What is the central bank (CB)?

A “central bank (CB)” is a public institution that manages the currency of a country or group of countries and controls the money supply. The central bank acts as a bank for commercial banks and influences the flow of money and credit in the economy in order to promote price stability.

Central banks are not commercial banks; individuals cannot open accounts or apply for loans with them. They are also referred to as the “bank of banks” or the “lender of last resort” and their primary task is to promote monetary and financial stability.

One of the main instruments of a central bank is setting interest rates to steer monetary policy. In addition, the central bank supervises the banking sector, ensures the smooth functioning of the payment system, and is responsible for issuing banknotes.