Central bank

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A central bank (or reserve bank) manages a state's currency, money supply, and interest rates.

Central banks usually oversee the commercial banks of their country. It issues the national currency, the nation's money.[1] It controls the overall supply of money. In contrast to a commercial bank, a central bank can increase or decrease the amount of money in the nation.

The oldest central bank is the Bank of England. The largest banks are now the European Central Bank (ECB) and the Federal Reserve of the United States.[2]

Central banks usually also have supervisory powers. These powers are meant to prevent bank runs, and to stop commercial banks and other financial institutions doing reckless or fraudulent things. The relation between central banks and governments varies from country to country.

The chief executive of a central bank is normally known as the Governor, President or Chairman.

References[change | change source]

  1. Sullivan, Arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Prentice Hall. p. 254. ISBN 0-13-063085-3.
  2. "The structure of the Federal Reserve System". federalreserveeducation.org. Retrieved 1 October 2010.