The European Central Bank (ECB) is one of the EU institutions. Its main purpose is to:
- keep prices stable (keep inflation under control), especially in countries that use the euro.
- keep the financial system stable – by making sure financial markets and institutions are properly supervised.
The Bank works with the central banks in all 28 EU countries. Together they form the European System of Central Banks (ESCB).
It also leads the close cooperation between central banks in the euro area – the 17 EU countries that have adopted the euro, also known as the eurozone. The cooperation between this smaller, tighter group of banks is referred to as the ‘Eurosystem’.
The ECB's role includes:
- setting key interest rates for the eurozone and controlling the money supply
- managing the eurozone's foreign-currency reserves and buying or selling currencies when necessary to keep exchange rates in balance
- helping to ensure financial markets and institutions are adequately supervised by national authorities, and that payment systems function smoothly
- authorising central banks in eurozone countries to issue euro banknotes
- monitoring price trends and assessing the risk they pose to price stability.
The ECB has the following decision-making bodies:
- Executive Board – oversees day-to-day management. It has 6 members (1 president, 1 vice-president and 4 other members) appointed for 8 years by the leaders of the eurozone countries.
- Governing Council – defines eurozone monetary policy and fixes the interest rates at which commercial banks can obtain money from the Bank. It consists of the Executive Board plus the governors of the 17 national central banks in the eurozone.
- General Council – contributes to the ECB's advisory and coordination work and helps prepare for new countries joining the euro. It consists of the ECB president and vice-president and the governors of the national central banks of all 28 EU countries.
The ECB is completely independent. Neither the ECB, the national central banks in the Eurosystem, nor any member of their decision-making bodies can ask for or accept instructions from any other body. All EU institutions and governments must also respect this principle.