• The European Central Bank is the
European institution in charge of
monetary policy in the Eurozone.
• The ECB is an official EU institution at
the heart of the Eurosystem and the
Single Supervisory Mechanism.
• Over 2,500 staff from all over Europe work for the ECB in Frankfurt am Main,
Germany.
• They perform a range of tasks in close cooperation with the national central banks
within the Eurosystem and, for banking supervision, with the national supervisors
within the Single Supervisory Mechanism.
• The Eurozone also called the Euro area goes a step further in the stages of
economic integration than a mere economic union.
• All it's members have agreed to adopt the same monetary policy and form
as such an economic and monetary union.
Historic evolution
• 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.
• In June 1988 the European Council confirmed the objective of the
progressive realisation of Economic and Monetary Union (EMU).
• It mandated a committee chaired by Jacques Delors, then President of the
European Commission, to study and propose concrete stages leading to this
union.
• The committee was composed of the governors of the then European
Community (EC) and national central banks
• The resulting Delors Report proposed that economic and monetary union
should be achieved in three discrete but evolutionary steps.
Stage One of EMU
Committee of Governors
• On the basis of the Delors Report, the European Council decided in June 1989 that the first
stage of economic and monetary union should begin on 1 July 1990. On this date, in
principle, all restrictions on the movement of capital between Member States were
abolished.
• The Committee of Governors of the central banks of the Member States of the European
Economic Community, which had played an increasingly important role in monetary
cooperation since its creation in May 1964, was given additional responsibilities.
• In view of the relatively short time available and the complexity of the tasks involved, the
preparatory work for Stage Three of Economic and Monetary Union (EMU) was also
initiated by the Committee of Governors.
Stage Two of EMU
Establishment of the EMI and the ECB
• The establishment of the European Monetary Institute (EMI) on 1 January 1994
marked the start of the second stage of EMU and with this the Committee of
Governors ceased to exist.
• The EMI had no responsibility for the conduct of monetary policy in the European
Union – this remained the preserve of the national authorities – nor had it any
competence for carrying out foreign exchange intervention.
• The two main tasks of the EMI:
• to strengthen central bank cooperation and monetary policy coordination, and
• to make the preparations required for the establishment of the European System of Central
Banks (ESCB), for the conduct of the single monetary policy and for the creation of a single
currency in the third stage.
Stage Three of EMU
Irrevocable fixing of exchange rates
• On 1 January 1999 the third and final stage of EMU commenced with the irrevocable fixing of
the exchange rates of the currencies of the 11 Member States initially participating in
Monetary Union and with the conduct of a single monetary policy under the responsibility of
the ECB.
• The number of participating Member States increased to 12 on 1 January 2001, when Greece
entered the third stage of EMU. Slovenia became the 13th member of the euro area on 1
January 2007, followed one year later by Cyprus and Malta, by Slovakia on 1 January 2009, by
Estonia on 1 January 2011, by Latvia on 1 January 2014 and by Lithuania on 1 January 2015.
• On the day each country joined the euro area, its central bank automatically became part of
the Eurosystem.
Joining the euro area
To adopt the euro, countries need to fulfil certain economic criteria, namely, a high degree of price
stability, a sound fiscal situation, stable exchange rates and converged long-term interest rates.
• Convergence reports
The European Central Bank contributes to the decision-making on future euro area members by
preparing convergence reports in which it analyses whether the countries concerned fulfill the
necessary conditions for adoption of the euro.
• Participation in decision-making bodies
The Governors of the central banks of the non-euro area EU countries are members of the General
Council of the ECB but they do not join the main decision-making body - the Governing Council - until
they adopt the euro. The Member States central banks’ experts are also members of the committees of
the European System of Central Banks (ESCB).
Organization
The ECB’s President is
Mario Draghi and the
Vice-President is Vitor
Constancio.
The main decision-making body is the
Governing Council, which consists of
the six members of the Executive
Board plus the governors of the
central banks of the 19 euro area
countries.
Responsibilities
• to adopt the guidelines and take the decisions necessary to ensure the performance of the tasks
entrusted to the ECB and the Eurosystem;
• to formulate monetary policy for the euro area. This includes decisions relating to monetary
objectives, key interest rates, the supply of reserves in the Eurosystem,
• to adopt decisions relating to the general framework under which supervisory decisions are
taken, and to adopt the complete draft decisions proposed by the Supervisory Board under the
non-objection procedure.
The Executive Board :
• the President
• the Vice-President
• four other members
All members are appointed by the
European Council, acting by a
qualified majority.
Responsibilities
• to prepare Governing Council meetings;
• to implement monetary policy for the euro
• to manage the day-to-day business of the ECB;
• to exercise certain powers delegated to it by the Governing Council.
The General Council:
• the President of the ECB;
• the Vice-President of the
ECB;
• the governors of the national
central banks (NCBs) of the
28 EU Member States.
The General Council can be regarded as a transitional body.
It carries out the tasks taken over from the European Monetary Institute which the ECB is
required to perform in Stage Three of Economic and Monetary Union on account of the fact
that not all EU Member States have adopted the euro yet.
• The Supervisory Board meets twice a
month to discuss, plan and carry out the
ECB’s supervisory tasks. It proposes draft
decisions to the Governing Council under
the non-objection procedure.
Composition
• Chair (appointed for a non-renewable
term of five years)
• Vice-Chair (chosen from among the
members of the ECB's Executive Board)
• four ECB representatives
• representatives of national supervisors
Euro-Crisis
Pre-Crisis