The CNB´s tasks in the European System of Central Banks
On the Czech Republic´s accession to the European Union, the Czech National Bank became part of the European System of Central Banks (ESCB). The tasks ensuing from this can be divided into two stages:
1. The period between EU accession and eurozone entry
- During this stage, which will last at least two years, there are no fundamental changes in the CNB´s activities, as it is not a full ESCB member. The CNB Governor is not a member of the European Central Bank´s Governing Council and takes part only in the meetings of the General Council, which does not have decision-making powers.
- Nonetheless, the CNB is obliged, in line with its primary objective, to maintain price stability. This strengthens the CNB´s role with respect to the task of further reducing inflation.
- The CNB is obliged to regard exchange rate policy as a matter of common interest for all the Member States. It is assumed that later, depending on the Czech Republic´s readiness, the CNB will conclude with the ECB an agreement on the ERM II exchange rate mechanism within the framework of the European Monetary System. The CNB will thereby commit itself to maintaining the Czech koruna´s exchange rate within the set band, which will put greater demands on exchange rate policy management.
- In order to undertake the tasks of the ESCB, the CNB is be obliged to provide the ECB with regular statistical information, which it collects from the competent national authorities and economic agents. This accentuates the role of the statistics department.
- The CNB is obliged to consult with the ECB on all important measures and draft legislative provisions in the ECB´s fields of competence.
2. The period after eurozone entry and adoption of the euro
- In this period, the CNB will be a full ESBC member with all the ensuing rights and duties. It will by governed primarily by the EC Treaty and the ESCB Statute.
- The CNB will lose one of its main functions - monetary policy management. In this area, the CNB will merely implement the single monetary policy based on the ESCB´s monetary policy instruments. The CNB Governor, however, will be a member of the ECB´s Governing Council and will thereby participate in the decision-making.
- Nonetheless, the loss of decision-making powers in the monetary area will not mean that the role of national banks will gradually diminish. The CNB´s activity will shift to tasks pinpointed in other areas.
- The CNB will become a full member of the TARGET payment system connecting all central banks of the European Union. This will accentuate the role of the CNB´s payment system department.
- The CNB will continue to supervise banks. Owing to the system of unified banking licences within the EU, the CNB will also have the obligation of overseeing the branches of Czech banks abroad.
- Despite the fact that the Czech Republic will be part of the single currency system, the CNB will still have the obligation of minting coins in euros for the needs of the Czech state and may also be authorised to issue banknotes.
- The CNB will continue to carry out open market operations, although the principles for these will be established by the ECB.
- The CNB will continue to manage the remaining part of its official foreign exchange reserves after fulfilling the obligation to transfer a set part of its reserves to the ECB.
- The CNB will continue to maintain and establish relations with central banks and financial institutions in third countries and with international organisations.
- The CNB will continue to maintain accounts for public entities and other market participants.