Central Bank As The Main Link Of The Banking System

The central bank of the country is the main link in the banking system of any state. The creation of the central bank of issue was due to the processes of concentration and centralization of capital, the transition to unified national monetary systems.

In all developed countries, there are several laws in which the tasks and functions of the central bank are formulated and fixed, as well as the instruments and methods for their implementation.

Usually the main legal act regulating the activities of the national bank is the law of the central bank of the country. It establishes the organizational and legal status of the central bank, the procedure for appointing or electing its management staff, the procedure for relations with the state and the national banking system.

Along with the Central Bank Law, interactions between the central bank and credit institutions are regulated by the Banking Law.

To determine the role of the central bank in the economic and political processes in the country, the degree of its independence is very important. Economic independence usually refers to the ability of the central bank to use the instruments at its disposal without significant restrictions. The degree of political independence of the central bank is determined by the level of independence in its relations with government bodies in the choice and implementation of monetary policy.

Central banks are a regulatory link in the banking system, therefore, the main goal of their activities is to strengthen monetary circulation, protect and ensure the stability of the national currency and its exchange rate in relation to foreign currencies; development and strengthening of the country’s banking system, ensuring efficient and uninterrupted settlements.

Traditionally, the central bank has five main tasks – it is designed to be:

1) the emission center of the country, that is, to use the monopoly right to issue banknotes;

2) the body regulating the economy by monetary methods, that is, to carry out monetary and foreign exchange policies;

3) a bank of banks, that is, to carry out transactions not with commercial and industrial clientele, but mainly with banks of a given country: keep their cash reserves, the amount of which is established by law; provide them with loans (lender of last resort), exercise control and supervision;

4) the banker of the government, that is, to support government economic programs and place government securities; provide loans and perform settlement operations for the government, store (official) foreign exchange reserves;

5) the main settlement center of the country, acting as an intermediary between other banks in the country when performing non-cash payments.

As a “bank of banks”, the central bank provides credit institutions with refinancing opportunities. At the same time, according to the law, the central bank has the right to restrict the country’s commercial banks in credit funds. The most common are two types of central bank transactions with credit institutions: buying and selling checks and bills; pledge transactions with securities, bills of exchange, and payment requests.

Keep in your mind that when you make any credit card transaction then always check with the cc checker. To identify the bank identification number(bincodes), check with an online binfinder.

Cryptocurrency All-in-One WordPress Plugin

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.