The Treaty on European Union (TEU) establishes the primary objective of the European System of Central Banks (ESCB) as maintaining price stability and supporting the general economic policies in the Community.
The TEU refers to the ESCB, rather than the Eurosystem, because its drafting was based on the assumption that all Member States of the European Union (EU) would adopt the euro. Until this happens, however, the Eurosystem is responsible for carrying out the following functions entrusted to the ESCB:
- Defining and implementing the single monetary policy
- Conducting foreign-exchange operations consistent with the established foreign exchange policy .Ultimate sovereignty in foreign exchange policy lies with governments. Therefore, definition of the guidelines for foreign exchange policy and the possible formulation of specific agreements in this area are the responsibility of the European Council. Nevertheless, the European Central Bank (ECB) must be consulted on these issues, to ensure that foreign exchange policy is compatible with the primary objective of price stability.
- Holding and managing the official foreign reserves of Member States
- notwithstanding the holding and management of the official working capital in foreign currency on behalf of their governments.
- Promoting the smooth operation of payment systems in the euro area.
- Authorising the issue of euro banknotes.
- Performing specific tasks relating to the prudential supervision of credit institutions in the Member States, since October 2013. These tasks are carried out through the Single Supervisory Mechanism, which is composed of the ECB and the national competent authorities.
- Compiling the necessary statistical information to fulfil the tasks conferred on the ESCB conferred on the ESCB.
- Contributing to the macroprudential policies established by the national competent authorities for credit institutions and to the stability of the financial system.
Lastly, the ECB must be consulted on Community proposals or national initiatives that fall within the scope of its mandate. The ECB maintains close links with both EU and international institutions, organisations and fora, whenever required by the functions assigned to the Eurosystem.