MARY JANE D.

LUNA

BSBA-FM / 4TH YEAR SET A

TUE-FRI / 6:30-8:00 PM

Assignment

1. What are the 5 features of central banks?

1. Banker's Bank: The central bank is the apex bank and all other banks in the country
are its members. They keep their cash reserves with the central bank.
2. Banker to the Government: It manages the government's account, raises money
through bonds, and advises the government on economic and financial issues.
3. Controller of Money Supply and Credit: It uses various methods like open market
operations, changing reserve ratios, and adjusting interest rates to control the money
supply in the economy.
4. Custodian of Country's Foreign Currency Reserves: The central bank holds and
manages the country's reserves of international currency. It also plays a significant role
in maintaining the value of the domestic currency in foreign exchange markets.
5. Lender of Last Resort: In times of financial crisis, the central bank lends money to
commercial banks as the lender of last resort.
2. What are the 6 roles of central banks?
1. Monetary Policy: Central banks implement and control the monetary policy of a
country. They regulate the money supply in the economy using various tools, such as
adjusting interest rates, to control inflation and stabilize the economy.
2. Financial Stability: Central banks work to maintain the stability of the country's
financial system. They monitor and regulate banks and other financial institutions to
prevent any financial crises.
3. Managing Exchange Rates: They play a major role in managing the country's foreign
exchange rates. They intervene in the foreign exchange market to prevent drastic
fluctuations in the exchange rate.
4. Government's Bank: They act as the bank for the government, managing its accounts,
facilitating its transactions, and helping it raise funds.
5. Lender of Last Resort: In times of financial crisis, central banks provide funds to
financial institutions to prevent the collapse of the financial system.
6. Regulator of the Banking System: They supervise and regulate the banking system to
ensure its smooth functioning and to maintain public confidence in the system.
3. What is central monetary authority?
The central monetary authority, often known as the central bank, is an institution that
manages a state's currency, money supply, and interest rates. It's essentially the body
 that oversees the monetary system for a nation (or group of nations), with a goal of
maintaining economic stability and fostering economic growth. Some of the key
responsibilities of a central monetary authority include formulating and implementing
monetary policy, controlling inflation, managing the country's foreign exchange and gold
reserves, regulating and supervising the banking industry, and acting as the
government's bank.
4. What is monetary board?
A Monetary Board is a body that oversees the management and operation of a country's
central bank or monetary authority. The board makes key decisions on interest rates
and the implementation of monetary policy. The composition of the Monetary Board
varies from country to country, but it usually includes a governor (who is often the
chairperson) and several members who are experts in finance, economics, or related
fields. Their primary role is to ensure the stability of the national currency and maintain
low inflation. They also supervise the operation of banks and other financial institutions
to safeguard the interests of depositors and promote a healthy financial system.
5. What are the powers of monetary board?
1. Policy Formulation: The Monetary Board has the authority to formulate and
implement monetary policy, which includes decisions about interest rates and money
supply to control inflation and stabilize the economy.
2. Regulation of Financial Institutions: The Board has the power to regulate and
supervise banks and other financial institutions to ensure the stability of the financial
system.
3. Currency Management: They are responsible for the issuance and management of
the nation's currency.
4. Management of Foreign Reserves: The Board manages the country's foreign
exchange reserves to maintain stability in the foreign exchange market.
5. Lender of Last Resort: In times of financial crisis, the Monetary Board can authorize
the central bank to lend money to financial institutions.
6. Setting Reserve Requirements: The Board determines the reserve requirements for
banks, which is the minimum amount of cash that banks must hold against deposits.
6. Cite atleaset 13 services of central bank.
1. Monetary Policy Implementation: Central banks implement and control the country's
monetary policy.
2. Inflation Control: They work to control inflation by manipulating interest rates and
the money supply.
3. Currency Issue: Central banks have the exclusive right to issue banknotes and coins.
4. Banker to the Government: They manage the government's accounts and facilitate
its financial transactions.
 5. Banker's Bank: Central banks serve as the bank for commercial banks, where they can
hold their reserves.
6. Financial Stability Maintenance: They work to maintain the stability of the country's
financial system.
7. Lender of Last Resort: In times of financial crisis, they provide funds to financial
institutions.
8. Foreign Exchange Management: Central banks manage the country's foreign
exchange reserves.
9. Regulation of Commercial Banks: They supervise and regulate the banking system.
10. Credit Control: Central banks control credit by adjusting the lending capacity of
other banks.
11. Interest Rate Policy: They set the base interest rate that affects all other interest
rates in the economy.
12. Economic Growth Promotion: Central banks use monetary policy to foster
sustainable economic growth.
13. Financial Market Development: They play a role in developing and maintaining
healthy financial markets.

7. What are the major tools of monetary management?

1. Open Market Operations (OMO): This involves buying and selling government
securities. When the central bank wants to increase the money supply, it buys
securities. When it wants to decrease the money supply, it sells securities.
2. Discount Rate: This is the interest rate charged by the central bank to commercial
banks for loans. Lowering the discount rate can encourage banks to borrow more,
increasing the money supply. Raising the rate has the opposite effect.
3. Reserve Requirements: This is the amount of funds that a bank must hold in reserve
against deposit liabilities. Lowering the reserve requirement can increase the money
supply as banks have more to lend. Raising the requirement decreases the money
supply.
4. Interest Rate Policy: The central bank can influence the economy by manipulating
interest rates. Lower interest rates encourage borrowing and spending, which can
stimulate the economy. Higher interest rates can slow the economy down.
5. Currency Exchange Rate: By buying or selling its own currency in the foreign
exchange market, a central bank can influence the value of its currency.
6. Capital Requirements: This is the amount of capital a bank or financial institution
must hold as required by its financial regulator.