What are the operations of the Central Bank

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The central bank performs important functions through certain operations. Their volume and structure depend on the objectives of the entire credit and monetary policy, they are reflected in its balance sheet.

Important terms

To understand what Central Bank operations are, it makes sense to understand the basic concepts:

1. The balance sheet of the Central Bank includes two parts: assets and liabilities. The second of them reflects obligations, sources of formation of resources. And in the first part there are requirements that characterize their use, composition and placement.
2. The main source of resources for such a bank in many countries is the issuance of banknotes. Its necessity is caused by expanded reproduction, as well as the implementation of a new product that requires additional means of payment.

Main positions in activities

From the above it follows that the operations of the Central Bank can be conditionally classified into active and passive. The first have an article in the initial position that reflects the stockgold (monetary) of the country. In a number of states, its share is large, in others it is less. The next asset position is “Foreign exchange reserves”. They are placed in the Central Bank. Their replenishment occurs through various actions related to management.

The operations of the Central Bank related to the refinancing of commercial institutions are placed on positions such as "Discounted bills" and "Loans secured." In those countries in which the government securities market is developed, investments in it are of great importance. The resulting interest is an important source of income. Other assets include direct loans to government agencies and the Treasury.

The passive operations of the Central Bank are distinguished by their peculiarity, which is that the source of their formation is the issue of banknotes, and not their own capital and various attracted deposits.

The Central Bank accumulates deposits of the state and commercial banks, stores cash. At the same time, he does not pay interest on their deposits, but conducts operations for them free of charge in the country.

Liabilities form the following articles:

1. UK (authorized capital).
2. Paper and money issue.
3. Funds (reserves).
4. Loans.
5. Deposits.
6. Other liabilities.

How are things in Russia?

Operations of the Central Bank of the Russian Federation are as follows:

1. Providing loans for a period of a year on bail.
2. Sale and purchase of bonds, depositcertificates.
3. Purchase and sale of currency, payment documents, precious metals, government securities, other assets.
4. Issue of guarantees with guarantees.
5. Transactions with instruments (financial) for risk management.
6. Opening accounts in foreign and Russian organizations in the country.
7. Issuance of bills and checks in different currencies.
8. Other operations used in the international practice of banks.

After studying the functions and operations of Central Banks, it is not difficult to understand that they play the role of a regulatory and coordinating body in economic systems.