The European Central Bank (ECB) is one of the institutions of the European Union. The ECB and the European System of Central Banks (ESCB) were established pursuant to the Statute on 1 June 1998. The ECB forms the core of the Eurosystem and the ESCB. The tasks assigned to them are fulfilled together by the ECB and the national central banks.
The main objective of the ECB is to maintain price stability (and thus also the purchasing power of the single currency) in the euro area. In addition to the ECB meticulously monitoring economic developments in the euro area and trying to influence the developments with its decisions, the ECB is also responsible, within the framework of the single supervisory mechanism, for the prudential supervision of credit institutions established in the countries participating in single supervision. The three decision-making bodies of the ECB are:
- the Governing Council,
- the Executive Board,
- the General Council.
The Governing Council of the European Central Bank is the main decision-making body of the ECB. It comprises the six members of the ECB’s Executive Board and the governors of the national central banks of the 19 euro area countries.
The main responsibilities of the Governing Council are the following:
- to formulate monetary policy for the euro area (this includes setting the key interest rates of the euro area), and
- to adopt the guidelines and take the decisions necessary to ensure the performance of the tasks entrusted to the Eurosystem;
- in the context of the ECB’s new responsibilities related to banking supervision, 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.
Pursuant to the Statute of the European System of Central Banks, the Governing Council must convene at least 10 times a year and the meetings may also take place as teleconferences. The meetings are usually held twice a month – every first and third week of the month. Monetary policy issues are usually discussed every six weeks. National Central Bank Governors take turns holding voting rights on the Governing Council. The rotation of voting rights provides the capacity to operate in a situation where new members are added to the Governing Council when the euro area membership expands. Members of the Executive Board of the ECB, on the other hand, have permanent voting rights.
The Executive Board of the European Central Bank consists of the President and the Vice-President of the ECB and four other members.
The main duties of the Executive Board are the following:
- to prepare Governing Council meetings;
- to implement monetary policy in accordance with the guidelines specified and decisions taken by the Governing Council. In so doing, it gives the necessary instructions to the euro area NCBs;
- to manage the day-to-day business of the ECB.
The members of the Executive Board are appointed from among persons with outstanding expertise in monetary and banking issues upon agreement among the heads of state of the euro area countries. The persons are recommended by the EU Council after it has consulted with the European Parliament and the ECB’s Governing Council. The Executive Board usually meets every Tuesday.
The General Council of the European Central Bank consists of the President and the Vice-President of the ECB, and the governors of the national central banks of all EU Member States.
The General Council is not responsible for the euro area’s monetary policy decisions. It fulfils the tasks that the ECB is required to perform until all EU Member States have adopted the euro. This means that the key task of the General Council is to prepare reports regarding the progress of non-euro area countries and give instructions on the preparations for the adoption of the euro.
The General Council contributes to:
- the ECB's advisory functions;
- the collection of statistical information;
- the preparation of the ECB's annual report;
- the establishment of the necessary rules for standardising the accounting and reporting of operations undertaken by the NCBs;
- the necessary preparations for irrevocably fixing the exchange rates of the currencies of those EU Member States that do not belong to the euro area.
The meetings of the General Council usually take place once every three months in Frankfurt. In accordance with the Statute of the European System of Central Banks and of the European Central Bank, the General Council will be dissolved once all EU Member States have introduced the single currency.
Cooperation bodies. The activities of the ECB’s decision-making bodies are facilitated by the ESCB committees, who also have an important role in the cooperation within the ESCB. The committees include the representatives of the ECB and of the national central banks of the Eurosystem, and representatives of other competent bodies.
The committees and their task forces:
- compile common analyses;
- discuss standpoints;
- prepare various documents together with the representatives of NCBs;
help the decision-making bodies of the ECB to gather information in order to make and implement their decisions.