Question

what is the role of the European central bank and European financial institutions in improving the financial markets? ( name of cites required)

Answer 1

Answer of the above question is given below.

A central bank is a financial institution given privileged control over the production and distribution of money and credit for a nation or a group of nations. In modern economies, the central bank is usually responsible for the formulation of monetary policy and the regulation of member banks.

Central banks are inherently non-market-based or even anti-competitive institutions. Although some are nationalized, many central banks are not government agencies, and so are often touted as being politically independent. However, even if a central bank is not legally owned by the government, its privileges are established and protected by law.

Role of European Central Bank

The ECB works with the national central banks of all EU countries. Together they form the European System of Central Banks.

It leads cooperation between central banks in the eurozone. This is referred to as the Eurosystem.

The work of the governing bodies

• Governing Council – assesses economic and monetary developments, defines eurozone monetary policy and fixes the interest rates at which commercial banks can borrow from the ECB.

• Executive Board – implements monetary policy, manages day-to-day operations, prepares Governing Council meetings and exercises powers delegated to it by the Governing Council.

• General Council – contributes to advisory and coordination work and helps to prepare for new countries joining the euro.

Backgrounder

The Role of the European Central Bank

As Europe has weathered a succession of economic crises, the European Central Bank has responded with an aggressive set of monetary policies that have redefined the bank’s original mandate.

Workers repair the euro sign in front of the European Central Bank headquarters in Germany. (Kai Pfaffenbach/Reuters)

WRITTEN BY

James McBride, Andrew Chatzky, and Christopher Alessi

UPDATED

Last updated October 3, 2019

    

The European Central Bank (ECB) is the central bank for the eurozone, the group of nineteen countries who use the euro common currency. Its mandate is to maintain price stability by setting key interest rates and controlling the union’s money supply.

After the emergence of the eurozone’s sovereign debt crises between 2009 and 2011, the ECB sparked controversy by undertaking a range of unorthodox monetary policies—including a program of unlimited bond buying, the use of negative interest rates, and a $3 trillion quantitative easing plan—that divided policymakers between those who thought the bank overstepped its authority and those who argued for it to take more aggressive action. Meanwhile, the ECB has been placed at the center of an initiative to create a eurozone-wide banking union that would grant the bank new powers of supervision over Europe’s largest financial institutions.