The role of the Bank of Greece
The Bank of Greece is the central bank of the country.
It is an independent authority exercising a public function: it pursues price stability, i.e. control over inflation (the rate of increase in prices) and the stability and smooth operation of the financial system (banks, insurance companies, etc.).
While remaining institutionally and operationally independent, it is subject to democratic control by Parliament.
The Bank of Greece is an integral part of the Eurosystem and, together with the other national central banks of the euro area and the European Central Bank, participates in the formulation of the single monetary policy for the euro area.
The Bank of Greece is not a commercial bank. A citizen cannot deposit money with the Bank or take out a loan from the Bank. In a sense, the Bank of Greece is the banker of banks, i.e. it accepts deposits from and lends to commercial banks operating in the country.
Independence and accountability
The Bank of Greece is independent. According to the Treaty on the Functioning of the European Union and its Statute, the Bank of Greece does not seek or take instructions in the performance of its tasks.
The experience of many countries over many years has shown that the institutional independence of central banks is crucial for their ability to achieve their primary objective of maintaining price stability.
The institutional framework of the Bank of Greece combines the fundamental requirement of independence with a legitimate demand for accountability and scrutiny.
The Bank is accountable to Greek citizens through the Hellenic Parliament.
Tasks of the Bank of Greece
The Bank of Greece is responsible for conducting monetary policy, while in the context of the Single Supervisory Mechanism it is the national supervisor of the Greek financial system.
As part of its tasks, the Bank of Greece:
Contributes to the maintenance of price stability
The Bank of Greece pursues price stability by conducting monetary policy. The Eurosystem’s monetary policy aims for an annual inflation rate of below but close to 2% over the medium term.
In the euro area, monetary policy decisions are taken in a centralised manner by the Governing Council of the European Central Bank (ECB) and are implemented in a decentralised manner by the national central banks.
In this context, the Bank of Greece participates in the formulation of the single monetary policy for the euro area. Its Governor is a member of the Governing Council of the European Central Bank, which decides mainly on interest rates and the terms on which commercial banks can borrow money from central banks. This, in turn, affects the interest rates at which individuals and businesses borrow from commercial banks.
Furthermore, the Bank implements monetary policy decisions in Greece. In particular, it conducts monetary policy operations (main and longer-term refinancing operations) whereby it provides liquidity to domestic credit institutions. It also offers standing facilities to credit institutions, providing and absorbing liquidity through the marginal lending facility and the deposit facility, respectively. Finally, it maintains the reserve accounts held by the banks operating in the country.
Safeguards the stability of the financial system
The financial system consists primarily of credit institutions (or banks, as they are commonly) and insurance companies.
Banking operations are part of our everyday lives. Banks are where people deposit their savings and borrow from. It is also through banks that people receive their wages, pay their bills and obtain cash.
Insurance companies, on the other hand, insure and compensate policyholders for risks to their lives and property.
The Bank of Greece, in cooperation with the relevant European authorities, monitors the banking risks that threaten financial stability, supervises credit institutions and insurance companies operating in the country and is responsible for their resolution, where necessary. It also oversees payment and settlement systems.