Central Bank

A central bank is a financial institution given privileged control by the Government over the production and distribution of money and credit for a nation. The central bank is usually responsible for the formulation of monetary policy, managing inflation and the regulation of member banks and financial institutions.

Functions of Central Bank:

• Enacts monetary policy, by easing or tightening the money supply and availability of credit thus seeking to keep a nation's economy on an even keel.
• Sets requirements for the banking industry, such as the amount of cash reserves banks must maintain vis-à-vis their deposits.
• Acts as a lender of last resort to troubled financial institutions and even government.