THE EUROPEAN CENTRAL BANK

Since 1 January 1999 the European Central Bank (ECB) has been responsible for conducting monetary policy for the euro area – the world’s largest economy after the United States.

The euro area came into being when responsibility for monetary policy was transferred from the national central banks of 11 EU Member States to the ECB in January 1999. Greece joined as the 12th member two years later. The creation of the euro area and a new supranational institution, the ECB, was a milestone in a long and complex process of European integration.

The 12 countries had to fulfil the convergence criteria, as will other EU Member States prior to adopting the euro. The criteria set out the economic and legal preconditions for countries to participate successfully in Economic and Monetary Union.

Today, the European Central Bank consists of 19 EU member states and is one of the largest currency areas in the world. It is one of the world’s most important central banks and is one of the seven institutions of the European Union (EU) listed in the Treaty on European Union (TEU). The capital stock of the bank is owned by the central banks of all 28 EU member states.

European Central Bank

The legal basis for the single monetary policy is the Treaty establishing the European Community and the Statute of the European System of Central Banks and of the European Central Bank. The Statute established both the ECB and the European System of Central Banks (ESCB) as from 1 June 1998. The ECB was established as the core of the Euro system and the ESCB. The ECB and the national central banks together perform the tasks they have been entrusted with. The ECB has legal personality under public international law.

European System of Central Banks

The ESCB comprises the ECB and the national central banks (NCBs) of all EU Member States (Article 107.1 of the Treaty) whether they have adopted the euro or not.

Euro system

The Euro system comprises the ECB and the NCBs of those countries that have adopted the euro. The Euro system and the ESCB will co-exist as long as there are EU Member States outside the euro area.

Euro Area

The euro area consists of the EU countries that have adopted the euro.