The Central Bank

This is a bank which is entrusted with the responsibility of maintaining economic stability and financial soundness of a country. It is therefore entrusted with two objectives:

1. Responsibility of maintaining financial soundness of the economy. The bank has therefore to identify gaps in financial markets and to seek solutions to these gaps.
2. To act as a commercial bank. It therefore has to operate profitability when offering services to difference parties.

Establishment of Central Bank of Kenya
The bank was Established by the Central Banking Act, 1966, and the Banking Act 1968.

Management of the Bank
Management and policy entrusted to a Board of Directors, comprising of seven members including the Governor, Deputy Governor, and Ps to treasury. The Governor of the Central Bank is the executive head of the bank.

Statutory Information and Accounts
The bank is required to publish a return of its assets and liabilities every month. A copy of the return to be submitted to Finance Minister. The bank has also to prepare and publish an annual report within 3 months of the end of fiscal year. Fiscal year ends 30th June.

Functions of Central Bank
1. Banker to the government
2. Lender to the government
3. Ensure Economic stability
4. Printing of currency notes
5. Lender of last resort

Tools Used To Control the Level Of Money In Circulation
1. Monetary policies. Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency e.g. Treasury bills, Treasury bonds, Reserve ratio etc.
2. Fiscal policies. Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy. e.g. taxation

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