The ECB’s accountability: Adjusting accountability arrangements to the ECB’s evolving roles

1. Introduction: The imperative of accountability within the European Union

As recalled in the introduction to this special issue, the 2007–2008 financial crisis and subsequent sovereign debt crisis have put the European Central Bank (ECB) in the spotlight due to its influential role in handling the events. Not only did the ECB take unprecedented, unconventional monetary policy measures, but its formal mandate has also expanded to cover supervisory tasks over banks in the Banking Union ² and to contribute to financial stabilization. In this context, a reassessment of the adequacy of accountability mechanisms applicable to the ECB is warranted and increasingly called for. ³

In the European Union (EU), accountability is a settled principle of good governance, ⁴ which requires that the exercise of public functions be subject to adequate checks and balances. Although the principle is straightforward, its application is largely circumstantial. There is no one-size-fits-all approach, as accountability arrangements need to accommodate the specificities of the functions whose exercise is controlled. Moreover, assessing the effectiveness of accountability arrangements is a dynamic exercise that needs to account for changes in the mandate and governance of the accountable body (that often constitute adaptations of their function to economic and societal developments); as well as for the evolution of public preferences (usually, but not necessarily, as expressed by elected bodies).

An independent central bank with multiple mandates should be subject to strong accountability. This paper endorses as a starting point the imperative that the ECB be subject to strong accountability arrangements. Accountability is essential for assessing the ECB’s performance and for holding it responsible with a view to legitimising its activities. At the same time, the ECB has been endowed, for good reasons, with a high degree of independence to pursue its mandates, and this paper does not question this choice.

Our intention is to examine the ECB’s accountability holistically, ascertaining the multitude of accountability arrangements corresponding to the different tasks, as well as the different angles of accountability with a view to determine the capacity of the existing framework to respond to the frequent calls for increased scrutiny of the ECB’s actions in the aftermath of the financial crisis. In this vein, the paper focuses on identifying those elements of the accountability arrangements that are flexible and therefore allow for adjusting the intensity, form and consequences of scrutiny over the ECB’s actions in relation to its various functions. The first section identifies the multitude of principals to which the ECB is accountable when performing its various functions. The second section discusses what the ECB is accountable for, whereas the third section analyses the different legal frameworks that represent benchmarks for holding the ECB accountable in the context of its various functions. The fourth section discusses the channels that allow principals to influence the ECB’s behaviour following accountability checks. The last section highlights the resilience inherent in the existing framework, which permits adjusting accountability arrangements to respond to calls for increased accountability. Such analysis does not purport to be all-encompassing, but by highlighting certain aspects of the accountability arrangements it tries to identify the multitude of layers in the accountability framework and the embedded flexibility.

2. To whom is the ECB accountable?

The ultimate beneficiary of the ECB’s accountability is the public at large and there are indeed mechanisms that compel the ECB to address the public directly. Yet most accountability mechanisms expose the ECB only indirectly to the public, through the scrutiny by another public body (referred to in this paper also as principal), which represents or otherwise acts in the public interest. Principals may be political, administrative or judicial bodies, at Union or national level, and may act in relation to all or specific tasks of the ECB.

Dedicated accountability provisions applicable to the ECB designate as principals are primarily given to political bodies that either represent elected governments (namely the Council) or are directly elected (the European Parliament or national parliaments). Yet legislation mandates or enables reviews of specific ECB actions also by administrative and judicial bodies, such performance reviews being intended to inform political bodies about specific ECB actions. In our view, the role of all such principals should be acknowledged and accounted for in the context of a comprehensive assessment of the ECB’s accountability.

