On 1 January 2019, the national central banks of EU Member States will see their respective share in the ECB’s capital change. This is the result of a regular recalculation of what is known as the capital key. This key determines what percentage share a national central bank must contribute to the ECB’s capital of around €10.8 billion.

Following the fresh calculation, 16 national central banks, including the Bundesbank, will have a higher share in the ECB’s capital. The remaining 12 central banks will see their shares reduce. The capital key is adjusted every five years to reflect current GDP and population figures. In addition to this regular cycle of updates, it is also recalculated whenever a new country joins the EU, most recently when Croatia acceded in 2013.

Two deciding factors – share of population and economic size

The capital key is calculated on the basis of a country’s share in the population and GDP of the EU as a whole, with each factor having equal weighting. If, for instance, a country accounted for 10% of the EU’s total population and produced 20% of the EU’s GDP, its central bank’s share in the ECB’s capital would be 15% (see chart).

Only euro area members have to pay up the full amountGermany is Europe’s most populous country and its largest economy and this is duly reflected in its central bank’s share in the ECB’s capital; from 1 January 2019 the Bundesbank’s share will be 18.3670%. Before the update, it was 17.9973%.

The central banks of the EU Member States are the ECB’s only shareholders. This arrangement helps to safeguard the ECB’s independence. Only the central banks of euro area countries have to pay their capital share in full, however. The other central banks contribute to covering the ECB’s running costs by paying 3.75% of their share.

As things stand, the paid-up subscriptions of euro area central banks to the ECB’s capital total around €7.5 billion, which amounts to a share of approximately 70%. Under this set-up the euro area countries are also the only ones with a stake in the ECB’s annual profits or losses, which are allocated according to their share in the paid-up capital. Paying in just under €2 billion, the Bundesbank has a share of 25.5674% as of 1 January 2019.

Brexit to change capital key

With the United Kingdom as an EU Member State, the Bank of England has, up to this point, also been making a contribution to the ECB’s capital. From 1 January 2019, its share will be 14.3374%. However, the United Kingdom’s withdrawal from the EU means that the Bank of England cannot remain a shareholder. As a knock-on effect, all national central banks will see their share of the capital key change once again.