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The European Central Bank (ECB)

Article

With the Treaty of Lisbon, which entered into force at the end of 2009, the European Union improved both the effectiveness of its institutions and its democratic basis.

Established by Article 127 et seq of the Treaty on the Functioning of the European Union (TFEU), the European Central Bank (ECB) is an EU body with headquarters in Frankfurt am Main. The ECB bears overall responsibility for all member states with regard to the common currency area and has special competencies vis‑à‑vis all member states that have introduced the euro.

Governance structure of the European Central Bank
Governance structure of the European Central Bank© ECB

The ECB’s primary objective is to maintain price stability so that fluctuations in the value of money are avoided. In order to achieve this, the ECB has set a target of annual inflation of below, but close to, two per cent.

The ECB enjoys independence in its decisions and is free from all political influence. This is important not only in terms of achieving its primary aim of maintaining price stability, but also for ensuring its exclusive responsibility for monetary policy.

In response to the financial and sovereign debt crisis, whose origins also lay in an unstable banking system, the heads of state and government of the eurozone decided on 29 June 2012 to set up the Single Supervisory Mechanism (SSM) for banks. In November 2014, the ECB took on the direct supervision of the 120 largest banks of the eurozone having carried out a comprehensive assessment of the banks, which also comprised stress tests.

The European System of Central Banks (ESCB) is managed by the ECB’s decision-making bodies, the Governing Council and the Executive Board:

www.ecb.europa.eu