With regard to the ECB’s monetary policy tasks, political accountability mechanisms are enshrined directly in the Treaty, designating as principals the European Parliament and the Council of the EU. Article 284 TFEU requires the ECB to present an annual report to and attend debates organized by the Council and the European Parliament. ⁵ The same provision allows (‘may’) the ECB President and members of the ECB’s Executive Board to be heard by the relevant committees of the European Parliament (in practice the economic and monetary affairs committee (ECON)), upon request or on their own initiative. The Treaty thus designs in broad terms accountability arrangements for monetary policy tasks, emphasising the role of the European Parliament but saying little about the intensity of the review. The Parliament’s rules of procedure provide more details on the format and frequency of interactions between the European Parliament and the ECB. ⁶ Interaction between the ECB and the council is framed by the underpinning council procedures, with the ECB participating regularly in the ECOFIN Council, the Eurogroup and their preparatory committees. ⁷ Hitherto, interactions with the council are not commonly analysed in terms of their potential to act as an accountability forum, although the agenda of relevant council meetings regularly includes discussions of various ECB reports, its priorities and other ECB activities. National parliaments are not designated in the Treaty as principals, yet in practice the ECB’s President or other members of the ECB’s Executive Board have accepted, on occasion, to appear before national parliaments. ⁸

As regards the supervisory side, ECB’s accountability towards political bodies stems from the regulation governing the Single Supervisory Mechanism (SSM), not the Treaty. Article 20 of the SSM Regulation explicitly lists both the European Parliament and the council as principals to which the ECB shall be accountable and provides more detail about the accountability mechanisms than the relevant Treaty provisions for the monetary policy tasks. The SSM Regulation seems to reinforce the role of the European Parliament: the ECB is required to cooperate for the purpose of parliamentary investigations, and the Chair of the Supervisory Board is obliged to (‘shall’) participate in hearings called by the Parliament, whereas it has the discretion to (‘may’) participate in hearings called for by the Eurogroup. The accountability arrangements related to the ECB’s supervisory tasks are further detailed in the inter-institutional agreement with the European Parliament, ⁹ as well as in the Memorandum of Understanding (MoU) entered by the ECB with the Council. ¹⁰ Both bilateral arrangements are subject to regular reviews and provide a tool for specifying the concrete modalities for holding the ECB accountable.

Furthermore, the SSM Regulation provides that national parliaments ‘may’ call the ECB to account (Article 21). Unlike provisions on accountability towards the European Parliament and the Council, the emphasis here is not on the obligation or discretion of the ECB to respond to national parliaments as in the case of accountability to the European Parliament and the Council, but on the right of national parliaments. Designating national parliaments as principals in the context of the ECB’s supervisory function is a remarkable difference compared to accountability arrangements for monetary policy tasks, especially given its justification on grounds of a far-reaching potential impact of ECB actions, ¹¹ which might be equally valid for the monetary tasks.

In addition to political accountability mechanisms, the ECB is held to account for various aspects of its activities by several administrative bodies, usually entrusted with performance reviews. ¹² The role of administrative bodies differs with regard to the ECB’s exclusive Union competence for monetary policy and to its supervisory tasks, with a broader set of designated principals active in the context of the latter. Although the European Court of Auditors (ECA) ¹³ and the European Ombudsman exercise their mandates in the context of both functions, the Commission ¹⁴ and the European Banking Authority (EBA) ¹⁵ have a formal review role only in the context of the supervisory function. Findings from these performance reviews, including possible recommendations, are transmitted to the ECB, as well as to the political bodies to which the ECB is accountable.

Furthermore, like all Union bodies, the ECB’s actions may be challenged in front of the European courts and indirectly in national courts, which may submit references for preliminary rulings ¹⁶ to the Court of Justice of the EU. In the past, European courts have been increasingly dealing with actions concerning the ECB not only relative to its new supervisory functions (where direct addressees of supervisory decisions are very likely to challenge ECB actions), but also in relation to the scope of its monetary policy tasks in the context of the crisis-related measures. Whereas the judicial review focuses on the legality and proportionality considerations, with the degree of intrusiveness of the review being often influenced by the complexity of the case and the degree of discretion or independence conferred on public bodies, ¹⁷ the judicial proceedings constitute an essential forum for the ECB to illustrate and justify the challenged measures and some of the ECB’s principals regularly intervene in the proceedings.

