The ECB’s accountability to the European Parliament 2019-2024: commitment in times of change

Prepared by Ferdinand Dreher, Nils Hernborg, Sarah Mochhoury, Timothy Mulder and Hanni Schölermann

1 Introduction

The independence of the ECB, particularly in its monetary policy decisions, ensures that it can effectively pursue price stability. At the same time, this independence is counterbalanced by accountability to ensure that the ECB remains answerable to the public and its representatives, thereby providing democratic legitimacy for its actions. The ECB’s accountability is primarily exercised through regular reporting to the European Parliament. This includes the publication of the ECB’s Annual Report, regular appearances before the European Parliament by the President of the ECB, and the answering of written questions from Members of the European Parliament (MEPs). The dialogue with the European Parliament allows the ECB to answer the questions and concerns of elected representatives, explain its actions and policies in detail, clarify its objectives and demonstrate how it is fulfilling its mandate. This enables EU citizens and their representatives to better understand the ECB’s policies and to form a judgement about its performance in respect of its mandate, thereby ensuring transparency and maintaining public trust.^[1]

The ECB discharges its accountability obligations on both the central banking side and the supervisory side, ensuring transparency and responsibility across its dual roles. On the central banking side, the ECB is accountable for its monetary policy decisions and related tasks of the Eurosystem. On the supervisory side, the ECB’s role within the Single Supervisory Mechanism (SSM) involves the direct supervision of significant banks in the banking union, and it is similarly accountable to the European Parliament, subject to distinct obligations and channels, as explained in Box 2. This dual accountability ensures that the ECB performs both its monetary policy and supervisory functions with a high level of responsibility and transparency.

During the ninth term of the European Parliament (2019-2024), the ECB took decisive measures to ensure price stability in the euro area. The economic fallout from the pandemic and the subsequent surge in inflation, exacerbated by Russia’s unjustified war against Ukraine, posed challenges for both price and financial stability. The ECB responded to these developments in a decisive manner with the aim of ensuring that inflation returned to its 2% medium-term target. In March 2020 the ECB launched large-scale asset purchases under the pandemic emergency purchase programme (PEPP) to ensure the smooth transmission of monetary policy and to support the euro area’s economic recovery from the pandemic. Following the surge in inflation in the aftermath of Russia’s invasion of Ukraine in February 2022, the ECB took successive steps to raise its key interest rates to their highest levels so far to ensure the timely return of euro area inflation to the ECB’s target and avoid the entrenchment of price pressures.

In July 2021 the ECB concluded the review of its monetary policy strategy and initiated work on a digital euro. In its 2020-2021 strategy review, the ECB reviewed the conduct of its monetary policy against the backdrop of a changing economic landscape. The ECB clarified that price stability can best be achieved by aiming for a symmetric 2% inflation target over the medium term. As part of the outcome of the review, the Governing Council launched a climate action plan, incorporating climate change risks in its monetary policy framework.^[2] It also took steps to modernise its monetary policy communication to make it more accessible to the wider public. In the same period, the Eurosystem launched its digital euro project, with the aim of ensuring that citizens would continue to have access to central bank money in the digital age. Following initial analysis on the possible issuance of a digital euro published in October 2020, the Governing Council officially launched the digital euro project in July 2021.^[3] Given the importance of the project for the Eurosystem, the European economy and its citizens, the ECB has been engaging extensively with all stakeholders, and since October 2020 the ECB has held dedicated public exchanges of views on a digital euro with the European Parliament to explain its work on the project (see Box 1).

The ECB’s policy responses to economic and structural changes during the ninth parliamentary term underline the importance of accountability in legitimising the ECB’s actions. Central bank accountability involves a combination of transparency, explanation and justification vis-à-vis elected representatives, and is essential in order to legitimise decisions taken by an independent central bank.^[4] As the elected body representing EU citizens, the European Parliament is at the heart of the ECB’s efforts to explain its decisions and policies. This was reaffirmed not only by an Exchange of Letters formally signed by the Presidents of the ECB and the European Parliament in June 2023, but also by further innovations introduced by the European Parliament in its interactions with the ECB during the 2019-2024 parliamentary term.

