European Central Bank

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European Central Bank

Founded	1998
Headquarters	Frankfurt, Germany
Key People	President Jean-Claude Trichet
Employees	approx. 1,400
Web site	http://www.ecb.int

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The European Central Bank (ECB) conducts monetary policy for the euro, the common currency for 15 of the 27 member states of the European Union (EU). The ECB, second only to the U.S. Federal Reserve in the ranks of global central banks, works with the euro-area's national central banks in the Eurosystem partnership that enacts ECB policy.

History

The supranational ECB and the European System of Central Banks (ESCB), which combines all national central banks (NCBs) in the EU, were established by statute in June 1998 and began conducting monetary policy on behalf of the newly-introduced single currency, the euro, in January 1999.^[1] The euro area first consisted of 11 countries, joined by Greece in 2001, Slovenia in 2007, and Malta and Cyprus in 2008.

Governance

The ECB has full independence from the European Union and its executive arm, the European Commission, and its member states. However, the bank must by statute publish a consolidated weekly financial statement, monthly bulletins and an annual report - the latter of which is addressed to the European Parliament, the EU Council, the European Commission and the European Council.^[2] The ECB is also subject to external audit from the European Court of Auditors, the EU's official external auditor.^[3]

Gallic challenge

French President Nicholas Sarkozy, who has in the past criticized the ECB for hiking interest rates, is expected to push soon for reforms to the ECB that could undermine its famed independence.^[4] The French want the ECB to allow member states to express opinions on ECB monetary policy and publish minutes of now-secret meetings of the ECB's governing council, its equivalent of the Federal Open Market Committee (FOMC) in the U.S. France also wants to establish a form of economic government for the EU's euro area, challenging the ECB's current over-arching role.

Key People

ECB President Jean-Claude Trichet^[5] of France succeeded Dutchman Wim Duisenberg in 2003 after a compromise deal had been reached within the EU to give each a half-term at the helm. Trichet, a career public-service bureaucrat, had previously been appointed to consecutive terms as governor of the Banque de France beginning in 1993 and had previously worked in the French government's Treasury Department, which he first joined in 1975. He was also chairman of the Paris Club for soveriegn debt re-scheduling from 1985 to 1993 and from 1987 served as alternate governor to both the World Bank until 1995 and the International Monetary Fund (IMF) until 1993. He also served a year until his appointment to the Banque de France as chairman of the European Monetary Committee. Like many high-ranking members of the French government and bureaucracy, Trichet is a graduate of the Ecole nationale d'administration (ENA).

Latest News

The ECB and the EC recently celebrated the launch of the Single Euro Payments Area (SEPA) by euro-area financial institutions that will make all euro-area payments across borders as seamless as domestic payments.^[6] The pair believe SEPA will accelerate the completion of a single euro-area market and help make euro-area businesses more competitive. A study by the ECB found SEPA would significantly reduce euro-area bank costs but would also increase competition in their market.