Central Bank

Business, Legal & Accounting Glossary

Definition: Central Bank

Central Bank

Quick Summary of Central Bank

Central bank is a general name given to a nation’s chief monetary authority. Central banks are responsible for a wide range of economic decisions. These may vary from ensuring currency stability, maintaining a low inflationary rate to assisting in full and gainful employment. A number of central banks also issue currency for their specific countries. The commercial entity function as the government’s bank, supervise commercial banks, handle exchange reserves and modulate the credit system. Central banks also perform the crucial role as lender of last resort. Prominent examples of central banks include Reserve Bank of India (RBI) and the United States Federal Reserve System.

Video Guide For Central Bank

What is the dictionary definition of Central Bank?

Dictionary Definition

central bank is a bank that manages the nations’ money supply.

Full Definition of Central Bank

A central bank is fundamentally a chief bank of a given nation. The essential responsibilities of the central bank include issuing and maintaining a stable influx of currency, ensuring optimal employment, and keeping inflation under control. Other tasks of the central bank consist of holding deposits on the reserves of other banks, as well as overseeing lending and exchange practices of commercial lenders. The central bank also plays a vital role in preserving the nation’s emergency funds. In the United States, the Federal Reserve System acts in the capacity of a central bank. In addition, the central bank of the United States, or “the fed”, sustains interest rates through executing the monetary policy and trading U.S. Treasury bonds known as T-bills. The central bank also serves the nation by facilitating business conduct and protecting the public interest.

Monetary Policy

It is defined as a collection of actions of a central bank and any other regulatory committee like currency boards. The monetary policy is concerned with determining the growth rate of the supply of money. The money supply influences interest rates of that country. For example, the monetary policy of the United States is determined by the Federal Reserve.

Lender Of Last Resort

It is an institution that grants loans to other banks and other comparable institutions plagued by monetary difficulties and believed to be near financial collapse. The country’s central bank usually performs the function. The lender of last resort in the United States is the Federal Reserve.

The responsibility of the lender of last resort includes protecting the financial integrity of individuals who have deposited funds in banks. Banks suffering a temporary liquidity crisis also approach the lender of last resort to tide over the period.

Open Market Operations

It is the activity of buying and selling of government securities in the open market. Open market operations are done in order to contract or expand the quantum of money in the banking system. The purchase of securities put in money into the banking system. Selling of securities withdraws the money. Open market operations form one of the major anchors of monetary policy.

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Central Bank. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
January 19, 2022 https://payrollheaven.com/define/central-bank/.
Chicago Manual of Style (CMS):
Central Bank. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
https://payrollheaven.com/define/central-bank/ (accessed: January 19, 2022).
American Psychological Association (APA):
Central Bank. PayrollHeaven.com. Retrieved January 19, 2022
, from PayrollHeaven.com website: https://payrollheaven.com/define/central-bank/

Definition Sources

Definitions for Central Bank are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 22nd November, 2021 | 4 Views.