Last but not least, when identifying principals we suggest also considering possible implications for accountability stemming from the performance of ECB tasks in the context of multi-layered systems. Monetary policy tasks have been conferred to the European System of Central Banks (ESCB), which is composed of the ECB and the national central banks, whereas ECB’s supervisory tasks have to be carried out within the SSM composed of the ECB and national competent authorities. ¹⁸ The SSM Regulation explicitly states ‘where national competent authorities take action under this Regulation, accountability arrangements provided for under national law should continue to apply’. ¹⁹ With regard to the monetary function, it was suggested that ‘national central banks are, nonetheless, well placed to explain monetary policy decisions at national level through interactions and communication with national audiences, especially considering the multinational setting of the euro area’. ²⁰ The structural entrenchment of the ECB in a multi-layered system, in which components remain accountable despite the transfer of tasks at central level, would deserve closer scrutiny in view of identifying possible accountability overlaps or gaps and all relevant actors that might be considered principals or would be able to influence principals. In this context, the concept of ‘accountability network’ developed in the literature ²¹ may help identify the broader scope of principals scrutinising the system in which the ECB operates.

An interesting example is the Contact Committee of the Supreme Audit Institutions of the European Union, which is a network of national auditors and the ECA. The Contact Committee has analysed the effects of the transfer of supervisory powers to the ECB on the capacity of supreme audit institutions to assess banking supervision. The Contact Committee is a model for an ‘accountability network’, which identified potential improvements to be taken at both European and national levels and published a widely diffused call for ‘ensuring fully auditable, accountable and effective banking supervision arrangements following the introduction of the Single Supervisory Mechanism’. ²² Similar networks might be emerging also amongst other types of bodies to which the ECB is or should be accountable (such as ombudsman and parliaments).

We suggest here that the analysis of the ECB’s accountability should go beyond formal mandates and the isolated identification of principals and their capacity to hold the ECB accountable. We prefer a holistic and evolving approach, acknowledging the variety and complexity of formal, informal, binding and voluntary accountability arrangements for the multiple ECB tasks. This involves acknowledging the multitude of principals, as well as emerging interactions and joint efforts by several principals specialising in specific types of accountability.

3. For what is the ECB accountable?

The ECB is accountable for both its actions and its inactions, as both may have an impact. Whereas the ECB might not be legally bound to act in all circumstances and has a large degree of discretion as to whether to act, inaction still reflects a deliberate choice in pursuing its tasks. The ECB’s failure to act may be challenged in front of the European courts and should, even more so, be subject to broader accountability checks.

Moreover, the ECB is accountable not only for its actions resulting in formal legal acts applicable to third parties (decisions, regulations, guidelines, instructions, recommendations), but also for its internal procedures and processes, for its MoUs or other forms of commitments. Furthermore, the ECB is accountable for its public communications, including through speeches and press releases, which, although non-binding, are tools for transmitting messages to the market and the public at large, which may have substantial impacts. ²³

Whereas it appears to be generally accepted that the ECB should be held accountable for the pursuit of its functions and tasks, the precise scope of such functions and tasks is not always clear. Questions arise mainly in the context of assessing failure to act or the compatibility of actions with the ECB’s mandate. Even if allocation of responsibilities may be clear cut (which is not always the case), the complex effects of some ECB actions may make them interfere with areas outside the ECB’s responsibilities. For instance, it is not always easy to identify the boundary between monetary and economic policy, although this makes a crucial difference in terms of identifying responsibilities. ²⁴ In other instances, the division of responsibilities is deliberately or de facto blurred, as in the case of responsibility for emergency liquidity assistance, which is in principle left to national central banks, but partly depends on ECB action. ²⁵ Examples may also be identified on the ECB’s supervisory side, as the SSM has been conceived as a system in that, albeit the coordination pertains to the ECB, responsibilities for carrying out supervision are distributed between the ECB and national supervisory authorities ²⁶ and several supervisory tasks remain in the remit of national authorities, although they are closely interlinked with ECB supervisory tasks. ²⁷

The blurred scope of functions and tasks may be partly attributed to moral hazard concerns linked to monetary policy and supervisory activity, and the hereto-related constructive ambiguity of certain provisions in the legal framework. At the same time, this also reflects the fact that Union law is evolving under the influence of economic and social developments reflected in policy priorities and different stages of integration. To ensure that accountability mechanisms are used for the ECB to give plain explanations of its choices and for the principals to genuinely question the effectiveness of the choices made, it is important that each debate is set in its right context. Although principals need to have a clear understanding of the various typologies of ECB tasks, their underlying governance frameworks, objectives and the means for achieving them, it is also the role of the ECB to set regularly the background for its actions. The ECB’s presentation of the context should itself be subject to scrutiny by informed principals.

