The Treaty on European Union (TEU) establishes the primary purpose 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 and not to 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 occurs, however, the Eurosystem is responsible for carrying out the functions entrusted to the ESCB which are:
- To define and implement the single monetary policy.
- To perform foreign currency transactions consistent with the established foreign exchange policy. The ultimate sovereignty over foreign exchange policy lies with governments and therefore, the 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 the foreign exchange policy is compatible with the primary objective of price stability.
- To hold and manage the official foreign currency reserves of Member States, notwithstanding the holding and management of the official working capital in foreign currency on behalf of their governments.
- To promote the proper functioning of the payment systems in the euro area.
- To authorise the issue of banknotes in the euro area.
- To perform specific tasks relating to the prudential supervision of credit institutions in the Member States since October 2013. These tasks are carried out by the Single Supervisory Mechanism, which is composed of the ECB and the NCAs.
- To collect the necessary statistical information to fulfil the tasks conferred on the ESCB.
- To contribute to the macroprudential policies established by the NCAs for credit institutions and to the stability of the financial system.
Finally, to indicate that the ECB must be consulted on Community proposals or national initiatives that fall within the scope of its responsibilities and that the ECB maintains close links with institutions, organisations and forums, both of the EU and internationally, whenever required by the functions assigned to the Eurosystem.