Central Monetary Authority (Week 5) PDF

The CENTRAL MONETARY Authority WeekBANKING & CENTRAL 5 WEEK 1 Central Monetary Authority Philippines - is the Bangko Sentral ng Pilipinas (BSP). It’s like the country’s main bank that manages money, controls inflation, and helps ensu...

The CENTRAL MONETARY Authority WeekBANKING & CENTRAL 5 WEEK 1 Central Monetary Authority Philippines - is the Bangko Sentral ng Pilipinas (BSP). It’s like the country’s main bank that manages money, controls inflation, and helps ensure the stability of the financial system. Monetary Authority - is an organization or institution that controls a country’s money supply and interest & rates. In simpleCENTRAL BANKING terms, it manages how much money is in the economy and how much it costs to borrow money. This helps keep the economy stable and healthy. WEEK 1 Central banks of the world a. Central banks are like the main banks for a country. b. They manage the country’s money, set interest rates, and help keep the financial system stable. c. They also work to control inflation and support economic growth. d. Each country usually has its own central bank, like the Federal reserve in the U.S. or the European Central Bank in Europe. Central Banks play a few key roles: e. Control Money Supply - they decide how much money & CENTRAL BANKING is in the economy f. Set Interest Rates - they set the cost of borrowing money, which affects how much people and businesses spend. g. Stabilize the Economy - They work to keep prices stab and avoid big economic swings WEEK d. Regulate Banks - they oversee other banks to make 1 The structure of central banks can be simplified into a few key parts: a. Governing Body - this is the top decision-making group, often called a board or committee. They set policies and make major decisions. b. Governor or President - this person leads the central bank and represents it to the public and other institutions. c. Departments - different parts of the bank handle specific tasks, such as managing monetary policy, supervising other banks, and maintaining financial stability. & CENTRAL d. Regional Offices BANKING (if applicable) - Some central banks have offices in different regions to help manage the economy across the country. e. Support Staff - teams of economists, analysts, and other experts who help with research and day-to-day operations. WEEK 1 The Central Bank balance sheet - A central bank's balance sheet shows what it owns and owes. Assets - what the central bank owns or has invested in. This usually includes: a. Government Bonds - Loans to the government. b. Foreign Reserves - Foreign currencies and gold. c. Loans to Banks - Money lent to commercial banks. Liabilities - what the central bank owes or what it’s responsible for. This mainly includes: d. Currency in Circulation - The physical money (bills and coins) used&byCENTRAL people. BANKING e. Bank Reserves - Money that commercial banks keep with the central bank. The difference between assets and liabilities reflects the central bank’s equity, which is usually quite small compared toWEEK its total assets. The 1 CENTRAL BANKS Week 7 & CENTRAL BANKING WEEK 1 International monetary stability - refers to the smooth and reliable functioning of the global financial system, where currencies maintain their value, exchange rates are stable, and there is confidence in international trade and investment. It means countries avoid extreme fluctuations in their currencies and financial crises, making it easier for businesses and governments to plan and cooperate economically. Key aspects include: & CENTRAL BANKING a. Stable Exchange Rates - When currency values remain steady, it's easier for countries to trade without the risk of sudden, damaging currency changes. b. Monetary Policies - Central banks (e.g., Federal Reserve, European Central Bank) work to control inflation and interest rates, which influence the valueWEEK of their currencies. 1 c. Global Cooperation - Countries collaborate, often through organizations like the International Monetary Fund (IMF), to prevent financial crises and maintain global economic health. In simple terms, international monetary stability helps ensure that the global economy functions smoothly without major disruptions caused by currency or financial market problems. & CENTRAL BANKING Central Bank Reorganization A central bank reorganization involves changes to the structure, governance, or functions of a country's central bank. The goal is typically to improve its WEEK efficiency, transparency, or alignment with government policies. 1 Here’s a simplified overview: 1. Governance changes - The leadership structure (like appointing a new governor or board) might be updated to strengthen oversight and decision-making. 2. Operational reforms - Changes to how the bank conducts monetary policy (e.g., interest rates, money supply management) or supervises financial institutions. 3. Legal or regulatory adjustments - Revising laws or regulations that define the central bank's roles and responsibilities, often to enhance independence or accountability. 4. Technology upgrades - Incorporating modern financial technologies & for CENTRAL BANKING better management and efficiency, like improving payment systems. In short, it’s about making the central bank more effective in managing the economy and financial stability. WEEK 1  Functions and Operations of the Banko Sentral Week 8 & CENTRAL BANKING WEEK 1 The functions and operations of the Bangko Sentral ng Pilipinas (BSP) (Philippines' central bank) are about managing the country's money and keeping the financial system stable. Key roles Bangko Sentral a. Control money supply - The BSP manages how much money is circulating to keep prices stable and the economy balanced. b. Set interest rates - It decides interest rates, which affects loans, savings, and overall & CENTRAL BANKING economic activity. c. Supervise banks - The BSP monitors banks to make sure they are safe and follow rules. d. Manage currency - It creates and controls the amount of Philippine pesos in the economy. WEEK 1 Monetary tools - are the methods a central bank, like the BSP, uses to control the money supply and influence the economy. Monetary tools: a. Reserve requirements - Banks must keep a certain amount of money in reserve (not loaned out). By changing this requirement, the BSP controls how much banks can lend. More lending = more money in the economy; less lending = less money. b. Interest rates - The BSP sets key interest rates, like the policy rate. Lower rates encourage borrowing and spending, while higher rates slow down borrowing to & CENTRAL BANKING control inflation. c. Open market operations - The BSP buys or sells government bonds to increase or decrease the money supply. Buying bonds puts more money into circulation; selling bonds reduces it. d. Lending to banks - The BSP lends money to banks in times of need (like a last-resort lender), ensuring WEEK banks have enough funds to keep operating smoothly. 1 Activities of the CB - like the BSP, are actions it takes to manage the country’s economy and financial system. Key activities: a. Monetary policy - The central bank controls money supply and interest rates to manage inflation and keep the economy stable. b. Issuing currency - It prints and distributes the country's money (like the Philippine peso). c. Supervising banks - The central bank monitors and regulates banks to ensure they operate safely and follow rules. & CENTRAL d. Foreign reserves BANKING management - It manages the country’s foreign currency reserves to maintain exchange rate stability. e. Lender of last resort - The central bank lends money to banks during emergencies to keep the financial system stable. f. Payment system oversight - It ensures that money WEEK transfers and payment systems are safe and efficient. 1