Risk sharing practices
within the Eurosystem raise the architectural question of the appropriate
degree of solidarity and responsibility among the central banks participating
in the system. In the euro area, the implementation of monetary policy is
typically decentralized. Whereas this is of little significance when the losses
of individual NCBs are shared by the Eurosystem as a whole, when individual
NCBs remain responsible for the losses they incur, the credibility of euro area
monetary policy and, in extreme scenarios, even the survival of the euro area
as a whole may be endangered. This article surveys the constitutional rules
applicable to risk sharing and maps the diverse landscape of risk distribution
in monetary policymaking within the Eurosystem. The article claims that the
central pillar of risk policy in the euro area – a default rule in favour of
loss sharing among NCBs – violates both the letter and spirit of the ESCB
Statute as written and shows how this gives rise to significant distributive
struggles within the Eurosystem. The conclusion provided is that a
decentralized implementation of monetary policy constitutes a significant
source of fragility for the euro area.