Talk:Central bank

It would be interesting and very informative to classify the banks as either state owned or privately owned. I know the distinction between the two is not always so obvious, but I'm sure some kind of a compromise can be made.

I did a good amount of googling to find out those I didn't already know.

Contents

1 State owned and controlled banks 2 Independent banks 3 Those I couldn't figure out at all 4 Central bank v national bank 5 Interest rates

State owned and controlled banks

• Bank of Cuba
• Bank of Libya

I also believe that these are:

• Central Bank of the Islamic Republic of IRAN
• Central Bank of the Democratic People's Republic of Korea (north korea)
• Norges Bank (Bank of Norway) "Norges Bank is a separate legal entity owned by the state."

Independent banks

(where the 'democratic' bodies of government might or might not have some kind of saying, these could be separated into two categories)

• Federal Reserve
• Bank of Canada
• Bank of Britain
• Bank of France
• Bank of Sweden & Bank of Finland
• Deutsche Bundesbank ('Bank of Germany')
• Bank of Saudi Arabia
• Banco Central de Chile (Central Bank of Chile)
• Bank of Japan

Those I couldn't figure out at all

• State Bank of Pakistan (the name could implify state ownership)
• Central Bank of Syria ("The Central Bank of Syria is an independent public sector establishment operating under the guarantee of the state , and within the guidelines issued to it by the Council of Ministers . The Capital of the bank is fully subscribed by the state.")

According to this, a good thumb rule seems to be that those counties treatened or blockaded by the U.S. have fully state owned central bank, except in Norway.

Any thoughts or opinions on this?

Only these: that in those cases where the bank does operate efficiently as an instrument of national policy, you may be looking at a national bank as opposed to a "central bank," -- and how ironic it would be if the U.S., which pioneered the concept of a national bank, were to have gone full circle to trying to suppress those impulses in other nations. --Herschelkrustofsky 10:59, 14 Oct 2004 (UTC)

Central bank v national bank

Excuse me for choking on my breakfast. The distinction here (and at national bank) is complete BS, probably driven by the peculiar status of the US Federal Reserve. A central bank is responsible for monetary policy, and is usually state-owned and non-autonomous (subject to political decision-making on interest rates etc). A "national bank" is simply a state-owned bank (when it isn't just a name for an ordinary private bank making itself sound big, eg "First National Bank"). It is a big deal when the usual central bank model (state-owned, politician-run) is not used - see the setting-up of the independent Bank of England in 1997 and ECB in 1999. (Enhanced credibility and so forth are supposed to make monetary policy more effective and enhance economic stability by leaving experts to try to hit well-defined targets. Expectations etc.) The Fed is a rare exception in being not just independent from government, but privately-owned. Rd232 14:54, 1 Jan 2005 (UTC)

Actually, the Fed is not the exception, it is the rule. The issue here is not the technical features of ownership, but rather, the political "autonony" or lack thereof. The real "exception" was Hamilton's national bank, and no one can deny that it was a highly controversial institution, because it was the first major departure from the European practice of giving the private banking community control over monetary policy; critics of the Fed would say that the creation of the Fed was simply a reversion to that policy. --HK 15:16, 1 Jan 2005 (UTC)

The distinction drawn in the article between "central" and "national" is at best US-only usage, at worst just wrong. A central bank makes monetary policy and is the lender of last resort; it may be public or private and have varying degrees of independence. Take C.E. Walsh, the guru of central bank inflation-targetting: on his website [1] (http://econ.ucsc.edu/~walshc/) you will not find the phrase "national bank" except as part of the proper name of a bank (eg Swiss National Bank). If you still disagree, please cite some sources. Rd232 16:33, 1 Jan 2005 (UTC)

I should think that the very concept of a national bank would be anathema to "the guru of central bank inflation-targetting." --HK 16:38, 1 Jan 2005 (UTC)

I was afraid I'd get that response. Having just had a fight to get natural monopoly conform to the standard definition in economics, I was hoping to correct this article without a battle. I can't find anything useful that relates to the supposed central/national distinction, though I gather it has something to do with historical usage in the US. Please either provide some sources or agree that you'll let me change the article. I don't want to say the distinction as outlined is completely fictional, but it isn't general. If you can show historical US usage in this way, that usage can be described in the article. Rd232 20:51, 1 Jan 2005 (UTC)

