The European Central Bank (ECB) is the institution of the European Union (EU) which administers the monetary policy of the 17 EU Eurozone member states. It is thus one of the world’s most important central banks. The bank was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt, Germany.

The European Central Bank is the de facto successor of the European Monetary Institute (EMI).

In June 1988 the European Council confirmed the objective of the progressive realization of Economic and Monetary Union (EMU). It mandated a committee chaired by Jacques Delors, the 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) national central banks; Alexandre Lamfalussy, the then General Manager of the Bank for International Settlements (BIS); Niels Thygesen, professor of economics, Denmark; and Miguel Boyer, the then President of the Banco Exterior de España.

The resulting Delors Report proposed that economic and monetary union should be achieved in three discrete but evolutionary steps:

• Stage One of EMU — On the basis of the Delors Report, the European Council decided in June 1989 that the first stage of the realization 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;
  
  
• 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’s transitory existence also mirrored the state of monetary integration within the Community. 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.
  
  
• 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 and by Estonia on 1 January 2011. On the day each country joined the euro area, its central bank automatically became part of the Eurosystem.

The tasks of the ESCB and of the Eurosystem are laid down in the Treaty establishing the European Community. They are specified in the Statute of the European System of Central Banks (ESCB) and of the European Central Bank (ECB). The Statute is a protocol attached to the Treaty. The Treaty text refers to the ‘ESCB' rather than to the „Eurosystem”. It was drawn up on the premise that eventually all EU Member States will adopt the euro. Until then, the Eurosystem will carry out the tasks.

According to the Treaty establishing the European Community (Article 105.2), the basic tasks are:

• the definition and implementation of monetary policy for the euro area;
• the conduct of foreign exchange operations;
• the holding and management of the official foreign reserves of the euro area countries (portfolio management);
• the promotion of the smooth operation of payment systems;

Useful links

Currency of European Union:

Euro

List of Central Banks:

Central Banks

Official website of European Central Bank:

www.ecb.int

International Monetary Fund:

www.imf.org

Organisation for Economic Co-Operation and Development:

www.oecd.org

European Investment Bank:

www.eib.org

Historical events of European Central Bank:

Historical events