BODIES OF THE EU: European Central Bank
• Functions: managing the euro, maintaining price stability and driving EU economic and monetary policy
• President: Mario Draghi
• Members: the President and Vice-President of the ECB as well as the governors of the central banks of all EU countries
• Created in 1998
• Headquarters: Frankfurt (Germany)
The European Central Bank (ECB) manages the euro and defines and implements EU economic and monetary policy with the main objective of maintaining price stability and supporting economic growth and job creation.
What does the ECB do?
• It fixes the interest rates on loans granted to commercial banks in the euro area, thereby controlling the money supply and inflation
• Generate foreign exchange reserves in the euro area, as well as the purchase and sale of foreign exchange to balance exchange rates
• Ensures proper supervision of markets and financial institutions by national authorities and the proper functioning of payment systems
• Preserves the security and soundness of the European banking system
• Authorizes the production of euro banknotes by euro area countries
• monitors price developments and assesses the risks to price stability
The President of the ECB represents the bank at high level European and international meetings.
The ECB has three decision-making bodies:
• The Governing Council, which is the main decision-making body.
It is composed of the six members of the Executive Board and the governors of the central banks of the euro zone countries.
• The Executive Board, which deals with the day-to-day management of the ECB.
It consists of the President, the Vice-President and four members who are appointed for eight years by the leaders of the euro-zone countries.
• The General Council, which essentially performs consultation and coordination functions.
It consists of the President and Vice-President of the ECB and central bank governors of all EU countries.
How does the ECB work?
The ECB works with the central banks of all EU countries. Together they constitute the European System of Central Banks.
The ECB directs cooperation between the central banks in the euro zone, constituting the Euro system.
What do decision makers do?
• The Governing Council of the ECB monitors developments in economic and monetary policy, defines the monetary policy of the euro area and sets the interest rates at which commercial banks may borrow from the Central Bank.
• The Executive Board implements monetary policy, manages day-to-day operations, prepares meetings of the Governing Council and exercises the powers delegated to it by the Governing Council.
• The General Council participates in consultation and coordination and helps prepare for the accession of new countries to the euro zone.