Definition of Central Bank: Duties and Authorities

Central Bank Definition

"Business entities in the financial sector that attracts and issue money in the community, especially providing credit and services in payment traffic and money circulation;"

"-- the central bank whose main task is to assist the government in regulating, maintaining and maintaining the stability of the country's currency value, as well as encouraging the smooth running of production and development, as well as expanding job opportunities;"

"Banks with the main task of assisting the government in regulating, maintaining, and maintaining the stability of the rupiah value, maintaining foreign exchange reserves, supervising banking activities, maintaining banking accounts to improve people's living standards; examples of central banks such as the Bank of Japan, Bank of England, The Fed, European Central Bank, Reserve Bank of Australia."

European Central Bank

 

What is a Central Bank?

The central bank is generally an agency that has responsibility for monetary policy in a country's territory. The central bank has a role to maintain price stability or the value of the currency prevailing in the country, which is known as inflation. The central bank keeps the inflation rate under control and always at the lowest possible value or the optimal position for the economy, by controlling the balance of the number of goods and money. If there is too much money in circulation, the central bank has the right to use its authority.

Central Bank Duties

1. Create and Implement Monetary Policy. Implemented to control the amount of money circulating in the community so that the prices of goods and services in the community are controlled.
2. Regulate and Maintain Smooth Payment System. The regulated payment systems are cash and non-cash payment systems. The central bank is responsible for creating rules, agreements, standards, and procedures used in the circulation of money in society.
3. Regulate and Supervise Banking. The supervision carried out is macroprudential supervision, namely policies made to limit the risks and costs of a systemic crisis so that the balance of the financial system is maintained.

Central Bank Authority

Authority to Make Monetary Policy

• Determine and determine the discount rate, minimum reserve for commercial banks, financing, or credit. And the monetary target by calculating the inflation rate in Indonesia.
• Monetary control on open market operations in the money market.

Authority to Regulate Payment System

• Determine and determine the use of payment instruments.
• Supervise payment system service providers.
• Create and permit the operation of the payment system.

Authority to Regulate and Supervise Banking

• Create and establish banking regulations in Indonesia.
• Provide sanctions to banks that violate the rules that have been set. By statutory regulations.
• Granting and revoking permits for institutions and business activities from a bank.
• Supervise the bank as a banking system.