European System of Central Banks, ESCB
The European System of Central Banks (ESCB) comprises the European Central Bank (ECB), which is located in Frankfurt, and the national central banks of all EU Member States.
The ECB and the national central banks of the Member States that have adopted the euro are jointly referred to as the Eurosystem. At present, eighteen national central banks are included.
See also Other EU cooperation.
Activities within the ESCB and the Eurosystem are regulated by the Treaty on the European Union and a special charter appended to the Treaty. The most far-reaching provisions of the charter apply to the central banks in the Eurosystem, which have the euro as a single currency and conduct a single monetary policy, hold a joint foreign reserve, are responsible for supplying cash in the single currency, and so on. Decisions in these fields are made at a central level, while the execution of the decisions is largely decentralised to the national central banks within the Eurosystem.
The main objective of the central banks in the ESCB is to maintain price stability. Without prejudice to this primary objective, the ESCB shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community (see Other EU cooperation).
Central banks that are members of the ESCB but not of the Eurosystem - which include the Riksbank - retain responsibility for conducting an independent national monetary policy and other national tasks. For these countries, participation in the ESCB entails cooperation that will facilitate entry into the Eurosystem as and when this becomes appropriate. One of the aims of participation in the ESCB is to facilitate entry into the Eurosystem if and when such a decision is taken. It also enables the Riksbank to exert influence on issues that are important to Sweden and to share and exchange knowledge and experience.
The ESCB was established on 1 June 1998, while the Eurosystem launched its activities on 1 January 1999 with the start of the third stage of the Economic and Monetary Union of the EU, which is to say when the monetary union was established and the euro was introduced as the single currency in eleven Member States. Preparations for these activities had been made by all national central banks of the EU states of the time, under the framework of the European Monetary Institute (EMI).
The Governing Council
The Governing Council is the highest decision-making body in the Eurosystem and the ESCB. Its members are the governors of the national central banks of the euro area and the members of the ECB's Executive Board. The Governing Council normally meets twice a month and monetary policy decisions are made at every second meeting. As Sweden has not adopted the euro, the Governor of the Riksbank is not a member of this Council. When the Governing Council takes a decision that concerns the entire ESCB, the members of the General Council (see below) can submit their views in advance.
The Executive Board
The ECB Executive Board has six members who are appointed by the Heads of State or Government in the euro area. Mario Draghi is President of the Executive Board, as well as the Governing Council and General Council. The Executive Board's main tasks are taking responsibility for managing the ECB's day-to-day business and ensuring that the decisions of the Governing Council are implemented.
The General Council
The General Council of the ECB consists of the governors of all national central banks of the EU Member States and the President and Vice President of the ECB. The Governor of the Riksbank is thus a member of the General Council. The Council usually meets four times a year. Its most important tasks are to prepare for the entry of new countries into the Eurosystem and to monitor and analyse the economies of the EU countries that have not adopted the euro. Among its other tasks, the Council adopts the convergence reports in which the ECB assesses the compliance of these countries with the economic convergence criteria and the extent to which their national legislation is compatible with the Treaty and the ESCB Statute. Convergence reports are prepared every second year or when a country applies for membership of the Eurosystem.
The Governing Council has formed sixteen committees with a large number of working groups for different parts of the operations within the ESCB. The national central banks have representatives in these groups, which mostly meet to provide the Governing Council with advice on issues affecting the Eurosystem. When such issues fall under the area of responsibility of the General Council, all central banks in the EU participate, including the Riksbank. The Riksbank is represented by members of the Executive Board in the International Relations Committee and the Banking Supervision Committee, and, all in all, the Riksbank participates in about 50 committees or groups in the ESCB.
Priority issues for the Riksbank
An effective regulatory framework
The joint regulations for central banks should be effective from an overall perspective, regardless of whether they apply to the Riksbank in its current situation or as a future member of the Eurosystem.
Financial crisis management
Parallel to the work being undertaken in various EU committees, the central banks should develop the effective coordination of measures for the management of financial crises.
Monitoring financial systemic risks
The Riksbank attaches great importance to the work of the EU's newly-started European Systemic Risk Board (ESRB). Governor Stefan Ingves is chairman of the Advisory Technical Committee (ATC), which handles most of these issues ahead of decisions by the board.
The division of responsibility in the ESCB
The division of responsibility specified in the ESCB Statute should be applied so that central banks in countries that have not adopted the euro can exercise influence on decisions affecting them.
True and fair assessment of Sweden
The ECB's assessment of the Swedish economy and conditions in Sweden as a whole shall be true and fair. The ECB's assessment of fulfilment of the convergence criteria with regard to participation in the Eurosystem should entail the same treatment as countries that have already joined; assessments of the exchange rate criterion and the legislation on the Riksbank are central aspects of the convergence assessment as regards Sweden.