What is The Role of Central Banks in Banking Crises
July 30th, 2007Central banks are important in Banking Crises. At times, central banks take deposits from other banks and, sometimes, from foreign governments which deposit their foreign exchange and gold reserves for safekeeping (for instance, with the Federal Reserve Bank of the USA). The Central Bank invests the foreign exchange reserves of the country while trying to maintain an investment portfolio similar to the trade composition of its client - the state. The Central bank also holds onto the gold reserves of the country. Most central banks have lately tried to get rid of their gold, due to its ever declining prices…
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