Lesson 12ª


 

 

 

 

 

   

 

Central Bank

a) Functions of the Central Bank

Here is a list of the main functions of the Central Bank:

Implementing the monetary policy

Controlling the nation's entire money supply (State Bank): they carry out the payments and receive the income that corresponds to Public Administration.

Banker's bank: they are in charge of supervising the bank system. They have the custody of of the reserves of commercial banks, moneylenders (when a bank has problems with cash flow), settlement of payments (they are in charge of collections and payments between banks).

Managing the reserves of a country's foreign currency.

Monetary policy: they determine the quantity of money in the system with the aim of trying to control the evolution of the interest rates in the short term.

The Central Bank's last objective is to gain stability in prices and interest rates, which in turn allows a steady growth of production and employment.

b) Balance

The Central Bank has the following assets:

Gold and foreign exchange .

Credits from the commercial banks

Credits from the public sector

Portfolio of fixed income (Public debt): money that they acquire which helps control the system's liquidity.

Fixed assets (buildings, instalations, computing systems, etc).

The Central Bank has the following liabilities:

Monetary liabilities (also called monetary base): made up by the cash in the public's hands and the bank reserves (cash in the hands of the banks and deposits that the Central bank has).

Non monetary liabilities: Funds and deposits from the public sector.