4. What is the benchmark for holding the ECB accountable?

Although accountability mechanisms broadly provide a forum for exchanging and challenging views in a pluralistic society, the thrust of accountability is primarily on checking whether and how public bodies fulfil their mandates. The ECB’s mandates are defined in Union law in terms of tasks, objectives, powers and tools, with important differences between the various functions conferred to the ECB. The mandate for monetary policy is enshrined in primary Union law, namely directly in the Treaty and the Statute of the ESCB and of the ECB. The mandate for the supervisory function is defined, pursuant to an enabling clause in the Treaty, ²⁸ through secondary Union legislation, namely the SSM Regulation. The role of the ECB in the context of post-crisis EU financial assistance is defined in inter-governmental arrangements and secondary legislation. These mandates represent benchmarks for holding the ECB accountable and differ in both nature and details for its multiple functions.

Article 282 of the TFEU confers the competence to conduct the Union’s monetary policy to the ECB together with the national central banks of Member States whose currency is the euro. The monetary policy mandate in Article 127 of the TFEU describes objectives and tasks. Maintaining price stability is the primary objective for the ESCB, whereas supporting the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union is a secondary objective. The ESCB’s monetary policy mandate is further framed by reference to principles ²⁹ and a list of basic tasks (defining and implementing monetary policy, conducting foreign-exchange operations, holding and managing official reserves, promoting the smooth operation of payment systems). ³⁰

Furthermore, the Treaty directly entrusts the ECB with advisory functions and the generic task of contributing to ‘the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system’. ³¹ In reaction to the financial crisis, a new framework was introduced to address emerging and acute problems in the Eurozone’s economic governance, which anchor ECB’s role in post-crisis economic and financial stability policies. Initially this was done exclusively through intergovernmental arrangements, with the most prominent being the 2012 Treaty on establishing the European Stability Mechanism (ESM Treaty), and subsequently incorporated also in the EU legal framework through the so-called ‘Two-Pack’ Regulations. ³² This framework mandates the ECB to work in liaison with the Commission on negotiating and monitoring the economic policy conditionality attached to financial assistance, assessing the economic situation of countries subject to assistance, and its potential impact on financial stability in the Eurozone.

The Treaty framework gives a broad mandate to the ECB, which remains largely undefined in primary law. It is for the ECB to specify the objectives and design instruments for implementation of monetary policy. The ECB does this mainly through its so-called Eurosystem framework for monetary policy instruments, which consists of a series of guidelines and decisions defining the ‘general framework’ and the ‘temporary framework’. The latter represents a reaction to the 2007–2008 financial crisis and the subsequent 2010–2012 sovereign debt crisis and some of its measures were transferred to the permanent ‘general’ framework. ³³ The temporary framework has proven an important tool allowing the ECB to adjust its standard monetary policy to unforeseeable and exceptional market developments. The Eurosystem framework for monetary policy instruments, with both its general and temporary parts, sets quantifiable targets for the pursuit of the general objective of price stability and constitutes a benchmark for assessing the ECB’s commitment to that objective. It is itself an object of scrutiny through the various accountability arrangements.

The supervisory mandate of the ECB is not specified but merely enabled in primary Union law. It is, however, more extensively developed in secondary law. The SSM Regulation sets the broad objectives underpinning the transfer of supervisory tasks to the ECB, namely ‘contributing to the safety and soundness of credit institutions and the stability of the financial system within the Union and each Member State, with full regard and duty of care for the unity and integrity of the internal market based on an equal treatment of credit institutions with a view to preventing regulatory arbitrage.’ ³⁴ Such objectives were criticized in the accountability literature as being even more vague than the price stability objective of the monetary policy function, and impossible to quantify in view of measuring their achievement. However, although the pursuit of such objectives is indeed hard to grasp in concrete immediately quantifiable terms (particularly because of their plurality and because none excludes orderly failure), it should be noted that the thrust of ECB’s supervisory mandate as laid down in the SSM Regulation is rather on the specific tasks that were conferred on the ECB. ³⁵ The ECB may only perform these conferred tasks and is obliged to carry them out in accordance with Union law and national legislation transposing directives, as well as binding technical standards and the supervisory handbook developed by the EBA. ³⁶

