The Bank of Spain becomes independent from the Government to keep prices stable

Automatic summary, not yet reviewed

1. The Bank of Spain becomes a public entity with autonomy to define and carry out monetary policy, whose main goal is price stability. Without prejudice to that goal, it will support the Government's general economic policy.
2. Neither the Government nor any other body may give instructions to the Bank on monetary policy. The Bank must regularly report to the Cortes Generales (Spanish Parliament) and the Government on its goals and execution, and the Governor can be called to parliamentary committees or the Council of Ministers.
3. The Bank is banned from granting credit or authorizing overdrafts for the State, the Autonomous Communities and local corporations, with limited exceptions. It also cannot buy public debt directly from the issuer, only in the markets.
4. The Bank keeps functions such as managing foreign currency reserves, issuing banknotes in pesetas, providing treasury and public debt services, and supervising the solvency of credit institutions. It may also regulate interbank and foreign currency markets to promote the smooth working of the payment system.
5. The governing bodies are the Governor, the Deputy Governor, the Governing Council and the Executive Commission. The Governor and Deputy Governor serve six-year, non-renewable terms, and can only be removed for specific causes such as the end of the term, resignation, reaching age seventy, or removal by the Government for serious causes.
6. The Governor, Deputy Governor and Councillors face strict conflict-of-interest rules: they cannot work with credit institutions or securities markets, must declare their assets and activities, and face fines of up to fifty million pesetas if they break the duty of secrecy, the conflict rules or the limitations.

Who it affects

• The Government and the Minister of Economy and Finance: They lose the power to instruct the Bank on monetary policy, though they can attend its meetings and appoint its governing bodies.
• Credit institutions: They are supervised by the Bank, can be subject to a reserve requirement of up to five percentage points, and can be fined.
• The Treasury and the Autonomous Communities: They cannot receive credit or overdrafts from the Bank, though the Bank provides them treasury and public debt services.
• The Cortes Generales (Spanish Parliament): They receive regular information on monetary policy and approve the Bank's budget, which is only an estimate.
• Members of the Bank's governing bodies: They have fixed terms, strict conflict-of-interest rules, a duty to declare their assets, and can be fined.

Words worth knowing

Política monetaria (monetary policy)

Decisions about money (interest rates, amount of money in circulation) aimed mainly at keeping prices stable.

Descubierto (overdraft)

A negative account balance, that is, spending more money than the account holds.

Coeficiente de caja (reserve requirement)

A rule requiring credit institutions to immobilize part of their funds in deposits at the Bank of Spain.

Entidades de crédito (credit institutions)

Banks and other entities that take money from the public and grant loans.

Deuda Pública (public debt)

Securities issued by the State to borrow money from those who buy them.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries