A central bank, reserve bank, or monetary authority is a public institution that manages a state's currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the nation's monetary base, and usually also prints the national currency, which usually serves as the nation's legal tender. Examples include the European Central Bank (ECB), the Federal Reserve of the United States, and the People's Bank of China.
The primary function of a central bank is to manage the nation's money supply (monetary policy), through active duties such as managing interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis. Central banks usually also have supervisory powers, intended to prevent bank runs and to reduce the risk that commercial banks and other financial institutions engage in reckless or fraudulent behavior. Central banks in most developed nations are institutionally designed to be independent from political interference.
Famous quotes containing the words central and/or bank:
Are the meditations of a central mind.
I hear the motions of the spirit and the sound
Of what is secret becomes, for me, a voice
That is my own voice speaking in my ear.”
—Wallace Stevens (18791955)
“Life is a long Dardenelles, My Dear Madam, the shores whereof are bright with flowers, which we want to pluck, but the bank is too high; & so we float on & on, hoping to come to a landing-place at lastbut swoop! we launch into the great sea! Yet the geographers say, even then we must not despair, because across the great sea, however desolate & vacant it may look, lie all Persia & the delicious lands roundabout Damascus.”
—Herman Melville (18191891)