Wrote up an article about the History of the Federal Reserve from Edward Flaherty (http://odur.let.rug.nl/~usa/E/usbank/bankxx.htm). It explains that the national banks were private US banks with the right to issue notes that would be accepted by other national banks. There were 100s of those. --J heisenberg 19:20, 3 Jan 2005 (UTC)

OK. But the right to issue notes is not specific to "national banks", except possibly in that historical context. In other times and places, all sorts of banks could and did issue notes. Rd232 20:50, 3 Jan 2005 (UTC)

Agreed. National banks fall far short of central banks--I would delete the line or replace it by a comment about independence --J heisenberg 20:59, 3 Jan 2005 (UTC)

The political autonomy of central banks is more a matter of degrees than a dichotomous issue. Virtually all central banks walk a fine line between autonomy and political influence. The Coyne Affair in the 1950s and 60s provides an illustration. In 1956 James Coyne was appointed governor of the Bank of Canada.. He pursued a tight monetary policy, and this brought him into conflict with the government who was pursuing an expansionary fiscal policy. In 1961 Coyne was forced to resign. The following policy statement was issued by the central bank under the new governor (Louis Rasminsky) : "In the ordinary course of events, the bank has the responsibility for monetary policy, but if the government disapproves of the monetary policy being carried out by the bank it has the right and the responsibility to direct the bank as to the policy which the bank is to carry out. . . .If this policy, as communicated to the bank, is one which the governor feels he cannot in good conscience carry out, his duty is to resign." (Bank of Canada Annual Report of the Governor to the Minister of Finance, 1961). But the government came under heavy political pressure by those who felt too much power was now resting with the government, and by 1967 the Bank of Canada act was amended to delineate the scope and extent of central bank autonomy. This is the framework in which most central banks operate. They are supposed to be independent enough to be immune from the vicissitudes of political whim, yet, at the same time, ultimately responsible to a democratically elected government. Is this fine line a contradiction in terms. . . maybe. But this precarious balance is maintained by counterposing threats. On the one hand, the central bank operates under the threat of government intervention, but on the other hand, governments must live with the political fallout if they do decide to intervene. mydogategodshat 19:23, 1 Jan 2005 (UTC)

This is the kind of discussion we should have under "independence", instead of the false central/national dichotomy. (I take it mydogategodshat is agreeing with me.) Rd232 20:51, 1 Jan 2005 (UTC)

I agree with you up to a point. I agree that the issue is too complex to be presented as a dichotomy. A more productive view would be to represent the range of policies as a continuum with "substantial autonomy" and "minimal autonomy" as the two end points. We would find that most central banks would find themselves near the middle of a gaussian distribution. What about the extremes: Are there examples of central banks with no private sector input? . . . probably, and the term "national bank" does seem to fit. Are there examples of central banks with no input from democratically elected officials? . . . probably, although the only one that I can think of that comes close is the Fed. What term do we use for them? mydogategodshat 04:35, 2 Jan 2005 (UTC)

There is a spectrum of independence for central banks, a term which covers everything being discussed here. If some people use "national bank" to describe part of that spectrum, fine, but I want sources, and a tight definition. The current dichotomy (especially the implication that it is widely accepted in economics) is wrong. Rd232 09:38, 2 Jan 2005 (UTC)

I have looked through my bookshelves for references to the term "national bank". Of the five financial macroeconomics books there, only one mentions the term. George Kaufman's Money, the Financial system, and the Economy uses the term to differentiate state chartered banks from nationally chartered banks. For example on page 86 he writes, "The Comptroller was established by the National Banking Act of 1863 to charter and supervise the operation of national banks." So I cannot find any evidence to support HK's claim. Unless Hk can find some references, I must agree with you that there is no significant difference between the two terms. However I should point out that my library is populated by economics books: if it consisted of political economy or developmental economics books, the results could be different. mydogategodshat 16:03, 3 Jan 2005 (UTC)

Part of the confusion could be the result of multiple meanings of the term. To use the term to indicate a member bank of the Fed is quite different from the way it could be used in less developed countries. mydogategodshat 16:17, 3 Jan 2005 (UTC)

Multiple meanings is part of the problem; though not sure any of them conform to HK's approach. The "central bank" is the official executor of government monetary policy, regardless of name (which may or may not include "National") or ownership or degree of independence. Basta. Rd232 19:12, 3 Jan 2005 (UTC)

Interest rates

The article says:

• Marginal Lending Rate (currently 3% in the Eurozone) A fixed rate for institutions to lend money from the CB

Shouldn't this be a rate for institutions to borrow money from the CB? Barrylb 15:23, 3 Jun 2005 (UTC)