When you think about a bank, perhaps the first thing that pops into your mind is the place where you manage your finances through services and products like deposits and loans. However, there is a financial institution that doesn't have a commercial focus but that plays a key role in the economy and that is also called a bank: a central bank.
A central bank is a public institution that is responsible for implementing monetary policy, managing the currency of a country, or group of countries, and controlling the money supply. Some of the main responsibilities central banks have are:
Central banks do all of this independently of the political group in power in any given country, as they aim to ensure the stability of the financial system. Their decisions are directly dependent on the supervisory body that composes the financial institution.
What central banks are there?
Central banks represent a country's financial institution but they can also represent a group of them. The eurozone is an example of a financial institution made up of a group of countries. In this case, the power falls under the Eurosystem, which is made up of two fundamental parts: the European Central Bank (ECB) and the national central banks of the eurozone's member states that have the euro as their official currency. The Bank of Spain, the Deutsche Bundesbank and the National Bank of Poland (Narodowy Bank Polski, NBP) are some examples.
As there are some countries that are part of the European Union but not part of the eurozone, in addition to the Eurosystem there is also another organisation called the European System of Central Banks (ESCB). This is made up of both the European Central Bank and all the national central banks of the countries that make up the European Union, whether they have the euro as their official currency or not.
In the United States, the Federal Reserve System is the central banking system there. Known simply as the Fed, it is responsible for carrying out the aforementioned tasks to watch over the country's economy and currency – in this case the dollar.