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.