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The European Central Bank (ECB)
The European Central Bank was established on 1 June 1998. It has legal personality and is fully independent of national and European institutions. The ECB ensures the smooth running of the Economic and Monetary Union by managing the European System of Central Banks (ESCB). Its primary objective is to maintain price stability by defining the monetary policy of the Union.
Protocol on the Statute of the European System of Central Banks and of the European Central Bank annexed to the Treaty on European Union and the Treaty on the Functioning of the EU [Official Journal C 83 of 30.3.2010].
This Protocol sets out the responsibilities of the decision-making bodies of the European Central Bank (ECB), which manages the European System of Central Banks (ESCB). It also explains the aims and tasks of the ESCB. The Protocol was annexed to the Treaty on European Union (EU) and on the Functioning of the EU which provides the legal basis for the ECB and the ESCB.
The European System of Central Banks (ESCB)
The ESCB is made up of the European Central Bank and the national central banks of the Member States. The ESCB's principal aim is to maintain price stability within the EU by way of:
- defining and implementing the monetary policy of the Union;
- conducting foreign-exchange operations of the euro vis-à-vis national currencies;
- holding and managing official foreign-exchange reserves of the Member States;
- promoting the smooth operation of payment systems.
Moreover, the ESCB is managed by the decision-making bodies of the ECB. The ECB is therefore responsible for ensuring, through its activities, the missions of the ESCB. The national central banks of the Member States are also an integral part of the ESCB. They act in accordance with the guidelines and instructions issued by the ECB.
The ESCB brings together the ECB and the central banks of all Member States, whether or not they have adopted the euro. The Protocol also refers to the Eurosystem which brings together the ECB and the central banks of only those Member States which have adopted the euro. The mission of the Eurosystem is to define and conduct the monetary policy of the euro area.
The ECB is managed by three bodies:
- the Governing Council: comprises the members of the Executive Board and the central bank governors of the Member States that have adopted the euro. The Governing Council is the main decision-making body of the ECB. It is responsible for adopting the guidelines and decisions required in order to achieve the ECB’s missions. Its main task consists, in particular, of formulating the monetary policy for the euro area. To this end, the Governing Council may, for example, set interest rates at which commercial banks can obtain money from their central bank..
- the Executive Board: comprises the President and Vice-President of the ECB and four other members. The members of the Executive Board are appointed by the European Council. The Executive Board implements the monetary policy as defined by the Governing Council and gives the necessary instructions to the national central banks. It also prepares meetings of the Governing Council and is responsible for the day-to-day management of the ECB.
- the General Council: comprises the President and Vice-President of the ECB and the central bank governors of all the EU Member States. It thus brings together the central bank governors of Member States which have introduced the euro and of those which have not. The General Council is considered as the third decision-making body of the ECB even though it has fewer decision-making powers. In particular, its mission is to contribute to the consultative functions of the ECB. It is also responsible for collecting statistical information, producing activity reports, etc.
Responsibilities of the ECB
The principal aim of the ECB is to ensure the missions of the ESCB. It acts jointly with the national central banks of the Member States. However, it is the ECB which decides on the conditions under which the national central banks are authorised to intervene.
Under the framework of the ESCB, the monetary functions of the ECB and the national central banks include, in particular:
- issuing bank notes and coins: only the ECB is entitled to authorise the issue of bank notes in the euro area. Member States may issue coins, but the ECB must first authorise the quantity of the issue;
- opening accounts with the ECB and the national central banks for credit institutions, public entities and other market participants;
- open market operations, namely when the ECB or the national central banks operate in the financial markets, for example by borrowing or lending claims;
- credit operations with credit institutions or other market participants;
- imposing the requirement on credit institutions established in Member States to hold minimum reserves on accounts with the ECB or the national central banks;
- making regulations for efficient and sound clearing and payment systems;
- international relations with the central banks and credit institutions of third countries and international organisations.
Financial and general provisions
The Protocol lays down several financial provisions for the ESCB, for example, relating to financial accounts, audits, the capital of the ECB, the key for capital subscription, the transfers of foreign-reserve assets to the ECB, etc.
The ECB is authorised to make regulations (directly applicable in all Member States) or to take decisions (compulsory for the addressee) necessary for carrying out the tasks provided for in the Protocol. It can also make recommendations and deliver opinions (which are not legally binding).
The acts or omissions of the ECB are open to judicial review by the Court of Justice of the European Union (CJEU). At national level, disputes between the ECB and its creditors, debtors or any other person are decided by the courts in the Member States, except where jurisdiction has been conferred upon the CJEU. The ECB is subject to the liability regime provided for in Article 340 of the Treaty on the Functioning of the EU. Lastly, the ECB enjoys in the territories of the Member States such privileges and immunities as are necessary for the performance of its tasks, under the conditions laid down in the Protocol on the Privileges and Immunities of the EU
The seat of the ECB was established in Frankfurt (Germany) by common accord of the Member States at the level of the Heads of State or of Government.
|Act||Entry into force||Deadline for transposition in the Member States||Official Journal|
|Protocol 4 on the Statute of the European System of Central Banks and of the European Central Bank||
OJ C 83 of 30.3.2010
This summary is for information only. It is not designed to interpret or replace the reference document, which remains the only binding legal text.
- The European Central Bank and the national central banks of the Member States
- A brief history of European Monetary Union (EMU), Economic and Monetary Affairs
- European Commission: Directorate-General for Economic and Financial Affairs
- Global financial institutions: World Bank and International Monetary Fund (IMF)