Central Banks, Stock Exchange and Commercial Banks
CENTRAL BANKS, STOCK EXCHANGE AND COMMERCIAL BANKS
CENTRAL BANKS
A central bank is the main national bank that provides a government and its commercial banking system with financial and banking services controlling the government’s monetary policy and issuing currency.
Functions of a central bank include:
• It has the sole right to issue currency – it maintains uniformity in the currency and manages it accordingly using knowledge about the economy
• It is a banker, advisor and agent to the government – it controls the finances of both state and national governments (such as managing interest, loans, cheques, debts, trade and general finances), and so is the governments banker. The central bank also acts as the governments financial advisor, giving advice on financial and fiscal matters
• It is the banker’s bank – it provides all money to commercial banks in the country, and is the custodian of cash reserves for them, therefore it is the “lender of the last resort”
• It regulates the monetary policy – by increasing or decreasing the supply of money to change interest rates to increase/decrease consumer spending
• It manages the national gold and foreign currency reserves – these are used to make payments to other countries (for national debts, agreements etc.) and regulate the value of its national currency
COMMERCIAL BANKS
A commercial bank provides financial services (e.g. savings, loans, investments etc.) for individuals and businesses, often at a small fee.
Functions of commercial banks include:
• Accepting money for consumer saving
• Assisting consumers with payments and stock trading
• Providing personal and commercial loans
• Operating pension funds
• Providing insurance
• Storing valuables (safe deposit box)
• Providing financial and tax advice
• Providing overdrafts (when the bank extends credit after all the money in an account has been withdrawn)
• Providing cheque services
• Providing credit and debit cards
Other types of consumer
CENTRAL BANKS
A central bank is the main national bank that provides a government and its commercial banking system with financial and banking services controlling the government’s monetary policy and issuing currency.
Functions of a central bank include:
• It has the sole right to issue currency – it maintains uniformity in the currency and manages it accordingly using knowledge about the economy
• It is a banker, advisor and agent to the government – it controls the finances of both state and national governments (such as managing interest, loans, cheques, debts, trade and general finances), and so is the governments banker. The central bank also acts as the governments financial advisor, giving advice on financial and fiscal matters
• It is the banker’s bank – it provides all money to commercial banks in the country, and is the custodian of cash reserves for them, therefore it is the “lender of the last resort”
• It regulates the monetary policy – by increasing or decreasing the supply of money to change interest rates to increase/decrease consumer spending
• It manages the national gold and foreign currency reserves – these are used to make payments to other countries (for national debts, agreements etc.) and regulate the value of its national currency
COMMERCIAL BANKS
A commercial bank provides financial services (e.g. savings, loans, investments etc.) for individuals and businesses, often at a small fee.
Functions of commercial banks include:
• Accepting money for consumer saving
• Assisting consumers with payments and stock trading
• Providing personal and commercial loans
• Operating pension funds
• Providing insurance
• Storing valuables (safe deposit box)
• Providing financial and tax advice
• Providing overdrafts (when the bank extends credit after all the money in an account has been withdrawn)
• Providing cheque services
• Providing credit and debit cards
Other types of consumer