Against this backdrop, this article reviews the ECB’s accountability interactions during the ninth term of the European Parliament. First, it recalls the key elements of the ECB’s accountability framework and discusses innovations in its accountability practices as well as new areas of engagement with the European Parliament that arose during the parliamentary term. Second, it analyses the content and form of accountability interactions in the ninth term and compares them with previous parliamentary terms. It provides an overview of the topics raised in questions asked by MEPs in quarterly hearings with the ECB and how these link to the changing economic environment and the ECB’s policy actions. The article focuses primarily on the ECB’s accountability in the area of central banking, with Box 2 providing a comparative analysis of the accountability interactions of ECB Banking Supervision.

2 The ECB’s accountability framework – innovations and new areas of engagement

The ECB’s accountability obligations are set out in primary EU law. The Treaty on the Functioning of the European Union (TFEU) assigns primary responsibility for holding the ECB to account to the European Parliament.^[5] In accordance with the provisions of the Treaty, the ECB is obliged to address and present an annual report on its activities to, among others, the European Parliament. In addition, the Treaty also states that, at the request of the European Parliament or on their own initiative, the ECB President or an Executive Board member may be heard by the competent committee of the European Parliament.^[6]

Over the years, the ECB has worked together with the European Parliament to strengthen its accountability even beyond the Treaty requirements. In addition to its obligations related to the Annual Report, the ECB is also held to account through several channels not specified in the Treaty. These include quarterly hearings before the Committee on Economic and Monetary Affairs (ECON), written questions and yearly visits to the ECB (see Table 1 for an overview of the main accountability channels).^[7] These practices have evolved over the years in cooperation with the European Parliament. For example, in 2016, in response to a request from the European Parliament, the ECB began to publish its written feedback on the European Parliament’s resolution on the ECB’s Annual Report.^[8] This practice has improved the dialogue further and shows that the ECB has modified reporting practices in response to concerns raised by the European Parliament.^[9]

The ECB also publishes a wide range of other documents outlining the considerations underlying its economic assessments and monetary policy decisions which elected representatives can use to scrutinise the ECB. These include first and foremost the monetary policy statement and the press conference following each Governing Council meeting at which monetary policy is discussed, and the subsequent accounts of those meetings. New staff macroeconomic projections are described in a detailed report outlining the projections and related assessments. In addition, Executive Board members give speeches and interviews on monetary policy and assessments of economic developments on an ongoing basis. The ECB also regularly publishes its Economic Bulletin after each Governing Council meeting focusing on its assessment of economic developments and on topical issues. All of these publications outline assessments and considerations that feed into monetary policy decisions and can be used by the European Parliament to hold the ECB to account in the regular interactions. On the financial stability side, the ECB publishes its Macroprudential Bulletin and the biannual Financial Stability Review. The ECB’s strategy review also led to a broad overhaul of the ECB’s communication practices. One important decision was to publish more detailed accounts of monetary policy meetings, thereby improving the transparency of the ECB’s decision-making and aligning with previous requests from the European Parliament.

In the ninth parliamentary term, the ECB and the European Parliament took steps to formalise their accountability relationship in the form of an Exchange of Letters. In June 2023 the Presidents of the ECB and the European Parliament signed an Exchange of Letters which further specifies the above-mentioned accountability channels and constitutes a common understanding of the accountability practices developed since 1998 in the area of central banking. For example, it spells out commitments by the ECB and the European Parliament as regards the publication of written questions and answers, and the modalities of hearings. This milestone, which now provides a transparent and formalised structure for the accountability arrangements, stands testimony to the joint commitment of the two institutions to continuing their effective dialogue. It underlines the collaborative effort of both the ECB and the European Parliament to effectively shape this accountability relationship. Prior to its signing, the Exchange of Letters received broad backing from, on one side, the ECON Committee, the Committee on Constitutional Affairs and the Conference of Presidents, and, on the other side, the ECB’s Governing Council, demonstrating the wider institutional importance attached to this important step.

