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A central bank, reserve bank, or monetary authority is the entity responsible for the monetary policy of a country or of a group of member states. Its primary responsibility is to maintain the stability of the national currency and money supply, but more active duties include controlling subsidized-loan interest rates, and acting as a lender of last resort to the banking sector during times of financial crisis (private banks often being integral to the national financial system). It may also have supervisory powers, to ensure that banks and other financial institutions do not behave recklessly or fraudulently.
Most richer countries today have an "independent" central bank, that is, one which operates under rules designed to prevent political interference. Examples include the European Central Bank (ECB) and the U.S. Federal Reserve. Some central banks are publicly owned, and others are privately owned. In practice, there is little difference between public and private ownership, since in the latter case almost all profits of the bank are paid to the government either as a tax or a transfer to the government.
Activities and responsibilities
- implementing monetary policy
- controlling the nation's entire money supply
- the Government's banker and the bankers' bank ("lender of last resort")
- managing the country's foreign exchange and gold reserves and the Government's stock register
- regulating and supervising the banking industry
- setting the official interest rate – used to manage both inflation and the country's exchange rate – and ensuring that this rate takes effect via a variety of policy mechanisms
Monetary policy
In many countries, the central bank may use another country's currency either directly (in a currency union), or indirectly, by using a currency board. In the latter case, local currency is directly backed by the central bank's holdings of a foreign currency in a fixed-ratio; this mechanism is used, notably, in Hong Kong and Estonia.


























