Functions Of The European Central Bank
The European Union inaugurated the first European central bank on June 1st in the year 1998. The headquarters of the European central bank is situated in Frankfurt, Germany. This bank holds a very vital place among the many banks of the world. The basic responsibility of this bank is the monetary policy of the sixteen member states of the euro zone. The European Monetary Institute (EMI) was the main forerunner of The European Central Bank. However, referring to its design, and importance, The European Central Bank is the heir of the German Bundebank.
At the beginning of the second stage of the Economic and Monetary Union (EMU) of European Union, the EMI was established in order to prepare for the creation of the ECB, European System of Central Banks (ESCB), and to manage the intermediary issues of the States taking on board the euro.
The European Central Bank under the Treaty on European Union then replaced this European Monetary Institute on 1 June 1998. Nevertheless, it came into full power with the start of the euro on 1 January1999. The start of the euro and the full functioning of the European Central Bank was the third stage of the Economic and Monetary Union.
The chief objective of the ECB was to keep the price steady within the Eurozone. It is the responsibility the ECB to outline, and execute the monetary policy for the Eurozone, to manage foreign exchange operations, to care for the foreign reserves of the European System of Central banks, and to advance smooth operation of the money market infrastructure.
The ECB has total control to approve issuance of euro banknotes. Even though the other states can supply euro coins, yet the authorisation of the amount is controlled by the ECB in advance. The ECB must work as a team with the EU, and with third parties and units, internationally. It contributes in keeping the stability of the financial system, and supervises the banking sector.
The European Central Bank consists of a Governing Council, Executive Board, and a General Council. As it is an independent body, therefore it is assigned a separate budget from the national central banks. The Governing Council takes all sorts of final decisions.
The responsibilities of The Executive Board include the responsibility of running the bank, and for the execution of the monetary policy, which is outlined by the Governing Council. The President of the Bank, a vice president and four other members constitutes the Executive Board. All these members are appointed for a term of eight years by the member states. The responsibilities of The General Council include the transitional issues like maintaining the exchange rates of currencies until all the member states adopt the euro. When the euro would be adopted by all the member states, then The General Council would be dissolved.
The first president of the European Central Bank was Wim Duisenberg, who was the former president of EMI. The French disagreed with Duisenberg to be the president, as they thought that if the ECB was located in Germany its president should be French. This dispute was settled in a noble way according to which, at the end of the mandate of Duisenberg at November 2003, Jean-Claude Trichet who was a Frenchman would replace him. Trichet is the current president of the ECB.
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