Why the Central Bank

Established
And
Central Bank Ecosystem
Gökçe Sert Özlem Cihanşümül
0501200146 0501200125
Before The Central Bank

Before the establishment of central banks, monetary systems operated in

a decentralized manner with various forms of currency circulating and
limited oversight. Private banks and other financial institutions issued
their own currencies, leading to a lack of uniformity and stability in
the monetary system. Governments played a limited role in managing the
money supply and regulating financial activities, and banking systems
were prone to crises and instability. However, as economies grew more
interconnected and complex, the need for a more stable and regulated
monetary system became apparent.
The history of central banking can be traced back several centuries,
evolving alongside changes in economic systems and the needs of
governments.
The concept of central banking emerged in the 17th century as governments
sought more efficient ways to manage their finances and stabilize their
economies. The Bank of England, established in 1694, is often considered
one of the earliest modern central banks. It was created to finance war
debts and provide a stable currency for England.
The widespread adoption of central banking is a rather recent phenomenon.
At the start of the 20th century, approximately two-thirds of sovereign
states did not have a central bank. Waves of central bank adoption
occurred in the interwar period and in the aftermath of World War II.In
the 20th century, central banks were often created with the intent to
attract foreign capital, as bankers preferred to lend to countries with a
central bank on the gold standard.
Functions of Central Banks:
Monetary Policy Control: One of the primary reasons for establishing
a central bank is to have an institution that can regulate the
nation's money supply and interest rates. This is crucial for
controlling inflation, promoting economic stability, and managing
economic cycles.

Lender of Last Resort: Central banks act as lenders of last resort

during financial crises. They provide liquidity to banks and
financial institutions to prevent widespread panic and systemic
collapse within the financial system.

Regulation and Supervision: Central banks often have regulatory and

supervisory authority over financial institutions within their
jurisdiction. They set rules and regulations to ensure the stability
and soundness of the banking system.

Currency Issuance and Management: Central banks are typically

responsible for issuing and managing the nation's currency. They
Currency Issuance and Management: Central banks are typically responsible
for issuing and managing the nation's currency. They ensure the integrity
of the currency, manage reserves, and sometimes conduct foreign exchange
operations to stabilize the exchange rate.
Government Banker: Central banks often act as bankers to the government,
managing its accounts, facilitating transactions, and sometimes
participating in the issuance of government debt.

Promotion of Financial Stability: Central banks play a key role in

maintaining overall financial stability by monitoring and addressing risks
within the
Overall, financial
central system.
banks play a crucial role in the modern economy by
implementing monetary policies that aim to achieve stable prices, full
employment, and sustainable economic growth.
Central Bank Ecosystem

The term "central bank ecosystem" describes the complex and varied
organization of a nation's central bank, describing the different groups,
committees, and roles that work together to manage and regulate the
country's financial and monetary system. This complex network of
interrelated components functions as a whole to ensure the integrity,
efficacy, and stability of the entire economic system. Now let's examine
the essential components of the the environment of central banks:
Monetary Policy Committee (MPC):

Role: Develops and implements monetary

policy policies.
Functions: Controls reserve requirements, opens markets, and interest
rates in order to affect the money supply and achieve economic goals.

Members of CBRT MPC comittee:

Fatih Karahan, Ph.D. (Governor)

Osman Cevdet Akçay, Ph.D.
Prof. Hatice Karahan
Prof. Elif Haykır Hobikoğlu
Prof. Fatma Özkul
Banking Supervision Committee:

Role: Monitors and regulates financial institutions to maintain stability.

Functions: Implements prudential regulations, supervises financial

institutions, and manages crisis situations to prevent systemic risks

Currency Issuing Department:

Role: Manages the issuance, circulation, and withdrawal of currency.

Function:Creates and produces banknotes, manages their distribution, and

takes precautions against counterfeiting.
 Financial Stability Unit:
Role:Ensures the financial system's general stability.

Function:Determines systemic risks, creates plans for dealing with crises,

and puts macroprudential laws into effect in order to stop and reduce
financial crises.
Interconnectedness of Central Banks:
International cooperation between central banks is aimed at tackling shared
challenges and preserving the stability of the global financial system.

International Organizations: To promote cooperation and information

sharing, take part in international organizations such as the Bank for
International Settlements (BIS) and the International Monetary Fund (IMF).

Technology and Central Banking:

Digital Currencies: Investigate and use digital currencies to improve
liquidity and efficiency.
Fintech Collaboration: In order improve financial services and payment
systems, partner with tech companies.
Interconnectedness of Central Banks:

Global Cooperation: International cooperation between central banks is

aimed at tackling shared challenges and preserving the stability of the
global financial system.

International Organizations: To promote cooperation and information

sharing, take part in international organizations such as the Bank for
International Settlements (BIS) and the International Monetary Fund (IMF).

Technology and Central Banking:

Digital Currencies: Investigate and use digital currencies to improve

liquidity and efficiency.

Fintech Collaboration: In order improve financial services and payment

systems, partner with tech companies.
Challenges and Future Considerations:

Challenges: Central banks face challenges in the form of regulatory

difficulty, technological problems, and economic uncertainty.

Future Considerations: Adopt the continuous digital transformations and

address issues like climate change and sustainable finance.
To Sum Up
The central bank ecosystem, influences economic growth, stability, and
adaptability through its varied components and collaboration. Central banks
play an essential part in the overall health of the economy by changing to
new opportunities and challenges as the economic landscape changes.
THANK YOU FOR LISTENING!