Central bank

A central bank is a bank responsible for the monetary policy of a country. This usually entails the control of commercial banks, a monopoly on the issue of banknotes and other privileges.

"Given that money is one half of every commercial transaction and that whole civilizations literally rise and fall on the quality of their money, we are talking about an awesome power, one that flies under cover of night."
Ron Paul, End the Fed, on the powers of a central bank

Legal status

Central banks can be nominally owned by private individuals or banks, but are run or influenced by national governments, that create them in the first place. Typically, they have a monopoly on the issue of legal tender, in the form of banknotes and coins.

In the late nineteenth century, the principle became accepted that the central bank must act as the "lender of last resort", freely lending money to banks threatened with failure. Another device is "deposit insurance", where the government guar­antees to redeem the banks’ demand li­abilities. These and similar devices remove the market brakes on rampant credit expansion.

Forms of central banks

Most countries have a central bank in one form or another (for example, Panama does not).

Notable central banks

• Federal Reserve System
• Bank of England
• European Central Bank

External links

• Central banks on Wikipedia
• Bank Rates and links