At the same time, the ECB and the European Parliament also intensified their interactions to cater for new workstreams and activities at the ECB. The most notable area of development is the ongoing digital euro project. The ECB has engaged extensively with the ECON Committee to explain technical issues and answer questions from MEPs in public exchanges of views and written exchanges. This includes regular public exchanges of views in the ECON Committee, with ten such exchanges taking place between October 2020 and the end of the ninth parliamentary term in July 2024. Box 1 provides further details on interactions related to the digital euro project. In addition, the ECB and the European Parliament also interacted closely in the context of the ECB’s strategy review and its climate action plan, including the latter’s implementation. Dedicated meetings were organised to discuss the strategy review, both while it was ongoing and following its conclusion.^[10] The ECB also continuously informed the European Parliament of the implementation of the climate action plan and answered numerous questions on the topic in hearings and letters and during visits to the ECB.^[11] The ninth parliamentary term also saw a number of ad hoc hearings on specific economic issues. For instance, ad hoc hearings were held in March and June 2022 on the macroeconomic impact of EU sanctions against Russia and on the ECB’s convergence report prior to Croatia’s adoption of the euro.^[12]

The ECB and the European Parliament have also further enhanced communication and improved the format of interactions. The Governing Council set out to make communication on monetary policy decisions more accessible to the wider public, including by giving the monetary policy statement a clear narrative and making it more understandable, and complementing it with a simpler, more concise and visual version aimed at a general audience. Similar communication improvements were also introduced for the ECB President’s introductory statements at the quarterly hearings before the ECON Committee, which, from 2021 onwards, was also complemented by a new two-page document with selected charts visualising the key points in the statement.^[13] The ECB’s revamped communication policy was welcomed by the European Parliament, which in several instances commended the ECB’s efforts to make its communications explaining policy decisions to citizens more accessible.^[14],[15] In addition to this, the European Parliament also adjusted the format of hearings, making them more interactive and strengthening their accountability character. Starting in June 2022, MEPs were given the opportunity to ask a follow-up question to answers given to them by the ECB President in the first round of the question and answer session. Together, these changes contributed to making the hearings more effective, informative and inclusive.

Box 1
The digital euro: a case study on intensifying parliamentary communication and engagement

Prepared by Nele Nomm and Hanni Schölermann

This box illustrates how the ECB has extended its engagement with the European Parliament to explain its work on a digital euro and provide technical expertise on related developments, including EU legislation. A digital euro would make people’s lives easier by providing a digital form of cash: a digital means of payment universally accepted throughout the euro area, issued by the central bank. Given the novelty of the topic, transparent communication and active engagement by the Eurosystem is crucial, including in order to address questions and concerns.^[16] A digital euro is a common European project accompanied by a legislative package.^[17] Therefore, engaging with the relevant stakeholders in the process is key to provide the necessary explanations and technical input to encourage progress in the discussions.^[18]

The initiation of dedicated exchanges of views on a digital euro with the responsible member of the ECB’s Executive Board before the ECON Committee of the European Parliament was a major innovation during the ninth parliamentary term. While Executive Board members have previously participated in ad hoc exchanges before the ECON Committee to explain the ECB’s reasoning and decisions on specific topics, the dedicated exchanges on a digital euro are the first time that a more structured and regular engagement has been set up on a specific topic. The first public exchange of views on a digital euro took place in October 2020, and there were ten such exchanges during the ninth parliamentary term, keeping MEPs regularly informed on the progress of the digital euro project.^[19] This approach is also unique in that it explicitly involves discussing design and operational aspects of a digital euro with the European Parliament before they are endorsed by the ECB’s Governing Council.

During these exchanges, MEPs have shown a keen interest in various topics related to a digital euro. Throughout the ninth parliamentary term, MEPs were actively interested in the motivation behind the digital euro project and the ECB’s intended timeline (Chart A). Initially, more questions were related to the possible impact that a digital euro could have on banks and payments. Over time, as the ECB’s work on the project progressed and draft legislation was proposed by the European Commission, MEPs increasingly used the exchanges of views to inquire about other aspects of the design, distribution and cost of a digital euro. The regular, dedicated engagement with the European Parliament has thus not only provided MEPs with a general overview of the digital euro project but also served to foster understanding and dialogue on more detailed aspects of a digital euro, as also demonstrated by the questions becoming increasingly specific to a digital euro over time (Chart B).

