The European Central Bank

Central Banks

• Central banks are responsible for:

  • Issuing currency

  • Managing monetary policy

  • Ensuring the banking system operates efficiently.

The European Central Bank (ECB)

Chapter 1: Issuing Currency and Managing Monetary Policy

• The euro was created, prompting the need for a dedicated central bank.

• Headquartered in Frankfurt, the ECB is currently led by President Mario Draghi, an Italian.

Chapter 2: Governance of the Banking System

• The ECB's executive board manages day-to-day operations.

  • Members include former national bank governors and high-level banking executives.

  • They are appointed by the European Council.

• The ECB is the largest bank in Europe, overseeing monetary affairs across the 19 eurozone countries.

Chapter 3: Structure of Leadership

• The president is part of a broader executive board.

• The ECB operates as a supranational institution:

  • Independent from member state control.

  • Accountable to the public.

Chapter 4: Monetary Affairs Oversight

• The ECB's primary responsibility is to maintain price stability within the eurozone.

Chapter 5: Main Role and Challenges

• Aims to keep inflation rates close to or below 2%.

• Sole authority to issue euros and set monetary policy for the eurozone.

• During the 2008 financial crisis, the ECB faced significant challenges and was responsible for bailing out eurozone countries in economic distress.

• Post-crisis measures established a fail-safe system to prevent future crises:

  • Banking union transitioned from bailing out to bailing in banks.

  • The ECB oversees banks through the Single Supervisory Mechanism.