The tasks conferred to the ECB are exhaustively listed in the SSM Regulation, and follow closely the structure of EU prudential legislation, particularly as laid down in the Capital Requirements Regulation (CRR) ³⁷ and the Capital Requirements Directive (CRD). ³⁸ The supervisory powers entrusted to the ECB pursuant to the SSM Regulation are identical to the ones that the CRD prescribes for all banking supervisors in the EU. ³⁹ The SSM, as the first pillar of the Banking Union, was constructed on the solid foundation of a single rulebook. The supervisory mandate of the ECB is thus framed much more precisely through secondary Union law designed by those to whom the ECB is held accountable. The standard for holding the ECB accountable in its supervisory function is thus not just the SSM Regulation, but also the single banking rulebook composed of secondary legislation (especially the CRD and CRR), non-legislative acts (delegated and implementing acts, including binding technical standards adopted by the Commission), as well as guidelines and recommendations on common supervisory practices developed by the EBA. The rulebook sets harmonized rules for prudent behaviour by the supervised institutions, as well as general parameters for supervisory measures. The EBA and the Commission monitor the ECB’s observance of the rulebook as part of their overall monitoring of convergence of banking supervisory practices.

Another benchmark for the accountability check is the inter-institutional balance within the EU. This requires monitoring that an institution’s exercise of powers is not overstretched in a way that affects the equilibrium of powers between all institutions. The European Parliament and the council are particularly skilful in monitoring and identifying situations where the ECB risks encroaching upon their competencies and impinging on the inter-institutional balance. For instance, in the context of a public consultation launched by the ECB in October 2017 on ECB guidance to banks for the prudential treatment of non-performing loans, ⁴⁰ the ECB used language that was akin to setting a general prudential requirement of the kind normally set through the CRR by the legislators. The co-legislators reacted promptly, issuing legal opinions and sending strong messages ⁴¹ to the ECB, highlighting major concerns with the ECB’s attempt to encroach upon their powers and at the same time called for the Commission to put forward legislative proposals (that were published in March 2018, also clarifying the more limited competences of the ECB). ⁴²

Last but not least, the ECB is held accountable in line with standards of good governance, due process, proportionality, administrative law principles and human rights values. These aspects are regularly invoked and scrutinized, albeit as secondary pleas, in court cases against supervisory decisions adopted by the ECB, especially in terms of access to documents, justification of decisions and proportionality.

5. What are the consequences of holding the ECB accountable?

Accountability mechanisms are primarily a forum where the ECB explains, clarifies and justifies its actions in view of convincing the principals about their effectiveness or explaining failure. Hence, the effectiveness of accountability mechanisms largely depends on the quality of communication and the intensity of the dialogue. In addition, and in line with our preferred broad understanding of the accountability framework, we consider an important aspect of effective accountability is also the principals’ capacity to change undesired behaviour and hold the ECB responsible for its actions. This may be achieved in formal or informal ways.

Clearly, judicial accountability of the ECB is the most direct way to constrain the ECB’s action and hold it liable for specific actions, as judgments by European courts are binding upon the ECB. Although judicial accountability may be perceived as too restricted given its focus on the legality review and that European courts may adopt a deferring approach in areas characterised by high complexity, we take the view that the influence of court judgments goes beyond the specific conclusions upholding or dismissing individual ECB actions and may affect overall ECB behaviour. So far, relevant jurisprudence consists of circa 30 decisions, out of which a majority has favoured (at least in part) the ECB, with a minority against the ECB. However, the number of cases filed against ECB decisions is growing, with the court showing ever more willingness to move away from a deferent review approach and an eagerness to scrutinize ECB decisions closely. For instance, the first court decision annulling an ECB supervisory decision ⁴³ highlights that the ECB’s discretionary powers are not absolute, but need to be justified in light of the specific circumstances where they are exercised. It also stresses that the ECB is bound by the objectives underpinning secondary legislation, which it may not deprive of effectiveness. Moreover, recent judgments concerning monetary policy decisions, although upholding ECB decisions, also show increased judicial scrutiny of the soundness of the ECB’s justification for adopting specific measures. ⁴⁴ Thus, judicial accountability is not only capable of reversing ECB decisions, but is also likely to constrain the ECB to observe high standards of justification in the future.

