What are the operations of the Central Bank

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 the operations of the Central Bank, it makes sense to deal with the basic concepts:

1. The balance 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 of such a bank in many countries is the issue of banknotes. Its need is caused by expanded reproduction, as well as the implementation of a new product that requires additional means of payment.

The main positions in the activity

From the above it follows that the operations of the Central Bank can conditionally be classified as active and passive. The former, at the initial position, have an article reflecting the stock of gold (monetary) of the country. In a number of states its specific gravity is large, while others have less. The next asset position is “Foreign exchange reserves”. They are located in the Central Bank. Their replenishment occurs through various actions related to management.

Central Bank operations related to the refinancing of commercial institutions are placed in such positions as “Promissory Notes” and “Secured Loans”. In those countries in which the market for government securities is developed, investment in it is of great importance. The resulting interest is an important source of revenue. Other assets include direct loans to government agencies and the Treasury.

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

The central bank accumulates deposits of the state and commercial banks, and stores cash cash. Moreover, he does not pay interest on their deposits, but conducts operations for them on the territory of the country for free.

Liabilities form such articles:

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

How are things in Russia?

The operations of the Central Bank of the Russian Federation are as follows:

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

Having studied the functions and operations of Central Banks, it is easy to understand that they play the role of a regulatory and coordinating body in economic systems.