ECB vs. Banque de France :: Economy Monetary Europe Papers

ECB vs. Banque de France With the introduction of a single currency for twelve different countries came along the introduction of a new banking system in France and 11 other countries. This system was officially put to work in January of 1999 when the euro became the currency in 11 countries in Europe; Greece became the twelve in June of 2001. At the time of introduction the countries could still use their own currency and the exchange rate between their currency and the euro was set by the new banking system. This system if officially named the European System of Central Banks (ESCB), and it is composed the European Central Bank, in Frankfurt, Germany and the National Central Banks (NCB) of the European Union Member States. All 15 EU members participate but the countries which did not introduce the euro have a special status and may implement their own monetary policy and do not partake in any of the decision making by the ESCB, they basically just observe what is going on. The ECB and the Banque de Fr ance, which is the national bank of France work together, but you may also separate their roles within the ESCB. Even though the ECB has much control in determining the financial status of France, the national bank has ways to fine-tune the economy. In the end the Banque de France is often held back by the ECB, and one of the main reasons is that the ECB is always torn in how to change its regulations and rates because the decision that applies to twelve countries that are never all going to be at exactly the same point economically, financially, or monetarily. As a whole the Eurosystem has four basic tasks that it is responsible to carry through the ECB and the national banks. The first is to define and implement the monetary policy. The second is to conduct foreign exchange operations. The third is to hold and manage the official foreign reserves of the Member States and the fourth is to promote the smooth operation of the payment systems (Organization of the ESCB, 1). These are just the broad goals or duties of the whole Eurosystem. When you break it down into the responsibilities of the ECB and the Banque de France things get more critical. Ultimately the ECB is responsible for defining the single monetary policy and making sure that the Banque de France and the other national banks implement the policies efficiently.