ECB And Its Role In Financial Crisis

ECB and its role in financial crisis.

ECB's third decision-making body is the General Council, it contributes to the advisory and coordination work and helps prepare for new countries joining the euro zone. The General Council will exist as long as there are EU Member States which have not adopted the euro as their single currency. The General Council comprises the ECB President, Vice-President and the 28 EU member states' national central banks. In other words, the General Council includes 19 euro zone countries and 9 non-euro area countries. Other members of the Executive Board of the ECB, the EU Council chairman and the one Commissioner may participate in the General Council meetings, but without the right to vote.

The fourth body is the Supervisory Board. The Supervisory Board meetings are held twice a month. They discussed, planned and carried out maintenance tasks of the ECB. The Supervisory Board in accordance with the procedure of acquiescence submits draft decisions to the Governing Board. The Board consists of: Chairman (appointed for a five-year term), Vice-President (elected from the ECB executive board members), four representatives of the ECB, national supervisory authorities.

The ECB is independent, but it does not mean that it is not responsible. The aim is to increase the ECB's responsibility in order to ensure the ECB's activities clarity and accountability. This means that information about the ECB's objectives and instruments must be available to the public.

The law provides that the ECB and the national central banks' accounts are scrutinized by independent auditors. It is also provided that the ECB is preparing weekly, quarterly and annual reports. The annual financial report must be verified by an independent auditor, along with auditor's opinion, report shall be submitted to the Management Board, which must approve it.

According that the Eurosystem is functionally independent, the ECB and the national central banks disposal all instruments and competencies necessary for the effective monetary policy and can independently decide how and when to use them. The Eurosystem may not be provided loans to Community bodies or national public sector entities, and this further enhances its independence by protecting it from any influence on the authorities. In addition, the ECB's Governing Council has the right to adopt binding regulations to implement the tasks of the ESCB and in certain other cases, as laid down in specific acts of the EU Council.

Eurozone crisis - this is a crisis that has affected the euro-zone since 2009. The crisis consisted of the public debt crisis, the banking crisis and the growth and competitiveness crisis. In 1992, EU Member States have signed the Maastricht Treaty, under which they undertook to limit their budget deficits and debt levels. However, in early 2009, a number of EU Member States have failed to stay within defined limits and started to issue securities based on future government revenue, hoping to reduce their debts and deficits. This has allowed Member States conceal their deficit and debt levels using of certain techniques. In late 2009 due to rising private and public sector debt levels around the world, investors began to fear because of public debt crisis. At that time, also appeared a crisis of confidence.