Central banking student's

1. CENTRAL BANKING
Created by: Phạm Thủy Linh
Trần Khánh Hà
Phạm Thị Nguyệt Ánh

2. Objectives
 Introduce overview of central banking
 Improve knowledge about a small part
of finance

3. Outline
 History
 Monetary policy
 Policy instruments

4. Outline
 History
 Monetary policy
 Policy instruments

5. History
 Central bank: manages a
state’s currency, money
supply, interest rates
 1609: The Bank of
Amsterdam
 1694: The Bank of England
 1790: The currency crisis
 1800: The Bank of France
http://ilcorsomercurio.altervista.org/Il_corso_M/Materie/4.Ingles
e/Images_UK/15-Bank.of.england.arp.750pix.jpg

6. History
 The 18th-19th centuries:
evolved slowly
 The 19th century:
established in many
European countries
 The 20th century:
established in Africa and
Asia
 The People's Bank of
China(1979): the most
recent bank model http://content.headlineasia.com/wp-content/
uploads/2014/02/pboc_imaginechina.jpg

7. History
 Naming of central banks
 ‘Bank of Country’
(normally used, but
Bank of India)
 ‘Central Bank of
Country’ (except Central
Bank of India)
 ‘Reserve Bank of
Country’
http://lindagalindo.com/wp-content/uploads/2013/12/bank.jpg

8. Outline
 History
 Monetary policy
 Policy instruments

9. Monetary Policy
 Involve establishing what
form of the country’s
currency
 Involve the issue of some
form of standardized
currency
 Use another country's
currency: directly or
indirectly
 Refer to the interest-rate
targets and other active
measures http://fambizsuccess.files.wordpress.com/2010/02/face-of-banking1.
jpg

10. Monetary Policy
Functions :
Implementing monetary policies
Determining Interest rates
Controlling the nation's entire money
Managing foreign exchange, gold reserves and
stock register
Regulating and supervising the banking industry
Setting the official interest rate

11. Monetary Policy
Goals:
 Currency issuance: hold
assets and incur liabilities
 Interest rate interventions:
control certain types of short-term
interest rates
 Limits on policy effects:
impossible to control both
interest rates & currency rates
http://borderlessnewsandviews.com/wp-content/
uploads/2013/04/money.jpg

12. Outline
 History
 Monetary policy
 Policy instruments

13. Policy Instruments
 Interest rates
 Marginal lending rate: a fixed
rate for institutions to borrow
money from the central bank
 Main refinancing rate: the
publicly visible interest rate
the central bank announces
 Deposit rate: the rates parties
receive for deposits at the
central bank http://www.thedigeratilife.com/images/interest_rates.jpg

14. Policy Instruments
 Open market operation
 Buying or selling securities
 Temporary lending of money
for collateral securities
 Foreign exchange
operations such as foreign
exchange swaps
 Capital requirements: hold a
certain percentage of their
assets as capital
http://us.cdn2.123rf.com/168nwm/radiantskies/radiantskies12
11/radiantskies121101115/16489336-abstract-word-cloud-for-open-
market-operation-with-related-tags-and-terms.jpg

15. Policy Instruments
 Reserve requirements: hold only a small percentage
of their assets in the form of cash reserves
 Exchange requirements:
 require that some or all foreign exchange receipts
-> the local currency
 generally used in countries with non-convertible or
partially convertible currencies
 Margin requirements: establishes a minimum ratio of
the value of the securities to the amount borrowed

16. Conclusion
Central bank has the primary function of
managing the nation's money supply and
has some considerable supervisory powers.

17. References
• www.investopedia.com/terms/i/interestrate.asp
• http://www.britannica.com/EBchecked/topic/4296
73/open-market-operation
• www.bankofengland.co.uk/about/pages/default.as
px
• http://www.economist.com/topics/peoples-bank-china
• http://www.centralbanksguide.com/currency+issua
nce/