January 2024

26 January 2024

Monetary policy

Corrective measures for national central bank transactions breaching the monetary financing prohibition

On 18 December 2023 the Governing Council decided that recovery interest would be an appropriate corrective measure to propose to a national central bank (NCB) in the event of an infringement of the prohibition of monetary financing laid down in Article 123(1) of the Treaty on the Functioning of the European Union (TFEU). Such infringements or breaches may occur when an NCB has financed transactions that should have been financed by other public authorities or bodies. Previously, corrective actions had only taken the form of government reimbursements of the funds in question to the NCB. As of 1 January 2024, they also include interest on the reimbursement amount. The relevant interest rate will be the ten-year sovereign yield of the Member State concerned or, if this is unavailable, the interest rate according to the methodology applied…