The Banque de France is no ordinary banking institution. As part of the European System of Central Banks (ESCB), it performs essential functions in our economy. It contributes to price stability and the smooth functioning of financial systems. Let's take a look at its four main tasks.
1. Implementation of monetary policy
The Banque de France implements the monetary policy decided by the European Central Bank (ECB). This policy aims to maintain price stability in the eurozone.
Framework for action within the Eurosystem
Since 1 January 1999, the Banque de France has acted under the authority of the ECB. Article L. 141-1 of the Monetary and Financial Code states: "In the performance of its tasks arising from its participation in the European System of Central Banks, the Banque de France [...] may neither seek nor accept instructions from the government.
This independence enables it to implement ECB decisions without national political interference. It strictly follows the guidelines and instructions issued by Frankfurt.
Refinancing transactions
The Banque de France uses several types of operations to regulate bank liquidity:
- Main refinancing operations (weekly)
- Longer-term refinancing transactions (monthly)
- Fine-tuning operations (exceptional)
These transactions are carried out in the form of tenders managed locally. They are generally carried out against collateral, through temporary sales of securities or secured loans.
The ESCB's role as operational agent
The Banque de France is the ESCB's national relay. It applies the decisions taken in Frankfurt to French banks. If a bank is short of liquidity, it applies to the Banque de France for refinancing.
Article 14.3 of the Statute of the ESCB underlines this obligation: "The national central banks are an integral part of the ESCB and act in accordance with the guidelines and instructions of the ECB.
2. Monetary issuance
Issuing banknotes is one of the Banque de France's best-known tasks.
The privilege of issuing banknotes
The Banque de France has a monopoly on issuing euro banknotes in mainland France and the French overseas departments. This privilege has existed since 1803 and has evolved with the advent of the euro.
Since 1999, Article 106 of the EC Treaty has stipulated that the ECB is exclusively responsible for authorising the issue of banknotes. The Banque de France puts them into circulation.
This two-tier system allows for centralised regulation of the money supply while maintaining decentralised distribution.
Production and management of banknotes and coins
The Banque de France is unique in that, unlike most central banks, it manufactures its own banknotes. The paper is produced at its factory in Vic-le-Comte (Puy-de-Dôme), then the notes are printed in Chamalières.
It also maintains the banknotes in circulation by removing counterfeit or damaged notes. Systematic sorting is carried out to guarantee the quality of banknotes in circulation.
Legal characteristics of banknotes
Banknotes issued by the Banque de France are legal tender. Under article L. 141-5 of the French Monetary and Financial Code, public and private entities must accept them as a means of payment.
Refusal to accept payment in legal tender banknotes is a second-class offence (article R. 642-3 of the French Criminal Code). Any agreement excluding such payment would be null and void.
In the event of loss or theft, the provisions relating to bearer securities do not apply to banknotes (article L. 122-1 of the French Monetary and Financial Code). This rule guarantees their unconditional discharge.
3. Management of foreign exchange reserves
The Banque de France holds and manages the French government's foreign exchange reserves. These reserves include gold and foreign currencies.
Agreement with the State
Article L. 141-2 of the French Monetary and Financial Code states: "The Banque de France holds and manages the State's foreign exchange reserves in gold and foreign currencies and records them as assets on its balance sheet in accordance with the terms and conditions set out in an agreement that it concludes with the State.
This agreement of 31 March 1999 (OJ of 21 April 1999) sets out the practical arrangements for managing and accounting for these reserves.
This recognition as an asset is unusual in accounting terms. We would expect to find them on the liabilities side as commitments to the State. This presentation is explained by its traditional nature.
Management procedures
Although the reserves belong to the State, the Banque de France does not dispose of them freely. It must comply with the guidelines defined in the agreement.
Management is carried out within a strict framework to guarantee the security of assets and their availability should the need arise to intervene on the foreign exchange markets.
European constraints
Article 31 of the ESCB Statute imposes an additional constraint: Banque de France foreign exchange transactions exceeding a certain amount require the prior approval of the ECB.
This provision prevents national interventions from disrupting the euro exchange rate or interfering with the common monetary policy.
In practice, the majority of the Eurosystem's foreign reserves remain in the national central banks' own portfolios.
4. Promoting payment systems
The Banque de France oversees the smooth operation and security of payment systems. This mission is fundamental to the economy.
Interconnection of banking networks
The Banque de France plays a pivotal role in the interconnection of the French banking networks. It manages the accounts opened by each credit institution.
Money movements between different networks pass through these accounts. For example, when a postal cheque is sent to a beneficiary with an account at a commercial bank, the flow passes through the Banque de France.
This "hub" function makes it the keystone of monetary circulation.
The interbank clearing system
Exchanges of means of payment between banks generate large amounts of money. The Interbank Teleclearing System (SIT) processes around one billion transactions every month.
For large-value funds transfers, the Banque de France manages the Transferts Banque de France (TBF) system. This system is the French component of the European TARGET network.
Payment security
Article L. 141-4 of the Monetary and Financial Code entrusts the Banque de France with the task of ensuring "the security of means of payment other than cash and the appropriateness of the standards applicable in this area".
In practical terms, it is involved in work to make card payments and online payments secure. Its role in this area was strengthened by the Everyday Security Act of 15 November 2001.
The rapid development of payment technologies makes this task particularly complex and sensitive in terms of consumer protection.
Sources
- Monetary and Financial Code, articles L. 141-1 to L. 141-6
- Treaty establishing the European Community, Articles 105 to 107
- Protocol No. 3 on the Statute of the ESCB and of the ECB
- Act 93-980 of 4 August 1993 on the status of the Banque de France
- Law no. 2001-1062 of 15 November 2001 on everyday security
- State-Banque de France agreement of 31 March 1999 (JO of 21 April 1999)
- "European System of Central Banks and the Banque de France", Gabriel Montagnier, Répertoire de droit commercial, February 2004
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