Bundesbank Independence, Organisation and Decision-Making

The Deutsche Bundesbank’s present structure and its legal and institutional operating basis may be said to reflect the troubled history of more than 100 years of German central banking. During this period the German currency broke down twice under the impact of war, inflation and the monetary disturbances following two lost world wars. These traumatic experiences left a characteristic imprint on German thinking in the field of central banking and currency order. Their consequences can still be felt today. The financial shock events culminating in the currency reforms of 1924 and 1948 had important implications for central banking legislation in Germany. In 1924 the Reichsbank, over which the Chancellor had exercised ultimate control since its foundation in 1876, was given a new charter as part of the reorganisation of the German monetary system in 1923–4. The new Banking Act expressly laid down that the central bank was independent of the Government. Supervision by the Chancellor was dropped and lending to the Government severely limited. Under the dictatorial Hitler regime (1933–45), the prerogatives of the Reichsbank were, however, formally abolished and its Directorate was dissolved in 1939, after it had boldly protested against inflationary budget financing.