Central Bank: functions, role, value

The most important link in the banking system and itsmanagement in any country is the central bank. The functions of this institute are diverse and quite interesting, because the issues he is dealing with lie in the most diverse spheres of the economic life of the state. Its main task is to ensure the stability of the national currency within the country and maintain its exchange rate in the foreign market.

In most cases, the financialobeys the state directly. Often formally, the owner of the bank's property is a state body, but usually the shareholders are private individuals. The main functions of the central bank of the country are extremely important and are the same for almost all states:

• First, the Central Bank is the issuer of banknotes operating in the country, that is, roughly speaking, prints money;
• Secondly, it acts as a "bank of banks", serves the needs of commercial financial institutions and monitors the stability of the system as a whole, taking on the preservation of mandatory reserves;
• thirdly, it serves as a conductor of the monetary and credit policy of the state, in connection with which it is engaged in the implementation of a number of actions.

So, this is what in general is doingany central bank. The functions that he performs in connection with the conduct of monetary policy are also noteworthy and interesting, they echo with his relations with commercial banks.

The Central Bank controls inflation and the exchange rate of the national currency, and it does this with the help of three financial instruments:

1. Money supply management. Excessive amount of money reduces demand for them and reduces their cost. As a result, the currency on the foreign market is cheaper, and the rate of inflation is accelerating. A rough tool that seriously affects the processes in a market economy.
2. Management of the basic interest rate and sizerequired reserves. By reducing and increasing these two indicators, the Central Bank also manages the "price" of money and regulates the operation of the banking system, through it affecting supply and demand in the money and commodity markets.
3. Currency interventions. The most commonly used tool, which slightly influences inflation, but helps control the exchange rate of the national currency. Buying or selling a reserve or national currency in open markets, the Central Bank can influence its mass in the economy and, consequently, its price. In addition, he can deal with the purchase and sale of securities issued by the state.

The central bank, whose functions, depending onfrom the country can be already or more widely, of course, is an indispensable organ in the financial and credit system of the state. In addition to conventional banks, it lends to the state, borrowing from domestic loans and selling government bonds issued by the Ministry of Finance or a similar body. The functions of the Central Bank of, and probably also of other countries, do not end there. Most of the Central Bank also collect and publish statistical information on macroeconomic indicators, the establishment of official currency quotations and other additional tasks.

In the economic system of any country it is difficult to findThe body that deals with the same important things as the central bank. The functions that he performs, and the tasks he solves, are so important that without them, perhaps, in a market economy the state simply can not exist.