Have you ever heard of the European Central Bank? Do you know what its objectives and duties are? Learn more from our lawyers, below!

The ECB is the central bank of the European Union countries which use the euro. It was established by the Treaty of Amsterdam in May 1999.

Their main task is to maintain price stability, by making sure that inflation remains low, stable and predictable. In this way, they seek to help people plan their saving and spending. They make sure that people will be able to buy as much with their money tomorrow as they can today. They also contribute to the safety and soundness of the European banking system, and this helps to ensure that people’s money stays safe in the bank.

History

The ECB is the central component of the Eurosystem and the European System of Central Banks (ESCB), as well as one of seven institutions of the European Union. It is one of the world’s most important central banks.

The first step towards creating the ECB was the decision, taken in 1988, to build an Economic and Monetary Union: free capital movements within Europe, a common monetary authority and a single monetary policy across the euro area countries.

When the ECB was created, it covered a Eurozone of eleven members. Since then, Greece joined in January 2001, Slovenia in January 2007, Cyprus and Malta in January 2008, Slovakia in January 2009, Estonia in January 2011, Latvia in January 2014, Lithuania in January 2015 and Croatia in January 2023.

Tasks and responsibilities

The European Central Bank and the national central banks together constitute the Eurosystem, the central banking system of the euro area. The main objective of the Eurosystem is to maintain price stability: safeguarding the value of the euro.

The European Central Bank is responsible for the supervision of credit institutions located in the euro area and participating non-euro area Member States, within the Single Supervisory Mechanism, which also comprises the national competent authorities. The bank contributes to the safety and soundness of the banking system and the stability of the financial system within the EU and each participating Member State.

The Eurosystem is responsible for defining and implementing monetary policy, conducting foreign exchange operations, holding and managing the euro area’s foreign currency reserves or promoting the smooth operation of payment systems, while The European Central Bank carries out specific tasks in the areas of banking supervision, banknotes, statistics, macroprudential policy and financial stability as well as international and European cooperation.

The ECB Governing Council makes monetary policy for the Eurozone and the European Union, administers the foreign exchange reserves of EU member states, engages in foreign exchange operations, and defines the intermediate monetary objectives and key interest rate of the EU. The ECB has the exclusive right to authorize the issuance of euro banknotes. Member states can issue euro coins, but the volume must be approved by the ECB beforehand. The bank also operates the TARGET2 payments system.

Values: independence, transparency, accountability, integrity

The bank strives for the highest level of integrity, competence, efficiency and accountability. They also respect the separation between their monetary policy and supervisory tasks. While performing their tasks, they are transparent while fully observing the applicable confidentiality requirements.

The independence of the ECB is conducive to maintaining price stability. The ECB is an independent institution that has full discretion to use its instruments, as necessary, to carry out its tasks and fulfil its mandate. Accountability is the necessary counterpart to that independence.

Transparency means that the central bank provides the general public and the markets with all relevant information on its strategy, assessments and policy decisions as well as its procedures in an open, clear and timely manner.

The ECB promotes integrity, good corporate governance and the highest ethical standards.

Paraschiva Miriam Ichim

Legal intern R&R Partners