There are, however, also other actions that may be taken to sanction or prevent undesirable ECB behaviour. Well-argued comments and criticism by any of the ECB’s principals is likely to be an effective tool for moral suasion and induce the ECB to react and adapt at least partly its behaviour or to better explain when it does not do so. Examples of such adaptations may be found for both tasks. For instance, research on the effectiveness of the monetary policy dialogue highlights not only that the dialogue has become ever more substantial, including on technical aspects, but also a growing perception that the ECB takes into account ECON’s views, including expert opinions prepared for ECON. ⁴⁵ Furthermore, the ECB started to submit to ECON minutes of its internal deliberations and increased visits to national parliaments. In relation to its supervisory tasks, the ECB has publicly announced follow-up actions to most of the aspects identified in the ECA report, ⁴⁶ the consistency reviews undertaken by the EBA, ⁴⁷ the Commission’s SSM report, or the joint call by ECON and Council to circumscribe its actions on non-performing loans. The ECB has all interest in maintaining constructive relationships with all relevant Union institutions and agencies and is worried about its reputation being affected by criticism or opposition from its principals. The ECB’s reputation and credibility are particularly relevant in financial markets.

Moreover, the principals of the ECB may also take targeted action to bindingly frame future ECB behaviour. This is mainly in the context of supervisory tasks where the co-legislators may adopt additional legislation to frame the ECB’s mandate, objectives and instruments, particularly in the context of the frequent reviews and updates of the prudential legislative framework. When putting forward legislative proposals, the Commission and the co-legislators during negotiations take into account past and potential future behaviour by the ECB and design rules with a view to frame or give flexibility to the ECB. This involves the choice to design provisions as obligations (‘shall’) or options (‘may’), ⁴⁸ attributing options and discretions to competent authorities or to Member States (to further determine whether the choice is enshrined in law or given to the supervisor). ⁴⁹ Similarly, inaction, or undesirable interpretation of the legal framework by the ECB, have in the past resulted in clarifications given either informally through interpretative notes, or formally through legislative amendments, both of which constrain future ECB action. ⁵⁰

In relation to the ECB’s exercise of monetary policy, principals cannot frame the ECB through legislative action, given the ECB is constitutionally and exclusively empowered to implement monetary policy within the Eurozone and that it is endowed with far-reaching independence to undertake such task. A treaty change would be necessary to enable certain monetary policy parameters to be set in legislation, and make it possible for principals to influence ECB action by adapting legislation. Apart from more fundamental questions as to whether it would be at all suitable to set in law a rigid price stability measure or a limited list of monetary policy instruments, this constitutional change would definitely impinge on the ECB’s independence. Principals’ possibility to influence the ECB’s behaviour is more nuanced in relation to the ECB’s perceived increased involvement in economic policy in the aftermath of the euro crisis in the context of financial assistance programmes. Here, the ECB’s role is clearly sponsored by the Eurozone Member States themselves, which in the intergovernmental ESM Treaty and the bylaws of the ESM made sure the ECB should be substantially involved in the various phases of the stability mechanism. Member States, to whom the ECB is accountable via the Council, may frame or restrict the ECB’s role should they mistrust its behaviour by amending the ESM Treaty or its by-laws.

6. Conclusion: Adjusting ECB’s accountability

The description of the various facets of the ECB’s accountability in the previous sections shows a certain flexibility in determining the accountability arrangements that allows modulating the intensity, form and consequences of scrutiny over the ECB’s actions, albeit to different degrees for the various functions. Furthermore, the relevant benchmarks for holding the ECB accountable, stemming from the Treaty, secondary legislation, case law and the ECB’s self-developed commitments are evolving and may adapt to circumstances (including the ECB’s behaviour). This reflects the evolving and reactive nature of the relationship between the agent and its principals.

