The European System of Central Banks was founded on 1 June, 1998 on the basis of the Maastricht Treaty and the Statute of the European System of Central Banks and of the European Central Bank. The prime objective of the institution is to maintain the price stability in the European Union and to improve monetary and financial cooperation between the Euro- system and member states outside the euro-zone.
But before moving on to the discussion firstly knows that, “What is Euro-system?” and “What is Euro-zone?”
What is Eurosystem?
It is the monetary authority over the members of European Union who have adopted the euro as their sole official currency. It is composed of the European Central Bank (ECB) and the National Central Banks (NCBs) of the EU Member States which have adopted the euro (currently 15). There are four functions of Eurosystem:
1. To define and implement the monetary policy of the eurozone
2. To conduct foreign exchange operations
3. To hold and manage the official foreign reserves of the Member States
4. To promote the smooth operation of payment systems.
What is Euro-zone?
It stands for monetary union of those member states of European Union who have adopted the euro as their sole official currency. It is consists of 19 of the 28 European Union (EU) member states i.e. Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.
Governing Bodies of European System of Central Banks (ESCB)
Governing Council: It is a body that takes the decisions on monetary policy.
Executive Board: It implements the decisions of governing council and takes care of daily official affairs of ECB (European Central Bank).
General Council: It was formed to take care of monetary helm of those member countries who have not yet adopted the euro as their currency.
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