Central Bank

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1- Central Bank is the entity responsible for overseeing the

monetary system for a nation.
2- Central banks have a wide range of responsibilities, from
overseeing monetary policy to implementing specific goals such
as currency stability, low inflation and full employment.
3- Central banks also generally issue currency, function as the
bank of the government, regulate the credit system, oversee
commercial banks, and manage exchange reserves and act as a
lender to commercial banks during times of financial crisis .
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4- More specifically, a central bank is a public
institution that manages a state's currency,
money supply, and interest rates.
5- In contrast to a commercial bank, a central
bank possesses a monopoly on printing the
national currency, which usually serves as the
nation's legal tender.
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6- The main function of a central bank is to manage the
nation’s money supply (monetary policy), through active
duties such as managing interest rates, setting the reserve
requirement , and acting as a lender of last resort to the
banking sector during tines of bank insolvency or financial
crisis.
7- Central banks usually also have supervisory powers,
intended to prevent commercial banks and other financial
institutions from reckless or fraudulent behavior.
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8- There are three key goals of modern monetary policy.

• The first goal: is price stability or stability in the value of

money.
• Today this means maintaining a low rate of inflation.
• The second goal: is a stable real economy, often
interpreted as high employment and sustainable economic
growth.
• The third goal: is financial stability. This includes an efficient
and smoothly running payments system and the prevention
of financial crises.
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Functions of central bank

1- Governance arrangements for the monetary policy function:

• One of the most challenging tasks in central bank design is to

organize the governance structure in a manner that permits policy

makers to meet their macroeconomic stabilization objectives

while remaining accountable for their actions.

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2- Delegation of independent authority:

• Monetary policy actions can be politically sensitive. For this

reason, it is now typical to insulate them from political pressure

by assigning them to an independent agency.

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3- Setting objectives:
Price stability is the primary objective in most central
bank legislation enacted over the past decade.
4- Exchange rate regime .
5- Governance arrangements for the financial
stability function .
6- Management of financial system liquidity and
lender of last resort.
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7- Stability of the payment system .

8- Financial stability. .

9- Financial regulation, prudential policy and

prudential supervision.

10- Governance arrangements for other functions

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