Understanding the Role of the Central Bank
Do you know what is meant by the central bank ??? If you don't know it, you are absolutely right to visit. Because here will be a complete review of the central bank's understanding, objectives, roles and duties and their functions in full. For that, let's look at the reviews below.
Central Bank
Understanding Central Bank
The Central Bank is a financial body, which is generally owned by the government, and ensures that the activities of these financial institutions can create a high and stable level of economic activity.
The central bank in the world, the World Bank (BI). According to the Act About amendments to the Act. No.3 of 23 of 1999 concerning the World Bank, the World Bank is an independent state institution in carrying out its duties and authorities, free from the influence of the government and or other parties, except for matters expressly regulated in the law.
Bank as a central bank that aims to achieve and maintain the stability of the value of the rupiah. To achieve this goal, the World Bank carries out a monetary policy that is continuous, consistent, transparent, and must consider the government's general policies in the economic field.
History of the Central Bank
Long before the arrival of the western nation, the archipelago had become the center of international trade. While in mainland Europe, mercantilism has developed into an industrial revolution and caused rapid European trade activities. That was when simple banking institutions emerged, such as Bank van Leening in the Netherlands. This banking system was then brought by the western nations who were expanding the archipelago at the same time.
The VOC in Java in 1746 founded De Bank van Leening which later became De Bank Courant en Bank van Leening in 1752. The bank was the first bank born in the archipelago, the forerunner of the banking world in the future. On January 24, 1828, the Dutch East Indies government established a circulation bank called De Javasche Bank (DJB). For decades the bank operated and developed based on an octroi from the ruler of the Kingdom of the Netherlands, until finally enacted DJB Wet 1922.
The Japanese occupation period had temporarily stopped the activities of the DJB and the Dutch East Indies banking. Then the revolutionary period arrived, the Dutch East Indies experienced a dualism of power, between the World Republic (RI) and the Nederlandsche Indische Civil Administrative (NICA). Banking was also divided into two, the DJB and the Dutch banks in the NICA region while the "World Bank Poesat Service" and the World State Bank in the Republic of Indonesia.
The Round Table Conference (KMB) of 1949 put an end to the conflict of the World and the Netherlands. DJB was later established as the central bank for the United Republic of the United States (RIS). This status continues to survive until the return of RI in the unitary state. Next as a sovereign nation and state, RI nationalized its central bank. Then since July 1, 1953 DJB changed to become the World Bank, the central bank for the World Republic.
The purpose of the Central Bank
The sole purpose of the central bank (BI) is to achieve and maintain the stability of the value of the rupiah, which is reflected in the inflation rate and the development of the rupiah exchange rate against foreign currencies. The instrument used to achieve and maintain the stability of the rupiah's value can be referred to by the task of the World Bank as a central bank.
The Role of the Central Bank
The role of the central bank (BI) is to achieve and maintain the stability of the value of the rupiah, which is reflected in the inflation rate and the development of the rupiah exchange rate against foreign currencies. The instrument used to achieve and maintain the stability of the rupiah's value can be referred to by the task of the World Bank as a central bank.
Central Bank Function
The function of the central bank is regulated in Law No. 23 of 1999 concerning the World Bank.
It was stated that the aim of the World Bank through policies is to achieve and maintain the stability of the value of the rupiah which focuses on inflation and the rupiah exchange rate. The World Bank is commonly known as the bank of bank.
The Duties of the Central Bank
Whereas the tasks of the Central Bank in this case the World Bank which has been explained in the Act are as follows:
Arranging money circulation by determining and operating according to monetary policy.
Make arrangements and encourage ease of payment and production systems.
Duties of the Central Bank Relating to the Government
Provision of credit to the government.
Regulate government treasury.
Assisting the auction process and selling government bonds.
Circulate money as a legal payment instrument.
Have full rights to the printing and production of money.
Has the sole right to print money.
Duties of the Central Bank in Banking
Determine interest rates.
As a banker.
Developing sound credit.
Coaching all existing banks.
Manage, control and expand the network and payment traffic.
Conduct support and encourage people to run productive businesses.
Central Bank Authority
World Bank's authority in the monetary sector, among others, are as follows:
To conduct monetary control, namely: open market operations, setting a discount rate, setting minimum reserve requirements, and arranging credit or financing.
Determine monetary targets by considering the national inflation rate target.
Control policies related to finance. The intended financial policies are:
Application of discount policy.
Application of minimum reserve requirement.
Control of financing and credit.