, by itself entering the international money market as a lender at short notice, place itself in funds, at foreign centres, which can be rapidly withdrawn when they are required. ”

“ Today, there is hardly any commercial, agricultural, or industrial activity of national economic importance which has not been assisted by one or all of these corporations,―the Central Bank indirectly, of course, through the support it has given to the loan activities of the two other institutions. ”

“ An institution might have been established with large capital, and a monopoly of the right of note issue, authorized to act as government fiscal agent, and to deal with the general public. Such an institution would presumably in the course of time have become a central bank, the main reliance of other banks in emergencies. In order to avoid competition with existing banks, the act provides that the receipt of deposits by the Federal Reserve Banks, and their normal lending operations shall be confined to those banks which subscribe to the capital and maintain balances with them. ”

“ In Austria the provincial governments have actively assisted in the establishment of rural banks to furnish credit for farmers and have advanced loans without interest to them. In Germany the government has indirectly aided the rural banks by establishing central banks founded on capital advanced by the government, in most cases at 3 per cent, interest. The central banks in turn furnish credit to the rural banks and the rural banks to the farmer. The Prussian Central Bank at Berlin now has a capital of 75,000,000 marks from the Prussian government. ”

“ A commission will be appointed to study our banking laws and to recommend, if it is found desirable, a central bank to become the fiscal agency of the Government in the control of credit, to act as the clearing house for inter-bank transactions, to manage bank reserves and to afford more flexibility in our currency system. ”

“ The monetary competence of National Authority shall necessarily be exercised exclusively by the Venezuelan Central Bank. The fundamental objective of the Venezuelan Central Bank is to achieve price stability and preserve the internal and foreign exchange value of the monetary unit. ”