Since 1 January 1999, foreign exchange policy has been the responsibility of the European Council and the Eurosystem, which implements the foreign exchange policy, carries out foreign exchange transactions and holds and manages the official currency reserves of Member States. Countries participating in the Economic and Monetary Union (EMU) can hold working capital in foreign currencies, in line with the provisions of the Treaty on European Union (TEU).
As the authority responsible for applying the foreign exchange policy, the Eurosystem can:
- Hold and manage all types of assets in foreign currency, units of account and precious metals.
- Conduct all types of banking transactions with national or foreign institutions or with international organisations, including borrowing and lending operations.
It manages the foreign reserve portfolio, which guarantees the European Central Bank (ECB) enough liquidity for its foreign exchange operations, is conducted in a decentralised way through participating national central banks which act on behalf of the ECB according to its instructions.