EU Institutions
European
Central Bank
The monetary authority of the eurozone. Its mandate is price stability — keeping inflation close to 2% — making it one of the most powerful institutions in European economic governance.
Key Facts
Full name
European Central Bank
Seat
Frankfurt am Main, Germany
Established
1 June 1998
President
Christine Lagarde (since 2019)
Eurozone members
20 EU member states (as of 2024)
Primary mandate
Price stability — inflation close to 2% over the medium term
Key interest rate
Main Refinancing Operations (MRO) rate
Legal basis
Art. 127–133 TFEU; ECB Statute
Independence
The ECB is deliberately shielded from political interference. Neither the ECB nor national central banks may seek or take instructions from any EU institution, government, or body. This is enshrined in Article 130 TFEU.
In exchange, the ECB is accountable — its President presents an annual report to the European Parliament and testifies before the ECON committee quarterly.
The ESCB
The ECB operates within the European System of Central Banks (ESCB), which includes the national central banks of all 27 EU member states — not just eurozone countries. The Eurosystem (ECB + 20 eurozone NCBs) is the subset that actually implements monetary policy.
Monetary Policy Tools
Interest Rates
The main instrument. By raising or lowering rates, the ECB makes borrowing more or less expensive, cooling or stimulating the economy.
Open Market Operations
The ECB buys or sells assets to manage liquidity in the banking system and keep short-term rates near its target.
Asset Purchase Programmes (APP/PEPP)
Quantitative easing — buying government and corporate bonds to inject money into the economy and lower long-term yields.
Targeted Long-Term Refinancing (TLTROs)
Long-term cheap loans to commercial banks, conditional on lending to businesses and households.
Reserve Requirements
Banks must hold a minimum percentage of deposits at the ECB. Adjusting this influences credit availability.
Forward Guidance
Communicating future policy intentions to shape market expectations and financial conditions before rates actually change.
Governing Bodies
Governing Council
6 Executive Board members + 19 eurozone national central bank governors
Chief decision-making body. Sets monetary policy for the euro area. Meets every 6 weeks.
Executive Board
President, Vice-President, and 4 other members
Implements monetary policy decisions; manages the ECB's day-to-day operations. Appointed for non-renewable 8-year terms.
General Council
ECB President + Vice-President + all 27 EU national central bank governors
Transitional body; coordinates EU central banks, including non-euro states. Will be dissolved once all EU states adopt the euro.
Supervisory Board
ECB Chair of supervision + 4 ECB representatives + 1 supervisor per participating state
Oversees banking supervision under the Single Supervisory Mechanism (SSM).
Structure
Organisational Chart
Click any node to explore the ECB's governance structure.
European Central Bank — Governance Structure
Click a node to exploreSelect a node to see details
AD5 Exam Tip
What the Exam Tests
- →Primary mandate is price stability (≈2% inflation target) — not growth, not employment.
- →The ECB is independent from political instruction — Art. 130 TFEU.
- →Eurosystem = ECB + 20 eurozone NCBs. ESCB = all 27 EU NCBs.
- →Governing Council meets every 6 weeks to set monetary policy.
- →Banking Supervision (SSM) was added post-financial crisis — a second major ECB function alongside monetary policy.
- →20 eurozone members as of 2024; Bulgaria is the next candidate to join.