The Main Functions Of The Central Bank

998 WordsDec 8, 20154 Pages
Central bank is a government created institution which has a very powerful impact by its behaviour on the economy of a country, this includes financial firms as it uses economic tools like credit policies and restriction and supply of money. The central bank of a country would have more impact on the day to day activities of financial services providers, including revenue and cost than any other institution in an economy. The primary function of the central bank is to make changes according to the situation in the market, this would involve supply and cost of money and credit to the financial system, which would directly or indirectly contribute to the nation’s growth and goal. (CHAPTER 2 THE IMPACT OF GOVERNMENT POLICY AND REGULAITON OPN THE FINANCIAL SERVICE INDUSTRY) The main functions of the central bank are that it controls the issue of legal tender and it has monopoly over it, thus in a way also has the control over the supply of money in the economy. As the central bank is the banker’s bank it has control over both the banking and the non-banking financial institutions. It is the government’s bank and performs traditional banking operations, lending and deposit taking for the government it has enough capacity to manage and administer the country’s national test. The central bank acts as the mediator and regulation with regard to the foreign exchange and gold reserve. The central bank plays a very important role in order to maintain and stabilize the price level and
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