Central Banks.....

A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a state or formal monetary union, and oversees their commercial banking system.....

 

In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in a financial crisis. Most central banks also have supervisory and regulatory powers to ensure the stability of member institutions, to prevent bank runs, and to discourage reckless or fraudulent behavior by member banks.

Central banks in most developed nations are institutionally independent from political interference. Still, limited control by the executive and legislative bodies exists.
 

Activities of central banks


Functions of a central bank may include:

•     setting an official interest rate – used to manage both inflation and a country's exchange rate – and ensuring that this rate takes effect via a variety of policy mechanisms

•     controlling a state's entire money supply

•     acting as a government's banker and as the bankers' bank ("lender of last resort")

•     managing a country's foreign-exchange and gold reserves and government bonds

•     regulating and supervising the banking industry