9. El Banco Central Europeo (BCE)

Understanding the European Central Bank

Introduction to the European Central Bank

• The video discusses the significance of the European Central Bank (ECB) within the framework of the European Union, emphasizing its unique role and independence.

Historical Context and Establishment

• The ECB's formation is linked to the development of Economic and Monetary Union (EMU), initiated in 1988 by Jacques Delors and governors from EU member states.

• A three-phase plan was established to achieve monetary union, which included creating a European Monetary Union and enhancing policy coordination among EU countries.

• The Maastricht Treaty revised earlier agreements, leading to a system of central banks, including the ECB, and establishing a single currency: the euro.

Structure of the ECB

• On January 1, 1999, the eurozone was created with 11 member states transferring their monetary policy powers to the ECB.

• The ECB operates within a broader system that includes national central banks from all EU member states, regardless of whether they use the euro.

Governing Bodies of the ECB

Council of Governors

• Comprised of six members from the Executive Committee and governors from eurozone national banks; it serves as ECB's main decision-making body.

• Responsibilities include adopting necessary guidelines for fulfilling ECB functions and formulating monetary policy for the eurozone.

Voting System in Council

• Following Lithuania's accession in 2015, a unique voting system was implemented where votes are rotated among member countries based on economic size.

Executive Committee

• Composed of a president, vice-president, and four other members appointed by qualified majority; they implement policies set by the Council.

Functions of Key Bodies

Tasks of Executive Committee

• Responsible for preparing council meetings and executing monetary policy according to council decisions while managing day-to-day operations at ECB.

General Council Role

• Includes representatives from all EU national banks; it provides advisory functions without voting rights but plays an essential role in statistical data collection.

Additional Responsibilities

Overview of the European Central Bank's Functions and Structure

Key Preparations for Euro Adoption

• The European Central Bank (ECB) is preparing to irrevocably fix exchange rates for member states that have exceptions regarding the euro.

• Once all remaining member states adopt the euro, this preparatory body will be dissolved.

Composition of the Supervisory Council

• The Supervisory Council consists of a president, a vice president, and four representatives from the ECB, along with one representative from each national competent authority in participating member states.

• The president and vice president are proposed by the ECB but must be approved by the European Parliament.

Functions of the ECB

• The ECB is responsible for planning, preparing, and executing supervisory functions assigned to it.

• According to Article 127 of the Treaty on the Functioning of the European Union, key functions include defining and executing monetary policy aimed at maintaining inflation below 2% over the medium term.

Economic Analysis Framework

• The ECB's approach to inflation control is based on two pillars:

• An economic analysis focusing on short-to-medium-term price determinants.

• A detailed monetary analysis assessing credit evolution's impact on inflation and economic growth.

Currency Management Responsibilities

• The ECB manages foreign currency reserves within the eurozone and engages in buying/selling currencies to stabilize exchange rates.

• It also oversees payment systems' functionality and prudential supervision of credit institutions under Regulation 1024/2013.

Supervision Mechanism Insights

• Under this regulation, both the ECB and national authorities form a Single Supervisory Mechanism (SSM), with oversight responsibilities divided between them based on bank size.