Money And Banking

Content

Introduction

Section Ι : Central Bank Structure

Summery about it

Function

Section П : Central Bank in Indonesia

Introduction

Objective

Organization & function

Mission

Vision

Strategic values

Strategic objectives

Conclusion

References

Introduction:

This research project is about the Central Bank in Indonesia where we will discuss the meaning, the job and the role of the Central Bank in the economy of the country and it is influence.

In this project we will use the historical and the comparative analyses. With the help of using the internet and books to get all the information we need.

The object of this project is to identify mainly the Central Bank in Indonesia.

Our project will be divided into two sections, the first section discuss the central bank from a theoretical point of view. The second section talks about the central bank in the Indonesia.

Section Ι: Central Bank Structure.

1- Summery about it:

Central bank: is an institution designed to oversee the banking system and regulate the quantity of money in the economy.

The central bank in the United State and agency in it is Federal Reserve, often simply called the Fed.

The Central Bank was created in 1914 after a series of bank failures in 1907 convinced Congress that the United State needed a central bank to ensure the health of the nation's banking system.

The primary elements in the Central Bank System are:

1) The Board of Governors

2) The Regional Federal Reserve Banks

3) The Federal Open Market Committee

Today, the Central bank is run by its board of Governors, which has seven members appointed by the president and confirmed by the Senate. The governors have 14- year's term. The president appoints the chairman to a four- year term. The most important of these seven members of the Board of Governors is a chairman.

2- Function

The chairman has some function he should be doing in the central bank such as:

1- Directs the Fed staff

2- Presides over board meetings.

3- Testifies regularly about Fed policy in front of congressional committees.

The Central Bank System is made up of the Central Bank Board in Washington, D.C., and twelve regional Central Banks. The Central Banks has twelve district banks and nine directors. Three appointed by the Board of Governors and six of them are elected by the commercial banks in the district. The directors appoint the district president, which is approved by the Board of Governors. The New York Fed implements some of the Fed's most important policy decisions.

The Federal Open Market Committee (FOMC) has some function should do it:

1- Serves as the main policy-making organ of the Federal Reserve System.

2- Meets approximately every six weeks to review the economy.

The Federal Open Market Committee (FOMC) is made up of the following voting members:

a. The chairman and the other six members of the Board of Governors.

b. The president of the Federal Reserve Bank of New York.

c. The presidents of the other regional Federal Reserve banks (four vote on a yearly rotating basis).

Monetary policy is conducted by the Federal Open Market Committee. Monetary policy is the setting of the money supply by policymakers in the central bank and the money supply refers to the quantity of money available in the economy.

Three Primary Functions of the Central Bank:

1) Regulates banks to ensure they follow federal laws intended to promote safe and sound banking practices.

2) Acts as a banker's bank, making loans to banks and as a lender of last resort.

3) Conducts monetary policy by controlling the money supply.

In the Federal Open Market Committee has some operation to increase the money supply, (the Fed buys government bonds from the public) .To decrease the money supply, (the Fed sells government bonds to the public).

* Banks and the money supply:

Banks can influence the quantity of demand deposits in the economy and the money supply.

Reserves are deposits that banks have received but have not loaned out.

In a fractional-reserve banking system, banks hold a fraction of the money deposited as reserves and lend out the rest. The reserve ratio is the fraction of deposits that banks hold as reserves.

When a bank makes a loan from its reserves, the money supply increases. The money supply is affected by the amount deposited in banks and the amount that banks loan.

* Deposits into a bank are recorded as both assets and liabilities.

* The fraction of total deposits that a bank has to keep as reserves is called the reserve ratio.

* Loans become an asset to the bank.

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