The European Central Bank (ECB)

KEY POINTS

• The ECB is the central bank of the euro area and is an independent European Union (EU) institution, representing the core of the Eurosystem, which conducts monetary policy in the euro area, and of the ESCB.
• The Eurosystem consists of the ECB and the national central banks (NCBs) of the euro area countries, whereas the ESCB consists of the ECB and the NCBs of all EU countries. The Eurosystem and the ESCB will co-exist as long as there are EU countries outside the euro area.
• The ECB’s primary objective is the maintenance of price stability, i.e. safeguarding the value of the euro. Without prejudice to its primary objective, it also supports the general economic policies in the EU.
• The basic tasks of the ECB are to:
  • define and implement the monetary policy for the euro area;
  • conduct foreign exchange operations;
  • hold and manage the official foreign reserves of the euro area countries;
  • promote the smooth operation of payment systems.
• In addition, the ECB collects statistical information for the performance of its tasks in cooperation with the NCBs and has the exclusive right to authorise the issue of euro banknotes within the EU.
• Together with the national supervisors, the ECB also carries out banking supervision in the euro area and in other participating countries within the Single Supervisory Mechanism (SSM). It was assigned this responsibility in 2014 in order to contribute to the safety and soundness of credit institutions and to the stability of the financial system.
• The ECB’s decision-making bodies are the Governing Council, the Executive Board and the General Council. The Governing Council, the main decision-making body, comprises the Executive Board members and the governors of the euro area NCBs. The Executive Board, responsible for monetary policy implementation and day-to-day operations, is composed of the President and the Vice-President and four other members. The General Council, which carries out tasks the ECB is required to perform until all EU countries have adopted the euro, comprises the President and Vice-President and the governors of the NCBs of the EU countries.
• The Supervisory Board was established in the context of the SSM and carries out the tasks relating to banking supervision. It consists of the Chair, the Vice-Chair, four ECB representatives and one representative of each of the national supervisory authorities in the participating countries within the SSM.
• The ECB was established in 1998 and is located in Frankfurt am Main, Germany.