EuroSystem

The Eurosystem is the monetary authority for the euro area, comprising the European Central Bank (ECB) and the national central banks (NCBs) of the EU member states that have adopted the euro. It is the core component of the European System of Central Banks (ESCB), which also includes the central banks of EU countries that have not yet joined the euro.

The governance and composition of the Eurosystem center on the ECB’s decision-making bodies. The Governing Council, the main policy-making body, consists of the ECB Executive Board and the governors of the euro-area national central banks. The Executive Board handles day-to-day management and policy implementation.

The primary objective of the Eurosystem is price stability in the medium term, interpreted as aiming for inflation below but close to 2%. It conducts monetary policy for the euro area and supports the general economic policies of the European Union. It also manages foreign reserves, contributes to the smooth operation of payment systems, and, on behalf of the Eurosystem, coordinates the issuance of euro banknotes by the national central banks.

Policy instruments include conventional and non-conventional tools: key interest rates (the main refinancing operations rate, the deposit facility rate, and the marginal lending facility rate), open market operations, reserve requirements, and liquidity facilities; asset purchases under the Asset Purchase Program; and various measures to ensure financial market stability. The Eurosystem also works with national authorities on financial stability and, where relevant, supports banking supervision and regulatory frameworks.

Banking supervision in the euro area is primarily conducted under the Single Supervisory Mechanism (SSM), a pillar of the Banking Union that operates in partnership with the ECB and national authorities, while the Eurosystem focuses on monetary policy and financial stability tools.