What is the central bank

Central bank

(also central bank, central bank, Banque d'Emission, central bank) an institution necessary for the currency and credit policy as well as the payment transactions of a state; in the Federal Republic of Germany the Deutsche Bundesbank. (European Central Bank)

Name for the currency and credit institution of a state that has the right (in the majority of states the monopoly) to issue legal tender (banknotes). The central bank also regulates domestic payment transactions, ensures the smooth processing of transactions with foreign currencies and usually handles the state's credit and financial policy in terms of banking. It is often state-owned (Deutsche Bundesbank) or at least under state supervision (Federal Reserve System (FRS)).

The central bank is the central organ for controlling the monetary and credit system of an economy. In addition to governments, central banks are responsible for economic policy and act according to the macroeconomic goals of a state (cf. Magical Square). In countries with a market economy, central banks mainly fulfill four functions:
1. Issue of notes (the central bank is the central bank, it determines the central bank money supply);
2. Refinancing possibility for the credit institutions (and thus the possibility of controlling the creation of money; discount, Lombard);
3. Granting loans to public budgets and processing their payment transactions;
4. Management of currency reserves (mainly foreign exchange for intervention); The central bank also maintains relationships with international currency organizations such as the International Monetary Fund and EMS. The central bank in the Federal Republic of Germany is the Deutsche Bundesbank, in Austria the Austrian National Bank and in Switzerland the Swiss National Bank.

The central bank is the central bank of a state, in the case of the participating countries of the European Monetary Union, from 2002 the central bank of the euro zone (European Central Bank). The German central bank is the Deutsche Bundesbank. The American central bank, the Federal Reserve Bank, is also known. As the sole bank, the central bank is authorized to issue banknotes and therefore has a monopoly on issuing notes. Central banks are also guardians of price and currency stability, for which they have the effective regulatory instrument of interest rate policy (key interest rates), and they are guardians of currency reserves. A central bank is both a bank of the state and a bank of the banks, (Bundesbank)

Bank that is responsible for issuing money and regulating payment transactions within a country (Deutsche Bundesbank. European Central Bank for the euro).

1. Abbr .: ZB. Abbreviation for central bank (ZNB), central bank (NB). In Germany Deutsche Bundesbank (as a member of the ESCB).
2. National Central Banks, ESCB.
3. Central Cooperative Bank.

See central bank

Institution for the implementation of the monetary order desired by the monetary community and for ensuring the functionality of the money and credit markets within the framework set by regulatory policy. The central bank is responsible for the usability of money in legal and economic transactions. Their functions are determined on the one hand by the respective level of development of the monetary system or the degree of monetization of the national economy as well as by the institutional structure of the financial institutions in the respective currency area. Conversely, the central bank policy has a major influence on the (social) information and transaction costs and thus the overall economic development. With the increased issuance of government paper money and banknotes in the past century, as well as the increasing parallel use of this paper money and full-value coins (predominantly based on gold and silver) as means of payment, the various issuing institutions (central banks) experienced increasing sovereign regulation or even monopolization in state hands . The central bank's tasks are in ascending order, depending on the stage of development: a) Settlement or processing of payment transactions between the banks as a central clearing house. b) Centralization of banknote issuance through appropriation of the banknote issuing monopoly and regulation of the circulation of legal tender (central bank). c) Regulation of - the creation of money by all other banks in the currency area, in particular through their obligation to hold minimum reserves in the form of central bank money and to convert the book money they have created into central bank money at the customer's request. This makes it the lender of last resort for all banks, i.e. it controls and determines the liquidity of the banking system. Accordingly, it has to enable the banks to create money and credit through refinancing and to ensure an orderly money market. d) Ensuring the quality and reputation of monetary institutions as well as trust in the existence of the order. Accordingly, it has to use the means of banking supervision (banking authorization, principles of adequate equity capital, solvency, risk provisioning), banking law as well as currency law (financial innovations) and monetary policy to ultimately avoid liquidity crises in the banking system and bank runs as well as escape from an open economy the domestic currency. e) International protection and representation of the currency community as well as coordination and development of international monetary relations as well as international clearing of payment transactions and, depending on the exchange rate system, interventions in the foreign exchange markets as well as maintenance and management of - currency reserves. f) Promotion of the overall system of monetary institutions (including the capital markets and corresponding institutions such as the stock exchanges) in international competition in the sense of a location policy for the monetary community. Predefined or self-imposed goals, the options for choosing and using the instruments, and finally the restrictions to be observed are expressed in central bank policy. Literature: Collins, M. (1993)

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