Chart A

Questions asked at exchanges of views on a digital euro before the ECON Committee, by topic, 2020-2024

(share of questions raised by MEPs, percentages)

Chart B

MEP questions over time, 2020-2024

(share of questions raised by MEPs in digital euro exchanges of views, percentages)

In addition to regular ECON Committee exchanges, the ECB has further strengthened its interaction with the European Parliament by initiating additional forms of communication on a digital euro. Regular digital euro progress reports have been shared with the ECON Committee upon publication, and the ECON Chair and the Committee at large have been kept informed of all major developments via dedicated notifications.^[20] The ECB has also organised multiple technical seminars with European Parliament staff to provide further technical background information on the project. Furthermore, as with other relevant legislative proposals, the ECB published two opinions on the single currency package and has engaged with MEPs working on the matter as part of the legislative deliberations.^[21]

The ECB’s engagement on a digital euro also extends beyond the European Parliament to other EU institutions and market stakeholders. The ECB has held regular exchanges with euro area finance ministers and has closely cooperated with the European Commission to discuss a broad range of policy, legal and technical issues arising from the possible introduction of a digital euro. In addition, given the reliance of a possible digital euro on financial intermediaries, merchants and consumers for distribution, acceptance and use respectively, the ECB is engaging extensively with all sides of the market via the Euro Retail Payments Board (ERPB).^[22]

The stakeholder engagement efforts on a digital euro are tailored to the needs of the current stage of the digital euro project. The ECB is now in the preparation phase and the co-legislators are discussing the legislative proposal. The legislative proposal sets out detailed reporting requirements following the adoption of the regulation, laying the groundwork for accountability and transparency if a digital euro is launched. A digital euro is a common European project, and the ECB is committed to actively engaging with all stakeholders along the way. The ECB’s Governing Council will only take a decision on the issuance of a digital euro once the legislative act has been adopted by the European Parliament and the Council.

3 Accountability interactions with the European Parliament in the period 2019-2024

The ECB interacted regularly with the European Parliament in its ninth term and even more frequently than in previous terms. The overall number of exchanges increased in the ninth parliamentary term, notably due to engagement on a digital euro, as well as other ad hoc exchanges (Chart 1, panel a). At the same time, there were 175 replies to written questions. This was lower than in the previous term, which had seen an exceptional increase, particularly in 2015 and 2016, related to the situation in Greece and the launch of quantitative easing (Chart 1, panel b). Nonetheless, MEPs made particular use of this channel in the first year of the pandemic, asking, for example, about the modalities of the PEPP.

Chart 1

Number of exchanges and replies to MEPs’ written questions

a) Exchanges with the European Parliament

(number per year)

b) Replies to written questions submitted by MEPs

(number per year)

To understand the focus of MEPs’ interactions with the ECB, we looked at the subject of their interventions in the quarterly hearings in the ECON Committee. Assessing the character of the ECB’s accountability interactions with the European Parliament requires looking beyond the frequency with which these channels are used. To understand what motivates and differentiates these interactions from each other, we looked at the topics that MEPs focused on when interacting with the ECB within the accountability framework.

With MEPs often addressing multiple questions of varying nature to the ECB in quarterly hearings, we employed a large language model to separate and classify their interventions. Our analysis is based on a full sample of 100 European Parliament transcripts from regular hearings before the ECON Committee between 1999 and 2024.^[23] Within a time window allocated to them, each MEP can pose one or more questions to the ECB President, including potential follow-up questions. We used the large language model to first extract the distinct questions posed in each MEP intervention.^[24] Then we used the same model to classify the topics raised in each question.^[25] We allowed questions to be classified under multiple topics, owing to overlaps between related topics. MEP interventions with more than one question and/or topic were weighted such that each intervention carries the same weight overall.

MEPs use exchanges with the ECB to raise a broad set of questions touching on several issues. The range of topics raised by MEPs in quarterly hearings before the ECON Committee has typically been broad (Chart 2). The topics raised most frequently in most parliamentary terms include monetary policy, the economic situation and outlook, and economic governance. Other questions concerned ECB governance or specific issues relating to individual Member States, as well as periodic or emerging topics related to events or changes in EU or ECB policies.^[26] These latter topics include banking supervision and financial stability, euro adoption, exchange rates, climate change, CBDCs and crypto-assets/stablecoins.

