Monpol

CENTRAL
BANKING
OBJECTIVE:
Identify learning theories
and principles on central
banking and operations.
Nature of Central Banking
A central bank is not a profit maximizer. It

is basically concerned in achieving
monetary stability, full employment and
economic growth.
What Is a Central Bank?
The central monetary authority which provides

policy direction in the areas of money, credit
and banking.
It supervises the operation of banks and
regulates the activities of non-bank financial
intermediaries.
What Does a Central Bank Do?
A central bank aims to stabilize a nation's economy through
managing the money supply and overseeing monetary policy.
During times of high inflation, for instance, a central bank may
raise interest rates to cool spending. During economic
downturns, it may engage in quantitative easing to stimulate
economic activity. These are just two examples of actions
that a central bank might take.
A Brief History of Central Banks
The first prototypes for modern central banks
were the Bank of England and the Swedish
Riksbank, which date back to the 17th century.
The Bank of England was the first to acknowledge

the role of lender of last resort. Organized in 1694
as a joint stock company and the known as the
“oldest” real central bank.
OTHER EARLY CENTRAL BANKS:
Bank of France
-it was created in 1800 mainly from private capital and the rest
from government funds. It was founded by Napoleon Bonaparte.
Riksbank of Sweden
-were established in 1656 as private bank and reorganized in 1688 as a state
bank and established to finance expensive government military operations.
Bank of Netherlands (1814)
National Bank of Austria (1817)
Bank of Norway(1817)
At the end of 1800, almost all countries in Europe

and other parts have organized their own central
bank.
FUNCTIONS OF CENTRAL BANK
A central bank is deemed as the lender of the last resort,
as per Hawtrey ( a British economist). The central bank is
the organ of the government which controls major financial
operations of the government. Through its various
operations, the objectives of the central bank are to
support the economic policy of a country by influencing the
way financial institutions behave.
THE FUNCTIONS OF A CENTRAL BANK CAN BE
discussed as follows:
1 Currency regulator or bank of issue
2 Bank to the government
3 Custodian of Cash reserves
4 Custodian of International currency

5 Lender of last resort
6 Clearing house for transfer and settlement
7 Controller of credit
8 Protecting depositors interests

3 PILLARS OF CENTRAL BANKING
The First Pillar: Price Stability Through The Conduct of Monetary Policy
The approach to price stability in the Philippines has evolved, reflecting

shifts in economic theories, policy approaches, and global best practices.
The central bank’s role in maintaining price stability has become more
sophisticated, emphasizing inflation targeting, data-driven analysis, and
proactive policy adjustments to manage inflation while supporting overall
economic growth.
The Second Pillar: Financial Stability Through Financial System
Supervision and Regulation
The central bank’s supervisory approach has expanded from focusing

solely on individual banks to encompassing the broader financial
system. This shift has been driven by various internal and external
factors, such as economic crises, global trends, technological
advancements, and legislative changes. As a result, the central bank’s
role has evolved significantly to ensure the stability and integrity of the
Philippine financial system.
The Third Pillar: Efficient Payments and Settlements System
through the issuance of currency, the operation of the real-time
gross settlement system, and oversight over the payments
system.
The approach to the payments and settlements system in the Philippines
has transitioned from traditional, manual processes to a more
sophisticated, integrated, and digital framework. Moreover, from being
the operator of the PESO Real-Time Gross Settlement, the BSP is now
mandated to oversee the National Payment System and exercise
supervisory and regulatory powers for the purpose of ensuring the
stability and effectiveness of the monetary and financial system.
MEMBERS:
ARQUISOLA, ROSENIE
CHAVEZ, KATRINA
OLMEDO, BLESSED NICHOLE
VALERO, LEONIGARDO

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CENTRAL

A central bank is not a profit maximizer. It

The central monetary authority which provides

The Bank of England was the first to acknowledge

At the end of 1800, almost all countries in Europe

1 Currency regulator or bank of issue

2 Bank to the government

3 Custodian of Cash reserves

4 Custodian of International currency

6 Clearing house for transfer and settlement

8 Protecting depositors interests

The approach to price stability in the Philippines has evolved, reflecting

The central bank’s supervisory approach has expanded from focusing

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