Main functions of the central bank

The central bank is considered the center of the entire banking system, as it is the link in the relations between credit organizations of all levels. It establishes a general regulatory framework and legislative framework for banks, thanks to which lenders can not only interact within the country, but also outside it, that is, carry out international transactions. That is why the functions of the central bank, which must be performed by them on-line, are of paramount importance for the country's economy as a whole and its position on the world stage.

The central bank of the country will only work efficiently when the government gives it the right to make its own decisions. Thus, only complete state non-interference will create a qualitative system in the sphere of banking . The less pressure from the state on the central bank, the more opportunities it has to fulfill all its tasks in a timely manner. But at the same time legally all the assets of the bank are state property.

The functions of the central bank can be listed for a long time, since the directions of its activities are diverse. As the main of them, one can single out control over the activities of other credit and financial organizations, maintain the exchange rate of the national currency, organize circulation of money, create a gold reserve of the country and save it. But most importantly, what distinguishes the central bank from many commercial ones is the right to issue banknotes , which can not be done at other levels of the banking system.

If we talk about such a function of the central bank, as the disposal of the state's gold and foreign currency reserve , we can safely say that it helps maintain the country's economy at the proper level. However, it is worth noting the dual nature, because in addition to supporting the economic sphere, there is the possibility of too close government intervention in the credit and financial sector. In addition, the central bank is a kind of conductor between the government and other credit organizations, because he is responsible for the strict observance and fulfillment of the goals outlined by the state's monetary and credit policy.

There is a wonderful tool with which to perform the basic functions of the central bank. By this means the variation in the size of the discount rate. For example, if there is a need to reduce the amount of money supply, the Central Bank decides to raise the interest rate at which it lends to commercial banks. Accordingly, the latter are forced to change the terms of lending to legal entities and individuals. Similarly, if there is a shortage of money in circulation, only the discount rate is reduced, which significantly reduces the cost of loans issued by other lending institutions.

The functions of the central bank of the Russian Federation are executed qualitatively due to the formation of a mandatory reserve fund. The bank's management determines at its own discretion the interest that must be deposited by credit institutions with an account with the Central Bank. This tool allows you to intelligently regulate the amount of money in circulation, in addition, the FOR is considered a good insurance and guarantee provision. Thus, if there is a need to tighten the terms of business of commercial banks, the main bank increases the amount of mandatory contributions.

The central functions of the central bank can be performed using various tools. It is necessary to pay special attention only to strict control over the dynamics of results from the application of one or another method. It is necessary to adhere to those methods of regulation, which provide a one hundred percent effect. Then the above functions will be performed automatically.