Central Bank

A Central Bank is the principal monetary authority of a nation, which performs several key functions, including issuing currency and regulating the supply of credit in the economy.

Often thought of as "the lender of last resort,” a nation’s Central Bank provides its economy with funds when commercial banks have a shortage of cash.  In other words, they prevent an all out failure of a country's banking system. However, the primary goal of central banks is to provide their countries' currencies with price stability by controlling inflation.

Central Banks have played a key role in keeping many of the world’s economies from total collapse.  For example, in October 2008 Iceland’s Central Bank came up with a plan to negotiate currency swap agreements with the central banks of other countries during their severe financial crisis. Likewise, the European Central Bank offered a  $6.7 billion loan to Hungary to stem a financial crisis that could have spread throughout all of Central Europe.

See our full report on international financial crisis here:  of Iceland and Hungary here:

ICELAND
HUNGARY

A central bank also acts as the regulatory authority of a country's monetary policy and is the sole provider and printer of notes and coins in circulation.  The Central Bank in the U.S. is the Federal Reserve. For full details see Federal Reserve.