The Central Bank is considered the center of the entire banking system, as it is a link in the relations between credit organizations at all levels. It establishes a general regulatory framework and legislative basis 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 should be performed by it online, are of crucial 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 effectively when the government gives it the right to make its own decisions. Thus, only complete state non-interference will create a high-quality system in banking . The less pressure from the state on the central bank, the more opportunities it has to timely fulfill all its tasks. But at the same time, legally all assets of the bank are state property.
The functions of the central bank can be listed for quite some time, since its activities are diverse. The main ones include monitoring the activities of other financial institutions, maintaining the national currency, organizing money circulation, creating the country's foreign exchange reserve and saving it. But the most important thing that distinguishes the central bank from many commercial ones is the right to issue banknotes , which cannot be done at other levels of the banking system.
If we talk about such a function of the central bank as managing the state’s gold and foreign exchange reserves , 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 it is responsible for the strict observance and fulfillment of the goals outlined by the monetary policy of the state.
There is a wonderful tool with which the basic functions of the central bank are performed. This is understood as varying the size of the discount rate. For example, if there is a need to reduce the money supply, the Central Bank decides to increase the interest rate at which it issues loans to commercial banks. Accordingly, the latter are forced to change lending conditions for legal entities and individuals. They act similarly in case of shortage of money supply , only the discount rate is reduced, which significantly reduces the cost of loans issued by other credit institutions.
The functions of the central bank of the Russian Federation are qualitatively performed through the formation of a mandatory reserve fund. The Board of the Bank, at its sole discretion, determines the percentage that must be deposited by credit institutions in an account with the Central Bank. This tool allows you to correctly regulate the amount of money in circulation, in addition, FOR is considered to be good insurance and guarantee coverage. 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 main functions of the central bank can be performed using various tools. It is necessary to pay special attention only to tight control over the dynamics of the results from the application of one or another method. You should adhere to those regulatory methods that provide one hundred percent effect. Then the execution of the above functions will be carried out automatically.