THE ECONOMICS OF MONEY,BANKING, AND FINANCIAL MARKETS 427

CHAPTER 15 Central Banks and the Bank of Canada 395 a similar role to that of the Federal Reserve Banks The European Central Bank and the national central banks of the countries that have adopted the euro are referred to as the Eurosystem (note that Slovenia adopted the euro on January 1, 2007, Cyprus and Malta in January 1, 2008, and Slovakia on January 1, 2009) The Eurosystem excludes the central banks of the European Union countries that have not yet adopted the euro The Eurosystem should not be confused with the European System of Central Banks, the term used to refer to the European Central Bank and the national central banks of all twenty-seven European Union (EU) member countries when all EU member countries adopt the euro, the Eurosystem and the European System of Central Banks will become one entity The European Central Bank, which is housed in Frankfurt, Germany, has an Executive Board that is similar in structure to the Board of Governors of the Federal Reserve; it is made up of the president, the vice president, and four other members, who are appointed to eight-year, nonrenewable terms The Governing Council, which comprises the Executive Board and the presidents of the National Central Banks, is similar to the FOMC and makes the decisions on monetary policy While the presidents of the National Central Banks are appointed by their countries respective governments, the members of the Executive Board are appointed by a committee consisting of the heads of state of all the countries that are part of the European Monetary Union DIFFERENCES BETWEEN THE EUROPEAN SYSTEM OF CENTRAL BANKS AND THE FEDERAL RESERVE SYSTEM In the popular press, the European System of Central Banks is usually referred to as the European Central Bank (ECB), even though it would be more accurate to refer to it as the Eurosystem, just as it would be more accurate to refer to the Federal Reserve System rather than the Fed Although the structure of the Eurosystem is similar to that of the Federal Reserve System, some important differences distinguish the two First, the budgets of the Federal Reserve Banks are controlled by the Board of Governors, while the National Central Banks control their own budgets and the budget of the ECB in Frankfurt The ECB in the Eurosystem therefore has less power than does the Board of Governors in the Federal Reserve System Second, the monetary operations of the Eurosystem are conducted by all the National Central Banks in each country, so monetary operations are not centralized as they are in the Federal Reserve System Third, in contrast to the Federal Reserve, the ECB is not involved in supervision and regulation of financial institutions; these tasks are left to the individual countries in the European Monetary Union Just as there is a focus on meetings of the FOMC in the United States, there is a similar focus in Europe on meetings of the Governing Council, which meets monthly at the ECB in Frankfurt to make decisions on monetary policy Currently, fifteen countries are members of the European Monetary Union, and the head of each of the fifteen National Central Banks has one vote in the Governing Council; each of the six Executive Board members has one vote In contrast to FOMC meetings, which staff from both the Board of Governors and individual Federal Reserve Banks attend, only the twenty-one members of the Governing Council attend the meetings with no staff present The Governing Council has decided that although its members have the legal right to vote, no formal vote is actually taken; instead the Council operates by consensus One reason the Governing Council has decided not to take votes is because of worries that the casting of individual votes might lead to heads of National Central Banks supporting a monetary policy that would be appropriate GOVERNING COUNCIL