Central Bank

Loading the player...

What is a 'Central Bank'

A central bank is an entity responsible for overseeing the monetary system for a nation (or group of nations). Central banks have a wide range of responsibilities, from overseeing monetary policy to implementing specific goals such as currency stability, low inflation and full employment. Central banks also generally issue currency, function as the bank of the government, regulate the credit system, oversee commercial banks, manage exchange reserves and act as a lender of last resort.

BREAKING DOWN 'Central Bank'

The central banking system in the U.S. is known as the Federal Reserve System (commonly known as "the Fed"), which is composed of 12 regional Federal Reserve Banks located in major cities throughout the country. The main tasks of the Federal Reserve are to supervise and regulate banks, implement monetary policy by buying and selling U.S. Treasury bonds and steer interest rates. Janet Yellen currently serves as the chairman of the Board of Governors of the Federal Reserve.

RELATED TERMS
  1. Bank of England - BoE

    The Bank of England is the central bank for the United Kingdom. ...
  2. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  3. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
  4. National Bank

    In the United States, a commercial bank chartered by the comptroller ...
  5. State Bank

    A financial institution that has been chartered by a state to ...
  6. 1913 Federal Reserve Act

    The 1913 U.S. legislation that created the current Federal Reserve ...
Related Articles
  1. Economics

    What Does a Central Bank Do?

    A central bank oversees a nation’s monetary system.
  2. Economics

    Explaining the Federal Reserve System

    The Federal Reserve System is the central bank of the United States. It regulates monetary policy and supervises the nation’s banking system.
  3. Personal Finance

    The Banking System: Federal Reserve System

    ByStephen D. Simpson, CFA The central bank of the United States is the Federal Reserve System. The Federal Reserve System came into being in 1913, after the passage of the Federal Reserve Act ...
  4. Personal Finance

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.
  5. Economics

    Regional Banks Give The Fed A National Perspective

    We all know that the Federal Reserve utilizes monetary policy to control the economy, but what do the 12 regional Federal Reserve Banks do?
  6. Economics

    What Do the Federal Reserve Banks Do?

    These 12 regional banks are involved with four general tasks: formulate monetary policy, supervise financial institutions, facilitate government policy and provide payment services.
  7. Economics

    Can Bitcoin Kill Central Banks?

    Bitcoin is a peer-to-peer unofficial currency that operates without government or central bank oversight. Can Bitcoin kill off the need for central banks?
  8. Economics

    The Federal Reserve: What Is The Fed?

    The Federal Reserve was created by the U.S. Congress in 1913. Before that, the U.S. lacked any formal organization for studying and implementing monetary policy. Consequently markets were often ...
  9. Investing

    Quantitative Easing

    Learn more about this monetary policy employed by central banks.
  10. Professionals

    Monetary Policy

    FINRA Series 6 Exam Study Guide - Monetary Policy. In this section, Monetary policy tools, money supply and interest rates. The role of the federal reserve board in monetary policy.
RELATED FAQS
  1. What is the structure of the U.S. Federal Reserve Bank?

    Wonder how the U.S. Federal Bank began and how it works today? Learn how this complex system is structured and how it works ... Read Answer >>
  2. How do central banks acquire currency reserves and how much are they required to ...

    A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign ... Read Answer >>
  3. Who determines the reserve ratio?

    Understand what the Federal Reserve is and what it regulates in the U.S. economy. Learn about the reserve ratio and how the ... Read Answer >>
  4. Why would the Federal Reserve change the reserve ratio?

    Understand the Federal Reserve's monetary policy and the tools it uses to change that monetary policy. Learn about the reserve ... Read Answer >>
  5. Who decides when to print money in the US?

    Learn who decides to print money in the United States. Many people relate credit creation, which is the Fed's job, with printing ... Read Answer >>
  6. What happens if the Federal Reserve lowers the reserve ratio?

    Learn about the Federal Reserve's monetary policy and the tools it uses to control it. Understand what happens if the Federal ... Read Answer >>
Hot Definitions
  1. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  2. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  3. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center