QS Study

Characteristics of Central Bank

The Central bank is the parent of other banks. Every economic activity is central bank cantered. There are different individual characteristics of this bank those makes it separate than other banks. That’s why Prof. DeKock, “A central bank being generally recognized as a bank which constitutes the apex of the monetary policy and baking structure of its country and which performs as best as it can, in the national economic interest.” For this it has some special types of characteristics which follow:

Single organization: the Central bank is single in every country. No other bank is similar to this types of bank. Hence, no other central bank can be established, so it is a single organization and as single it has no chance to compete with other banks.

Legal Entity: the Central bank is established by the special ordinance of government, so it has the legal entity. It is not established as similar to other banks. And this legal entity gives central bank special dignity.

Symbol of economic sovereignty: “Central” is the symbol of economic sovereignty of the country. This is a unique characteristic of the central bank. It indicates that the economy of a country is regulated and governed by an authority.

Guardian of money Market: This bank has the full control of the money market. Organizing, directing and controlling the money market is the sole duties of the central bank.

Issuance of Note: In a country, this types of banks has the sole right to issue note and money on behalf of the government. No other bank can do this and all central bank in all country has the right to issue the note.

Maintenance of monetary value: This bank works for maintaining the value of money. For this, it ensures the expected supply of money.

Clearing House: Central bank arranges clearinghouse for the purpose of clearing the inter-bank transactions.

Relation with government: Central bank works as an agent of the government. It deposits the fund, supply fund, does different activities in the home and abroad on behalf of the government.

Lender of the last resort: When banks fall into economic crisis central bank works as the lender of the last resort. This bank helps other banks in the crucial moment of fund crisis in the money market.

Implementing economic policies: One of the main tasks of this bank is implementing economic policies. The Central bank works for the purpose of implementing the economic policies taken by the government.

The controller of the scheduled bank: It controls the scheduled bank and works as the parent of those banks. All scheduled banks have to do some mandatory activities given by this bank.

The controller of foreign exchange: It does all kinds of works related to foreign exchange, exchange rate, reserve, maintaining a relationship with other country’s central bank.

According to the above discussion, we can conclude that central bank can be differentiated by the above characteristics.