The overall structure of the ECB’s accountability arrangements, which is framed in binding but generic terms, in constitutional rules for the monetary function and in secondary legislation for the supervisory function embeds a certain degree of ‘adjustability’. Although there are differences in terms of intensity of review (with the supervisory accountability being more extensively framed), and of flexibility for changing the framework (secondary legislation being easier to change than the treaty), in both cases the details and practicalities of accountability arrangements are left to be developed by the parties concerned. Bilateral instruments mandated by law allow the ECB and its political principals to negotiate the practical modalities of interaction on the supervisory side. The absence of an explicit mandate for further details in the context of the monetary tasks does not prevent the ECB and the relevant institutions from supplementing the binding framework with additional arrangements. MoUs, as well as unilateral initiatives or commitments by the ECB, may boost the accountability framework where shortcomings are identified. This has already happened in the context of monetary policy, with the ECB approaching additional actors (such as national parliaments) or improving communication beyond the founding framework (frequency of ECON hearings, communication of Governing Council minutes, in camera hearings).

Consequently, should formal accountability arrangements prove insufficient and hard to change, the ECB and its principals have their own responsibility in boosting accountability. Voluntary commitments to more transparency or MoUs specifying inter-institutional relations are welcome and powerful practices allowing the ECB to address accountability criticism. Equally, principals may also better frame their use of accountability tools, including by exploring the possibility of using accountability networks.

As regards the benchmarks used to assess the ECB’s actions, we have pointed out the very different nature and substance of the frameworks governing the various ECB functions.

For monetary tasks, the ECB has extensive leeway in specifying the objective of price stability and in defining how to implement monetary policies to achieve such objectives, which allows the ECB to find the best policy response for different circumstances. This gives the ECB wide flexibility for action in case of unforeseen circumstances. The effective exercise of discretion by the ECB before the crisis was not much questioned, as the ECB had consistently acted within the general framework it had set for itself, reassuring the public about the predictability and rationale of its actions. To the extent that such ECB rules were not challenged and the ECB regularly demonstrated consistency in pursuing its primary objective, the debate as to whether it should be rather for political bodies to specify in legislation the targets for key variables defining price stability or the instruments to achieve that objective instead of being left to the discretion of a non-representative agency, was more about efficiency and convenience (in terms of expertise and costs) and less about accountability.

Yet the scrutiny of the ECB’s actions has increased given its prominent role during the last decade’s various crises, triggering concerns about the adequacy of existing accountability arrangements. The ECB’s actions had not only the pursued effects on inflation targets, but had also financial stability consequences. The ECB acted by virtue of its discretionary powers, but also by engaging with the Commission and the Council in economic policy measures aimed at stabilising euro area Member States’ economies. The developments during and in the aftermath of the crises were largely unpredictable and ECB reactions demonstrate policy responsiveness and capacity to innovate in an uncertain environment. The ECB has been learning by doing and developed an alternative toolset of monetary policy instruments for special circumstances purporting to offer more predictability and scrutiny for the ECB’s actions in an exceptional context. The ECB’s changes to its monetary policy framework may be seen as an adjustment to the relevant accountability benchmark.

On the supervisory side, the ECB’s actions were from the outset much more constrained as the regulatory framework is developed extensively in the single rulebook for banking. The prudential framework consists of an extremely dense and extensive set of mainly directly applicable rules, the CRR being considered an instrument of maximum harmonization. The discretion left to the ECB acting in its supervisory capacity is much more framed and subject to frequent adjustments. Prudential legislation is regularly subject to review with a view to implementing international standards or to adapting to market developments. Such legislative reviews integrate increasingly considerations and assessments of the ECB’s past and potential future supervisory stances. This may be seen as intrinsic to the accountability framework, as it allows the ECB’s principals to reactively frame the ECB’s behaviour.

By looking at the various dimensions of accountability in the context of the multi-layered systems in which the ECB operates, this paper has emphasized the inherent adjustability of various elements of the ECB’s accountability arrangements. It is claimed that the scope, intensity and consequences of the ECB’s accountability may be modulated at the initiative of the ECB or its principals to finetune accountability needs corresponding with the ECB’s multiple functions, in line with developments in the ECB’s role and public perception.