European System of Central Banks

The European System of Central Banks (ESCB) was established by the Treaty on European Union on 1 June 1998 and is composed of the European Central Bank (ECB) and the national central banks of the European Union (EU) Member States.

The Eurosystem comprises the ECB and the national central banks of those EU Member States that have adopted the euro. Some EU Member States have not yet adopted the euro due to a derogation (they do not fulfil the necessary conditions) or a special status (they are covered by an exemption clause). It is therefore important to distinguish between the ESCB and the Eurosystem. 

The ESCB is currently comprised of the ECB and the national central banks of the 27 European Union Member States. The Member-States participating in the euro area are: Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland. The central banks of these countries and the ECB comprise the Eurosystem.

In addition to the Eurosystem, the ESCB includes the central banks of Bulgaria, Czech Republic, Denmark, Latvia, Lithuania, Hungary, Poland, Romania, Sweden and the United Kingdom. Portugal is a participating Member-State, and Banco de Portugal is part of the ESCB and the Eurosystem.

The Statute of the ESCB/ECB (hereinafter referred to as the Statute) is laid down in the Protocol annexed to the Treaty on European Union and the Treaty on the Functioning of the European Union. In addition to other provisions, the Statute defines the objectives, tasks and organisation of the ESCB/ECB and reflects the decision that Member-States will adopt the euro, but contemplating the necessary adjustments regarding the national central banks of the non-participating Member States.

The primary objective of the ESCB/ECB is to maintain price stability. Without prejudice to this objective, the ESCB supports the general economic policies in the Union and contributes to the achievement of its objectives as laid down in the Treaty.

The main tasks of the ESCB/ECB are to define and implement the monetary policy of the Union (namely, in the euro area), to conduct foreign exchange operations, to hold and manage the official foreign reserves of the Member States and to promote the smooth operation of payment systems.

Within its statutory tasks, the ESCB/ECB will contribute to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system.

The ECB also has advisory functions on Community or national legislation within its fields of competence, and is thus consulted by the relevant national authorities.

In order to undertake its tasks, the ECB, assisted by the ESCB central banks, collects statistical information, and is also active in the field of international co-operation and representation.

The three decision-making bodies of the ESCB/ECB are the Governing Council, the General Council and the Executive Board.

The Governing Council is the main decision-making body of the ESCB/ECB and comprises the Executive Board, i.e. the President and Vice-President of the ECB and four other members, as well as the governors of the euro area central banks, therefore including the governor of Banco de Portugal.

The Governing Council, chaired by the President of the ECB, adopts the guidelines and takes the decisions necessary to ensure the performance of its tasks. In particular, the Governing Council formulates the monetary policy of the euro area, guiding the Executive Board in its implementation.

The Governing Council meets, as a rule, twice a month at the ECB's premises in Frankfurt am Main. The first monthly meeting focuses on the monetary policy of the euro area.

The Executive Board is also responsible for the preparation of meetings of the Governing Council, as well as for the current business of the ECB.

The General Council comprises the President and Vice-President of the ECB and the governors of the ESCB central banks. It therefore includes the governors of all Member-State central banks, regardless of whether these participate in the euro area. The governor of Banco de Portugal is therefore also a member of the General Council.

The General Council undertakes the transitional tasks entrusted to the ECB related the existence of Member States with a derogation, as well as other responsibilities set out in the Statute. It has no responsibility for monetary policy decisions in the euro area. The General Council normally meets four times a year at the ECB’s premises.

The members of the decision-making bodies of the ECB exercise their powers and perform their tasks independently. Each member has the right to one vote, and decisions are taken by a simple majority of the votes cast, save as otherwise provided for in the Statute.

The centralised decision-making model is complemented by its decentralised implementation by national central banks. In order to assist the decision-making bodies of the ECB, the Governing Council may set up and dissolve committees - the Eurosystem/ESCB Committees – and define their mandates. In addition, the Governing Council may also set up committees on an ad hoc basis.These structures are composed of members from the ECB and national central banks, including experts from Banco de Portugal.