European Central Bank

Its job is to

    Manage the single currency, the euro

    Maintain stable prices in the eurozone


The euro is the currency of 17 member states.

European Central Bank: what it does

 

The European Central Bank (ECB) is the central bank for Europe’s single currency, the euro.

The ECB’s headquarters are in Frankfurt-am-Main, Germany.

ECB headquarters in Frankfurt-am-Main Its job is to manage the single currency, the euro.  This means maintaining stable prices across the Euro zone.

The Euro zone is the name for the countries that use the single currency, the euro.

To maintain price stability it seeks to keep inflation at or below two per cent.

Inflation is the term used for increases in the cost of products and services.

As a result of worldwide economic problems and the large sums of money that many countries have borrowed to balance their budgets, the ECB has had to do other things.

It has set up a fund that lends money to Euro zone countries that are deeply in debt such as Greece, Ireland and Portugal, to tide them over until they can repay their debt.

To help such countries the ECB has itself bought some of their bonds.

Governments use bonds to borrow money from the public.  You get interest on what the government has borrowed from you and a commitment by the government to repay by a certain date. 

On March 21, 2014 the EU agreed a bank union that will serve to deal with future financial crises. Member states gave power to the European Central Bank to supervise the banking sector and on the advice of the European Commission shut banks that are failing. There will be a 55bn euro rescue fund paid by the banks themselves to cover the costs of winding up any such banks. The rules will apply to all banks in the eurozone and to those in other countries that sign up to them. The UK is not part of this union.  The ECB will take on these new responsibilities later in the year.

How it works

From November 2011 the President of the ECB and chairman of the Executive Board is Mario Draghi, former Governor of the Banca d’Italia.

The President is chairman of the Executive Board that is responsible for the day to day running of the bank.
Mario Draghi, President of the ECB and chairman of the Executive Board

Overseeing the Executive Board is the Governing Council.  The Governing Council consists of the presidents of the central banks of all euro zone member states.

A meeting of the Governing Council of the European Central Bank

The UK is not represented on the Governing Council as it is not a member of the Euro zone. 

For more information about the European Central Bank click the logo here.