a) Functions of the
Here is a list of the main functions of the
Implementing the monetary policy
the nation's entire money supply (State Bank): they carry
out the payments and receive the income that corresponds to
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).
reserves of a country's foreign currency.
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.
The Central Bank has the following assets:
Gold and foreign exchange .
the commercial banks
the public sector
fixed income (Public debt): money that they acquire which
helps control the system's liquidity.
(buildings, instalations, computing systems, etc).
The Central Bank has the following 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).
liabilities: Funds and deposits from the public sector.