European Central Bank

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Definition: European Central Bank

The European Central Bank is based out of Frankfurt in Germany. Its main task is to manage the Euro which is the single currency used by the 28 member nations and also to maintain economic stability in the European Union Nations. The European Central Bank maintains price stability by controlling inflationary levels. It uses the Euro to do the same. It also keeps the financial systems stable in the union by ensuring strict supervision in the financial markets and institutions.

The European Central Bank co ordinates with the main central banks of all the member nations to ensure stability. They together form a body called European System of Central Banks (ESCB).

• There are many tasks that are performed by the ECB. Some of them are

• Interest rate setting for the benefit of the Economy to ensure Stability.

• Maintaining a decent forex reserves and to keep the currency exchange rate stable to ensure less volatility in trades.

• To maintain supervision for the markets and all types of financial institutions to ensure a smooth flow financial system

• To overlook the smooth printing of currency notes by the member Central Banks

• To overlook the money price trends and also measuring the risk that gets associated with it.

The ECB has the decision making bodies in the form of an Executive Board, a governing council and a General council.

It should be noted that the ECB is completely an autonomous and independent body. All European union institutes and governments have to follow this fact.



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