What is the ESCB and the Eurosystem?

17/12/2024

The European System of Central Banks (ESCB) comprises the European Central Bank (ECB) and the national central banks of all Member States of the European Union (EU), whether or not they have adopted the euro. The Eurosystem is the monetary authority of the euro area and comprises the ECB and the national central banks of the Member States whose currency is the euro.

The Treaty on European Union (TEU) assigns to the ESCB the primary objective of maintaining price stability and supporting the general economic policies of the EU. The Treaty refers explicitly to the ESCB and not to the Eurosystem because the drafters assumed at that time of optimism that all EU countries would adopt the euro.

The reality is that the Eurosystem and the ESCB will continue to co-exist as long as there are EU states that have not embraced the euro. As long as this continues, the Eurosystem will carry out the tasks entrusted to the ESCB. Among them, the following stand out:

• Defining and implementing the single monetary policy.
• Perform operations in currencies consistent with the established exchange rate policy.
• Own and manage the official reserves of the currencies of the Member States.
• Promote the smooth functioning of payment systems in the euro area.
• Authorise the issuance of banknotes in the euro area.
• Develop specific tasks related to the prudential supervision of credit institutions located in participating Member States. These tasks are carried out through the Single Supervisory Mechanism formed by the ECB and the national competent authorities, which we will develop in a next post.
• To collect the statistical information necessary for the performance of the tasks of the ESCB.
• Contribute to the achievement of macroprudential policies established by national competent authorities for credit institutions and the stability of the financial system.

“Disclaimer: Please note that this is a translation of the original in Spanish that has been obtained using eTranslation (the machine translation tool provided by the European Commission), with the intention of giving you a basic idea of the content in English until a human translation becomes available. The Banco de España accepts no liability whatsoever in connection with this translation.”