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A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base. Many central banks also have supervisory or regulatory powers to ensure the stability of commercial banks in their jurisdiction, to prevent bank runs, and in some cases also to enforce policies on financial consumer protection and against bank fraud, money laundering, or terrorism financing.
The euro is the official currency of 20 of the 27 member states of the European Union. This group of states is officially known as the euro area or, commonly, the eurozone, and includes about 344 million citizens as of 2023. The euro is divided into 100 euro cents.
The European Central Bank (ECB) is the prime component of the Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important central banks.
The Deutsche Bundesbank is the German member of the Eurosystem and has been the monetary authority for Germany from 1957 to 1998, issuing the Deutsche Mark (DM). It succeeded the Bank deutscher Länder, which had introduced the DM on 20 June 1948.
The European System of Central Banks (ESCB) is an institution that comprises the European Central Bank (ECB) and the national central banks (NCBs) of all 27 member states of the European Union (EU). Its objective is to ensure price stability throughout the EU, and improve monetary and financial cooperation between eurozone and non-eurozone member states of the EU.
In macroeconomics, an open market operation (OMO) is an activity by a central bank to give liquidity in its currency to a bank or a group of banks. The central bank can either buy or sell government bonds in the open market or, in what is now mostly the preferred solution, enter into a repo or secured lending transaction with a commercial bank: the central bank gives the money as a deposit for a defined period and synchronously takes an eligible asset as collateral.
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The president of the European Central Bank is the head of the European Central Bank (ECB), the main institution responsible for the management of the euro and monetary policy in the Eurozone of the European Union (EU).
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The European Stability Mechanism (ESM) is an intergovernmental organization located in Luxembourg City, which operates under public international law for all eurozone member states having ratified a special ESM intergovernmental treaty. It was established on 27 September 2012 as a permanent firewall for the eurozone, to safeguard and provide instant access to financial assistance programmes for member states of the eurozone in financial difficulty, with a maximum lending capacity of €500 billion. It has replaced two earlier temporary EU funding programmes: the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM).
Benoît Georges Cœuré is a French economist who has been serving as President of the Autorité de la concurence since 2022. He previously served as a member of the Executive Board of the European Central Bank from 2012 to 2019.
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Sabine Lautenschläger is a German jurist who served as a member of the Executive Board of the European Central Bank from 2014 to 2019. She previously served as vice-president of the Deutsche Bundesbank from 2011 to 2013.
The banking union refers to the transfer of responsibility for banking policy from the national to the European Union (EU) level in several EU member states, initiated in 2012 as a response to the Eurozone crisis. The motivation for banking union was the fragility of numerous banks in the Eurozone, and the identification of a vicious circle between credit conditions for these banks and the sovereign credit of their respective home countries. In several countries, private debts arising from a property bubble were transferred to the respective sovereign as a result of banking system bailouts and government responses to slowing economies post-bubble. Conversely, weakness in sovereign credit resulted in deterioration of the balance sheet position of the banking sector, not least because of high domestic sovereign exposures of the banks.
In 2009–2010, due to substantial public and private sector debt, and "the intimate sovereign-bank linkages" the eurozone crisis impacted periphery countries. This resulted in significant financial sector instability in Europe; banks' solvency risks grew, which had direct implications for their funding liquidity. The European central bank (ECB), as the monetary union's central bank, responded to the sovereign debt crisis with a series of conventional and unconventional measures, including a decrease in the key policy interest rate, and three-year long-term refinancing operation (LTRO) liquidity injections in December 2011 and February 2012, and the announcement of the outright monetary transactions (OMT) program in the summer of 2012. The ECB acted as a de facto lender-of-last-resort (LOLR) to the euro area banking system, providing banks with cash flow in exchange for collateral, as well as a buyer of last resort (BOLR), purchasing eurozone sovereign bonds. However, the ECB's policies have been criticised for their economic repercussions as well as its political agenda.
References
- 1 2 This is a matter of central bank credibility
- ↑ Transcript of the press conference
- ↑ What is ANFA?
- ↑ Press release accompanying the publication of the agreement, ECB, 5 February 2016
- ↑ What is ANFA? (updated version), ECB, 5 February 2016
- ↑ Heimliches Gelddrucken in Rom und Paris (clandestine money printing in Rome and Paris), Frankfurter Allgemeine Zeitung, 7 December 2015