4.4.3: Role Of Central Banks Flashcards
1
Q
What are the roles of the central bank?
A
- Controlling monetary policy, through interest rates and controlling money supply.
- Banker to the government, e.g. Bank of England was responsible for managing national debt until 1998.
- Bank to other banks; banks deposit their money within the central bank, to balance the accounts of banks at the end of each day.
- They regulate financial systems; can be used to prevent financial institutions from undertaking activities which harm consumers or they prevent risky activities.
2
Q
What does financial regulation usually include?
A
- banning market rigging
- preventing the sake of unsuitable products
- maximum interest rates to prevent consumer exploitation and prevent excessively risky lending
3
Q
What are the three key bodies to financial regulation?
A
- The FPC identifies and reduces system risk and supports government economic policy
- The PRA ensures competition, ensures consumers have access to services minimizes risk should a bank fail and ensures banks take responsible action
- The FCA protects consumers, promotes competition and enhances the integrity of the system by preventing market rigging
