CHAPTER 5: PRUDENTIAL SUPERVISION

Article 25 Prudential supervision

1. The European Central Bank may offer advice to and be consulted by the Council, the Commission and the competent authorities of the Member States on the scope and implementation of legally binding acts of the Union relating to the prudential supervision of credit institutions and to the stability of the financial system.
2. In accordance with any European law adopted under Article 3-185(6) of the Constitution, the European Central Bank may perform specific tasks concerning policies relating to the prudential supervision of credit institutions and other financial institutions with the exception of insurance undertakings.

CHAPTER 6: FINANCIAL PROVISIONS OF THE EUROPEAN SYSTEM OF CENTRAL BANKS

Article 26 Financial accounts

1. The financial year of the European Central Bank and national central banks shall begin on the first day of January and end on the last day of December.
2. The annual accounts of the European Central Bank shall be drawn up by the Executive Board, in accordance with the principles established by the Governing Council. The accounts shall be approved by the Governing Council and shall thereafter be published.
3. For analytical and operational purposes, the Executive Board shall draw up a consolidated balance sheet of the European System of Central Banks, comprising those assets and liabilities of the national central banks that fall within the European System of Central Banks.
4. For the application of this Article, the Governing Council shall establish the necessary rules for standardising the accounting and reporting of operations undertaken by the national central banks. Article 27 Auditing
5. The accounts of the European Central Bank and national central banks shall be audited by independent external auditors recommended by the Governing Council and approved by the Council. The auditors shall have full power to examine all books and accounts of the European Central Bank and national central banks and obtain full information about their transactions.
6. Article 3-384 of the Constitution shall only apply to an examination of the operational efficiency of the management of the European Central Bank. Article 28 Capital of the European Central Bank
7. The capital of the European Central Bank, shall be 5 000 million euro. The capital may be increased by such amounts as stipulated by a European decision by the Governing Council acting by the qualified majority provided for in Article 10(3), within the limits and under the conditions set by the Council under the procedure laid down in Article 41.
8. The national central banks shall be the sole subscribers to and holders of the capital of the European Central Bank. The subscription of capital shall be according to the key established in accordance with Article 29.
9. The Governing Council, acting by the qualified majority provided for in Article 10(3), shall determine the extent to which and the form in which the capital shall be paid up.
10. Subject to paragraph 5, the shares of the national central banks in the subscribed capital of the European Central Bank may not be transferred, pledged or attached.
11. If the key referred to in Article 29 is adjusted, the national central banks shall transfer among themselves capital shares to the extent necessary to ensure that the distribution of capital shares corresponds to the adjusted key. The Governing Council shall determine the terms and conditions of such transfers.

Article 29

Key for capital subscription

1. The key for subscription of the European Central Bank’s capital, fixed for the first time in 1998 when the European System of Central Banks was established, shall be determined by assigning to each national central bank a weighting in this key equal to the sum of: — 50 % of the share of its respective Member State in the population of the Union in the penultimate year preceding the establishment of the European System of Central Banks; — 50 % of the share of its respective Member State in the Union’s gross domestic product at market prices as recorded in the last five years preceding the penultimate year before the establishment of the European System of Central Banks. The percentages shall be rounded up or down to the nearest multiple of 0,0001 percentage points.
2. The statistical data to be used for the application of this Article shall be provided by the Commission in accordance with the rules laid down by the Council under the procedure provided for in Article 41.
3. The weightings assigned to the national central banks shall be adjusted every five years after the establishment of the European System of Central Banks by analogy with paragraph 1. The adjusted key shall apply with effect from the first day of the following year.
4. The Governing Council shall take all other measures necessary for the application of this Article.

Article 30

Transfer of foreign reserve assets to the European Central Bank

1. Without prejudice to Article 28, the European Central Bank shall be provided by the national central banks with foreign reserve assets, other than Member States’ currencies, euro, International Monetary Fund reserve positions and special drawing rights, up to an amount equivalent to 50 000 million euro. The Governing Council shall decide upon the proportion to be called up by the European Central Bank. The European Central Bank shall have the full right to hold and manage the foreign reserves that are transferred to it and to use them for the purposes set out in this Statute.
2. The contributions of each national central bank shall be fixed in proportion to its share in the subscribed capital of the European Central Bank.
3. Each national central bank shall be credited by the European Central Bank with a claim equivalent to its contribution. The Governing Council shall determine the denomination and remuneration of such claims.
4. Further calls of foreign reserve assets beyond the limit set in paragraph 1 may be effected by the European Central Bank, in accordance with paragraph 2, within the limits and under the conditions laid down by the Council in accordance with the procedure laid down in Article 41.
5. The European Central Bank may hold and manage International Monetary Fund reserve positions and special drawing rights and provide for the pooling of such assets.
6. The Governing Council shall take all other measures necessary for the application of this Article.

Article 31

Foreign reserve assets held by national central banks

1. The national central banks shall be allowed to perform transactions in fulfilment of their obligations towards international organisations in accordance with Article 23.
2. All other operations in foreign reserve assets remaining with the national central banks after the transfers referred to in Article 30, and Member States’ transactions with their foreign exchange working balances shall, above a certain limit to be established within the framework of paragraph 3, be subject to approval by the European Central Bank in order to ensure consistency with the exchange rate and monetary policies of the Union.

The Governing Council shall issue guidelines with a view to facilitating such operations. Article 32 Allocation of monetary income of national central banks

1. The income accruing to the national central banks in the performance of the monetary policy function of the European System of Central Banks (hereinafter referred to as ‘monetary income’) shall be allocated at the end of each financial year in accordance with the provisions of this Article.
2. 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.
3. If, after the start of the third stage, the balance sheet structures of the national central banks do not, in the judgment of the Governing Council, permit the application of paragraph 2, the Governing Council, acting by a qualified majority, may decide that, by way of derogation from paragraph 2, monetary income shall be measured according to an alternative method for a period of not more than five years.
4. The amount of each national central bank’s monetary income shall be reduced by an amount equivalent to any interest paid by that central bank on its deposit liabilities to credit institutions in accordance with Article 19. The Governing Council may decide that national central banks shall be indemnified against costs incurred in connection with the issue of banknotes or in exceptional circumstances for specific losses arising from monetary policy operations undertaken for the European System of Central Banks. Indemnification shall be in a form deemed appropriate in the judgment of the Governing Council. These amounts may be offset against the national central banks’ monetary income.
5. The sum of the national central banks’ monetary income shall be allocated to the national central banks in proportion to their paid-up shares in the capital of the European Central Bank, subject to any decision taken by the Governing Council pursuant to Article 33(2).
6. The clearing and settlement of the balances arising from the allocation of monetary income shall be carried out by the European Central Bank in accordance with guidelines established by the Governing Council.
7. The Governing Council shall take all other measures necessary for the application of this Article.

Article 33

Allocation of net profits and losses of the European Central Bank

1. The net profit of the European Central Bank shall be transferred in the following order: (a) an amount to be determined by the Governing Council, which may not exceed 20 % of the net profit, shall be transferred to the general reserve fund subject to a limit equal to 100 % of the capital; (b) the remaining net profit shall be distributed to the shareholders of the European Central Bank in proportion to their paid‑up shares.
2. In the event of a loss incurred by the European Central Bank, the shortfall may be offset against the general reserve fund of the European Central Bank and, if necessary, following a decision by the Governing Council, against the monetary income of the relevant financial year in proportion and up to the amounts allocated to the national central banks in accordance with Article 32(5).