Many people are curious about what is central bank is. Generally, this type of bank is always there in every country. Because indeed the central bank becomes the main bank that oversees to ensure the optimal running of a country’s banking. So that later it can support the vision and mission of the government in terms of banking and the economy of a more sustainable country.
However, there are quite a lot of people who don’t understand this. Many do not know what a central bank is and what a task mechanism this kind of bank is. So, of course, it would be better if the information related to this is available in full. Therefore, to help provide such information, the following is an explanation of the central bank in general.
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About Central Bank
Related to what is central bank, etymologically, this bank is a bank that helps support the government of a country in terms of banking as well as the economy. Where the central bank is the main bank of a country that can issue policies to various other banks in the country.
Generally, this central bank is under the direct supervision of the government of a country. In addition, this bank can be said to be a government-owned bank that is run following the laws and regulations applicable to the country.
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As a state bank with many roles, of course, the existence of the bank is quite important. Therefore, generally, a country sets a central bank very carefully. So that later it can support the running of banking in the country.
Moreover, generally, the role of the central bank in the country’s economy is also quite important. So it is necessary to ensure that the bank’s operations are following the decisions that have been mutually agreed by the relevant government.
Central Bank Responsibilities
Being a very important bank institution in a country, of course, some many important tasks and responsibilities must be done by the central bank. Each of these tasks will be based on the policies set by the government and serve to ensure the optimal running of domestic banking operations. Some of the responsibilities and duties of this central bank include the following.
• Establishing Monetary Policy
As the main bank in a country, of course, the central bank must set a wide range of policies that are important to the economy and banking of a country.
Therefore, generally, the central bank monitors the condition of banks in the country and sets policies related to issues that occur. So that private banking and commercial banking operations will run following the provisions requested by the government. This is usually will be done through all the regulations and policy that raised from the central bank to another bank in the country.
• Monitoring Various Bank and Financial Institution
The central bank is also tasked to monitor and see the development and operations of private banks and commercial banks in the country. Thus the central bank will ensure the health of the bank’s financial condition in general.
• Central Bank Will Responsible for Money Supply
Of course, the central bank is a bank that is responsible for the cash supply and its turnover. Therefore, central banks generally have the authority to print some money to be distributed to other banks under its supervision. Thus, the money supply will be maintained optimally according to the government’s calculation and analysis scheme specifically.
Central Bank Services
Central banks generally also have several services aimed at the government of the country in which the bank is located. As previously explained that the majority of the duties and responsibilities of central banks relate to the government of the country. Therefore, the services provided are also typically serving the government. Some of these services are as follows.
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• Generally, the central bank serves the provision of credit, especially to banks that are under its supervision. In addition, the central bank also provides credit services to the government related to the development of existing infrastructure within the country.
• The central bank also reserves the right to provide foreign currency exchange services to banks under its supervision. Thus, all transactions in the form of foreign currency will be converted following the amount of rate given by the central bank specifically following the international rate.
• The services of the central bank also include a service to issue a guarantee letter to the bank under its supervision. The guarantee will help support the bank in question in carrying out banking activities and other important economic activities. Therefore, the central bank always conducts supervision of the financial statements of every bank in the country. Because this is generally related to the warrant issued as needed.
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However, there are quite a lot of people who don’t understand this. Many do not know what a central bank is and what a task mechanism this kind of bank is. So, of course, it would be better if the information related to this is available in full. Therefore, to help provide such information, the following is an explanation of the central bank in general.
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