The prominence of different topics varies over time, with monetary policy and the economic situation and outlook taking centre stage in the ninth parliamentary term. Over time, the share of topics has fluctuated notably. Monetary policy and the economic situation and outlook were by far the most discussed topics in the ninth term. Economic governance, including issues such as the EU’s fiscal framework, also remained a relatively popular topic of discussion, albeit less frequent than in previous terms. These three topics alone accounted for around 70% of the questions raised in the ninth term, which was a greater concentration of topics than in previous terms. By contrast, MEPs posed fewer questions on banking supervision and financial stability and Member State-specific issues in the ninth term. At the same time, the number of questions on climate change increased as climate change gained in prominence in the EU’s policy agenda and the ECB took measures to incorporate climate change into its own policies.

Chart 2

Topics raised at quarterly ECON Committee hearings, by parliamentary term and by year in the ninth term

(share of questions raised by members of the European Parliament, percentages)

In the hearings that took place in the ninth parliamentary term, questions on monetary policy and especially the economic situation became more frequent as euro area inflation increased. The onset of the pandemic and the launch of the PEPP in March 2020 were followed by a slight increase in questions on monetary policy (Chart 3, panel a). There was another uptick at the September 2021 hearing, which was the first hearing after the announcement on the strategy review in July 2021. Then, as euro area inflation started rising to historic levels following the pandemic and Russia’s invasion of Ukraine, the share of questions on monetary policy increased further – peaking at around 40% in June 2022 when the Governing Council indicated its intention to raise rates. From 2021 onwards MEPs also asked about the economic situation and outlook more frequently, particularly following the significant rise in inflation. Hearings that took place when inflation was high featured a greater number of questions on the economic situation and, albeit to a lesser extent, on monetary policy (Chart 3, panel b).^[27],[28]

Chart 3

Share of questions from MEPs on monetary policy and the economic situation in individual hearings and against HICP inflation (2019-2024)

a) Share of questions in each hearing on a given topic	b) Share of questions in each hearing on a given topic against HICP inflation
(percentages)	(x-axis: HICP inflation, percentages per annum; y-axis: percentages)

Questions often touched on both monetary policy and the economic situation. Monetary policy, like other topics, was more often mentioned in combination with another topic than on its own. In the ninth parliamentary term, around 80% of MEP questions touched upon two topics, with around 20% touching upon only one topic.^[29] Looking more deeply at such multi-topic questions, those touching upon both monetary policy and the economic situation were the most common combination in the ninth term (33% of all questions; Chart 4). However, topics also cluster in several other ways, reflecting a rich accountability dialogue and the interconnectedness of policy fields. Questions touching on both monetary policy and economic governance (9%) and on monetary policy and climate change (4%) were also relatively frequent, underlining this interconnectedness. Compared with the eighth parliamentary term, the share of questions on both monetary policy and the economic situation rose substantially (up from 14% in the eighth term, when it was also the most frequent topic combination), reflecting the economic shocks during the ninth parliamentary term and their implications for monetary policy.^[30]

Chart 4

Share of monetary policy-related questions at quarterly ECON Committee hearings in the eighth and ninth parliamentary terms

(percentages)

Box 2
ECB accountability in banking supervision

Prepared by Laudine Goumet and Lise Handal

The establishment of the Single Supervisory Mechanism (SSM) and the subsequent establishment of ECB Banking Supervision in 2014 were accompanied by the introduction of a dedicated accountability framework.^[31] The SSM Regulation^[32] states that ECB Banking Supervision is accountable to the European Parliament and the Council of the EU. These provisions are further specified in the Interinstitutional Agreement between the European Parliament and the ECB and the Memorandum of Understanding with the Council of the EU. Their practical application is further explained in the ECB Annual Report on supervisory activities.^[33]

This box provides an overview of ECB Banking Supervision’s accountability to the European Parliament, which is subject to specific arrangements and distinct from the ECB’s central banking accountability, and highlights trends in supervisory accountability interactions during the ninth parliamentary term. In practice, both formal and informal channels ensure ECB Banking Supervision’s accountability to the European Parliament (see Table A). That accountability is distinct owing to ECB Banking Supervision’s unique mandate and the structure of the banking union, in which national competent authorities supervise less significant banks. Among other considerations, the diversity of supervisory tools, the absence of a single quantifiable supervisory objective, and banking data confidentiality create distinct scrutiny challenges. Consequently, ECB Banking Supervision’s accountability includes more informal, closed-door exchanges with the European Parliament than occur on the central banking side, as well as additional rights for national parliamentarians.^[34]

