Central Bank

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.

Read more about Central Bank:  History, Activities and Responsibilities, Goals of Monetary Policy, Policy Instruments, Banking Supervision and Other Activities, Independence

Famous quotes containing the words central and/or bank:

    The fantasies inspired by TB in the last century, by cancer now, are responses to a disease thought to be intractable and capricious—that is, a disease not understood—in an era in which medicine’s central premise is that all diseases can be cured.
    Susan Sontag (b. 1933)

    It was like passing a boundary to dive
    Into the sun-filled water, brightly leafed
    And limbed and lighted out from bank to bank.
    That’s how the stars shine during the day.
    Wallace Stevens (1879–1955)