Functions of a central bank

In nowadays we all know what is a bank and almost anyone has at least one bank account. Any country has a bank and without one, we could not use international money transactions, what is very useful in business and not only business. There are Commercial banks, Community banks, Community development banks, Land development banks, Credit unions or co-operative banks, Private banks, Offshore banks, Savings bank, Ethical banks, Investment banks, Merchant banks, Universal banks and also there are Central banks. This blog is about central bank.

What is a central bank?

A central bank is also known as reserve bank or monetary authority. It is an institution that manages a state's currency, money supply, and interest rates. Usually, Central banks oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in the state, and usually also prints the national currency, which usually serves as the state's legal tender. Reserve banks also act as a "lender of last resort" to the banking sector during times of financial crisis. Most central banks also have regulatory and supervisory powers to ensure the solvency of member institutions, prevent bank runs, and prevent reckless or fraudulent behaviour by member banks.

Functions of a central bank:

• implementing monetary policies;
• setting the official interest rate and ensuring that this rate takes effect via a variety of policy mechanisms;
• controlling the nation's entire money supply;
• the Government's banker and the bankers' bank ;
• managing the country's foreign exchange and gold reserves and the Government's stock register;
• regulating and supervising the banking industry;