Table A

Accountability channels between ECB Banking Supervision and the European Parliament (formal and informal)

Category	Accountability channels
Requirements under the Interinstitutional Agreement
Section I.1	The ECB shall submit an annual report on supervisory activities to the European Parliament, the EU Council, the Commission and the Eurogroup and present it in the format of a public hearing before the ECON Committee.
Section I.2	The ECB shall participate in biannual ordinary public hearings before the ECON Committee.
Section I.2	The ECB may be invited for ad hoc exchanges and confidential meetings with the ECON Committee.
Section I.3	The ECB shall respond to written questions from MEPs.
Section I.4	The ECB shall also forward to the European Parliament a meaningful record of the Supervisory Board proceedings, including annotated decisions.
Informal practices
Since 2015	Yearly invitation of ECON Committee members to the ECB with a session dedicated to banking supervision.
Since 2017	ECB Banking Supervision response to the European Parliament’s Banking Union Annual Report resolution.
Since 2020	Transmission of a quarterly updated list of significant institutions and ECB Banking Supervision public consultation information.
Regularly	Bilateral meetings with MEPs.

In the ninth parliamentary term, the Chair of the Supervisory Board received 51 letters from MEPs and attended 15 public hearings, including both regular hearings and ad hoc exchanges.^[35] The Chair also participated in 12 closed-door meetings with members of the Banking Union Working Group. These closed-door meetings are not public and are excluded from this assessment.

The number and topics of MEPs’ questions in letters and public hearings have varied over time and have been largely event-driven, reflecting salient political and banking sector issues. While public hearing questions have remained stable owing to regular scheduling, the volume of letter-based questions declined during the ninth term, a trend also observed on the ECB’s central banking side (Chart A).^[36] As shown in Chart A, based on large language model classification, MEPs seem to prefer the immediacy and public nature of hearings for discussions on EU policy and key banking union matters (representing 33% of all questions in hearings), risks to financial stability (28%) and supervisory practices (21%). Questions were driven in particular by the pandemic, Russia’s war on Ukraine and the 2023 market turmoil. On the other hand, MEP letters concerned more specific and less immediate matters, such as questions on ex post supervisory decisions (representing 43% of all questions in letters), risks to the financial sector and the corresponding supervisory approach (24%), and questions about specific cases concerning individual banks (17%).

Chart A

Shares of questions asked in public hearings and absolute numbers of questions asked by MEPs by letter to the Chair of the Supervisory Board each year during ninth term of the European Parliament

a) Topics of questions in public hearings before the ECON Committee

(percentages)

b) Topics in written questions from MEPs

(number of letters)

4 Conclusion

The intensification of interactions between the ECB and the European Parliament during the ninth parliamentary term underlines the ECB’s commitment to being accountable for its policies. These interactions went beyond merely fulfilling procedural requirements between the ECB and the European Parliament, enhancing the quality and depth of the two institutions’ engagements. The signing of the Exchange of Letters between the Presidents of the ECB and the European Parliament in June 2023 represented a milestone in codifying the ECB’s accountability arrangements vis-à-vis the European Parliament and is a testament to their mutual commitment to ensuring robust accountability of the ECB. Moreover, by addressing specific issues through flexible formats and dedicated hearings throughout the parliamentary term, the ECB remained responsive to evolving challenges and scrutiny demands. One key innovation in this regard during the ninth term was the introduction of regular public exchanges on a digital euro, but the number of other ad hoc exchanges of views also increased. Similarly, the ECB and the European Parliament sought to make the regular hearings of the ECB President more interactive. Together, these innovations also increased the transparency of the ECB’s actions and improved its outreach to citizens and their representatives.

An active and flexible accountability dialogue with the European Parliament will continue to be crucial as the ECB navigates economic uncertainties and structural transformations of the euro area and the global economy. The accountability arrangements agreed in the Exchange of Letters, as well as the precedent of intensive interactions and innovations in the engagement with the European Parliament over the ninth parliamentary term, also provide a firm basis for a robust accountability dialogue as the ECB responds and adjusts to future challenges, be they of a cyclical or more structural nature. Jointly with the European Parliament, the ECB will ensure that its accountability practices continue to meet scrutiny demands, ensuring the democratic legitimacy of all its actions.