Central Banks Of Different Countries

What Is a Central Bank?

Central Banks are the main or most important banks of any country. These are the biggest financial institutions in a country. A Central Bank is a government-run entity that maintains a country’s or a set of nations’ currency and regulates the money supply or the quantity of money in circulation. Price stability is a primary goal of many Central Banks. Central Banks are also obligated by law to encourage full employment in certain nations.

Setting interest rates – the “cost of money” – as part of monetary policy is one of the most important instruments available to any Central Bank. A Central Bank is not the same thing as a commercial bank. A person cannot establish an account or request a loan from a Central Bank. Also, it is not driven by profit as a public institution.

It serves as a bank for commercial banks, influencing the flow of money and credit in the economy to maintain price stability. Commercial banks may generally borrow money from the Central Bank for extremely short periods.  To borrow money from the Central Bank, they must first provide collateral, a valuable asset such as a government bond or a business bond that serves as an assurance that they will return the money.

An Overview: Commercial Banks 

Commercial banks may encounter “liquidity” issues if they lend long-term versus short-term deposits. Liquidity concerns occur when a bank has enough money to settle a loan but not the capacity to transform it into cash fast. A Central Bank may act as a “lender of last resort” in this situation. This contributes to the financial system’s stability. Aside from monetary policy, Central Banks may have a broad variety of responsibilities. For example, they are responsible for issuing banknotes and coins, ensuring the seamless operation of payment systems for banks and traded financial products, managing foreign reserves, and educating the public about the economy.  Many Central Banks also assist in financial system stability by overseeing commercial banks to ensure that they are not taking excessive risks.

History 

First, the Central Banking system was started in the 17th century. The Bank of Great Britain (England) and the Swedish Riksbank were the first modern Central Banks, dating back to the 17th century. The Bank of England initially recognized the position of lender of last resort.  Other early Central Banks, such as Napoleon’s Bank of France and Germany’s Reichsbank, were created to fund costly government war activities.

The Central Bank Of India

The Reserve Bank of India, also known as RBI, is India’s Central Bank.  The Reserve Bank of India was established in response to the Hilton Young Commission’s recommendations. The Reserve Bank of India Act, 1934 establishes the legal framework for the Bank’s activities, which began on April 1, 1935.

The Bank was established to regulate the issuance of banknotes, preserve reserves to ensure monetary stability, and administer the country’s credit and currency system to its benefit.

The Bank commenced the functioning by undertaking the tasks initially done by the Imperial Bank of India, namely the administration of Government accounts and public debt, from the Government and Controller of Currency. The current currency offices in Cawnpore (Kanpur), Lahore, Karachi, Madras, Rangoon, Bombay and Calcutta were converted into Issue Department branches. The banking department commenced its operations from offices in Delhi, Rangoon, Madras, Bombay and Calcutta. 

An intriguing aspect of the Reserve Bank of India was that from its formation, the bank was seen as performing a distinctive role in the context of development, particularly agriculture. When India began its plan endeavours, the Reserve Bank’s development role came into prominence, particularly in the 1960s, when the Reserve Bank pioneered the notion and practice of leveraging money to catalyse development. 

With liberalisation, the Bank’s attention has switched back to basic Central Banking tasks such as Monetary Policy, Bank Supervision and Regulation, Payments System Oversight, and financial market development.

Central Banks Of Different Countries

Every country or area has a central organisation in charge of overseeing its economic and financial policies and ensuring the financial system’s stability. These institutions, unlike financial firms, are not market-based and are not competitive. Every country has its Central Banks and here are some following famous Central Bank names of different countries:

The Federal Reserve System of the United States

The Federal Reserve is the United States’ Central Bank. It is most likely the world’s most powerful Central Bank. With the US dollar accounting for over 90% of all currency transactions worldwide, the Fed’s influence has a far-reaching impact on the worth of several currencies.

The European Central Bank (ECB) 

At the end of the 19th century, the European Central Bank (ECB) was founded. The ECB’s central committee is the committee that makes monetary policy decisions. The council is composed of six members of the ECB’s executive board and the governors of all 19 euro nations’ Central Banks.

The Bank of England (BOE)

The Bank of England (BOE) is a Central Bank which is a publicly owned institution, which means it is accountable to the British population via parliament. It was founded in 1694 and is widely regarded as one of the biggest and most successful Central Banks. Its purpose is to keep its macroeconomic and fiscal systems stable.

National Bank of Switzerland (SNB)

The Swiss National Bank is autonomous in charge of the country’s monetary policy. Its primary purpose is to preserve price stability while monitoring its economic situation. There are two offices: one of these in Berne and another in Zurich. Several other Central Banks are present, which are huge as the Central Banks mentioned above and all those Central Banks of different countries do the same work as mentioned above.

Conclusion

The Central Bank is the biggest and the most important financial institution for any country. It watches the regulations related to finance, controls the circulation of money/currency in the country, and keeps an eye on private financial institutes so they cannot commit fraud and vice versa.