ROLE OF EUROPEAN CENTRAL BANK

ECB
The European Central Bank (ECB) is the institution of the European Union (EU) which administers the monetary policy of the 17 EU Eurozone member states.

Established:1998 Headquarters :Frankfurt, Germany President :Jean Claude Trichet Main Purpose

STRUCTURE OF ECB
 Executive Board

 Governing Council

 General council

ECB ACCOUNTABILITY
Monthly Bulletin Quarterly Report Annual Report Weekly consolidated Financial Statement A. Statistics Pocket B. Convergence Reports C. Economic Research Papers

POWER AND OBJECTIVES

Right to authorize issuance of banknotes. The primary objective of the ECB is to maintain price stability . The Key Tasks:
Conduct foreign exchange operations. To take care of the foreign reserves . Promote smooth operation of the financial market. Developed technical platform for settlement of securities

POWERS AND OBJECTIVES(CONTD..)

Rescue operations
Allocate considerable national income to servicing debts Scale back a wide range of national expenditures (such as education, infrastructure, and welfare transfer payments) in order to make their payments.

TASKS OF ECB
Treaty of European community Statue of Euro system Basic Tasks
Definition of Monetary policies Conduct of Foreign exchange Holding management Promotion of Payment systems

FURTHER TASKS
 Bank notes  Statistics in corporation with NCB  Financial stability & supervision  International & European corporation  Monitor & stabilize Banking sector

FOREIGN EXCHANGE POLICY:

 ESCB will have the capacity to conduct foreign exchange intervention.  Treaty does not prescribe any specific exchange rate.  New mechanism- standard fluctuation rate(15%).

MONETARY POLICY:
 Meaning  Primary objective  Decisions

MONETARY POLICY(CONTDu)
 Monopoly supplier of Monetary Base  Signalling the monetary policy stance  Ensuring proper functioning of Money Market  Guiding Principles a)Operational Efficiency b)Equal Treatment & Harmonization c)Decentralized Implementation d)Simplicity, Transparency, Continuity, Safety & Cost Efficiency

EURO
 Officially adopted on 16 December 1995.  Entered circulation on 1 January 2002.  Second largest reserve currency.  Second most traded currency.

DESIGN

BANKNOTES

ROLE OF EURO
 Transaction costs and risks  Price parity  Trade  Inflation  Exchange rate risk  Financial integration  Effect on interest rates

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