European Central Bank: Guarantor of eurozone stability

History of the European Central Bank

The European Central Bank (ECB) is the financial institution responsible for regulating monetary policy in the member states of the eurozone. It is headquartered in Frankfurt am Main, Germany. Officially, the ECB was established in 1998 on the basis of the Amsterdam Agreement of 1997, but the history of its formation began long before that.

After the Second World War, the process of European unification and the formation of a single market space became active. In the period from 1947 to 1957 the integration of the states of the region took place and the European Payments Union emerged. In 1957, the largest countries of Europe united into the European Economic Community (EEC). Then, in 1979, the conventional monetary unit ECU was introduced, the exchange rate of which was linked to a basket of European currencies. In 1988, a memorandum was signed "On the Establishment of a European Monetary Area and a European Central Bank". In 1992, an international treaty establishing the European Union was concluded in Maastricht, and in January 1994, the European Monetary Institute was established in Frankfurt am Main to prepare the transition to the euro single currency. In 1998, the institution was transformed into the European Central Bank.

Today the ECB functions as a special legal entity on the basis of international agreements. At the time of its creation, its authorised capital exceeded five billion euros, and its shareholders are the central banks of European countries. The Bank of Germany (18.9%), the Bank of France (14.2%), the Bank of Italy (12.5%) and the Bank of Spain (8.3%) made the largest contributions, while the shares of the other euro area central banks range from 0.1 to 3.9%.

The ECB's governing bodies are the Governing Council and the Executive Board, which is responsible for the day-to-day management of the bank. The Executive Board consists of six members, including the chairman and his deputy, and their nominations are proposed to the Governing Council for approval by the European Parliament and the heads of the euro area member states.

The European Central Bank (ECB) fulfils a number of key functions:

  • Ensuring economic stability in the euro area, primarily controlling inflation at or below 2%.
  • Formulating and implementing monetary policy in the euro area.
  • Managing foreign exchange reserves.
  • Issuing the euro.
  • Setting interest rates.

To carry out these functions, the ECB uses various instruments, including stabilisation loans, collateral auctions for leading banks, participation in foreign exchange operations and other open market measures.

Although formally independent of political influence, the ECB is obliged to submit annual reports to the European Parliament, the European Commission, the Council of the European Union and the Council of Europe.

The European Central Bank is an example of successful international co-operation aimed at ensuring economic stability and prosperity.


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