The term "issuing bank," "bank of banks," and "government bank" embody the fundamental functions of a central bank.
In most countries, the central bank is the bank responsible for managing the country's money supply and interest rates. Most central banks have the sole power to issue currency, and most also have responsibilities for supervising or regulating the banking sector. The European Central Bank is an exception, delegating the responsibility for supervising smaller banks within the Eurozone to individual countries.
The United States Central Bank
The Federal Reserve System (also known as the Fed) is a privately owned central bank in the United States and the world's most influential central bank. Established in 1913, it comprises 12 regional Federal Reserve Banks, the largest and most important of which is the Federal Reserve Bank of New York. The Fed's core governing body is the Federal Reserve Board, which derives its authority from and is subject to congressional oversight by the U.S. Congress. It is considered an independent central bank because its decisions do not require approval from the President of the United States or any higher level of the legislature.
The Fed does not receive funding from Congress and is financially independent. Its significant profitability is primarily due to its ownership of government bonds. The U.S. The central bank employs a dual central banking system, with central banks at both the central and local levels exercising financial regulatory authority. Local central banks have their own governing bodies and, in addition to implementing a unified monetary policy, enjoy a high degree of independence in their operations.
European Union Central Bank
The European Central Bank (ECB), established in June 1998, serves as the central bank for the eurozone. Currently, it comprises 18 of the 28 EU member states, all of which are shareholders of the ECB. The ECB operates as a transnational central bank, exercising central bank functions across borders. Its primary functions include issuing currency, serving member governments, and implementing a common monetary policy, as well as matters decided unanimously by member governments.
The ECB has a single objective: price stability, meaning an inflation rate within the eurozone, as calculated by the consumer price index, close to but below 2%. While the ECB centralizes monetary policy, the specific implementation remains the responsibility of the individual eurozone central banks, which, for example, maintain their own foreign exchange reserves.