History of Bangladesh Bank

Prior to the birth of Bangladesh in 1971, functions of the State Bank of Pakistan were performed
through the Dhaka Branch office. After the liberation war, Dhaka branch office of State Bank of
Pakistan was recognized as the central bank of Bangladesh and it was named Bangladesh Bank.
Bangladesh Bank was established under the Bangladesh Bank Order, 1972 (Presidents Order No
127 of 1972) and the law includes the establishment, incorporation, capital and management of
Bangladesh Bank.
Central Banks around the World
Most of the nations and countries have their own central banks and governing body. Even though
European Central Bank (ECB) formulate and implement the monetary policy for the Euro Zone,
the member countries have their own central banks and governors. However, very few nations
are left that does not have any official central bank. Some of the leading central banks are,
1. Federal Reserve Bank (Fed) of USA
2. European Central Bank
3. Bank of England
4. Bank of Japan
5. Swiss National Bank
6. Bank of Canada
7. Reserve Bank of Australia
8. Reserve Bank of New Zealand (Lien, 2011)

Functions of the central banks are almost identical. A brief history and short description of the
major functions of Federal Reserve Bank, European Central Bank and The Reserve Bank of
India are described next.

Central Bank of United States of America: Federal Reserve (Fed)
Federal Reserve Bank A.K.A Fed plays the role of central bank in USA. It was established in the
year of 1913 based on Federal Reserve Act (1913) and the headquarter is in Washington DC,
USA.
History
In the time of late 19
th
century and early 20
th
century, the economy of the USA observed a series
of financial panic. In response to the panic, the idea of Federal Reserve System was generated.
The history can be traced back to the reign of President Woodrow Wilson who formed a group of
advisors that crafted a proposal which eventually became the Federal Reserve Act (1913). The
legislation called for the creation of a network of 12 regional reserve banks, headed by a seven-
member Federal Reserve Board made up of public officials appointed by the President. (A brief
history of Federal Reserve Bank)
Function
1. Examining, Monitoring and Controlling all banks except the Federal or National Banks:
Federal Reserve Bank examines, monitors and controls all state banks as well as the financial
holding companies, bank holding companies and bank subsidiary, international banks operating
in United States and US Banks operating outside of the country
2. Chartering International Banks in US and US Banks Operating in Foreign Countries:
The Federal Reserve Bank solely possesses the power of chartering International Banks that
want operate in United States and the banks of United States that want to operate outside of the
country.
3. Approving setting up branches and Merger & Acquisition: All banks except the national
banks must take approval from Fed to set up branches and to merge with or acquire another
bank.
4. Imposing Reserve Requirement to Commercial Banks: The reserve requirement is set by
the Federal Reserve Bank and all commercial banks must keep the required amount of reserve
with the central bank.
5. Function of Clearing House: The Federal Reserve Bank is the clearing house for commercial
banks all over the United States and it collects and clears the checks.
6. Implementing Monetary & Fiscal Policy: If the government wants to reduce or increase the
money supply, Federal Reserve Bank increases the reserve requirement or reduces the reserve
requirement. The treasury department of US uses Federal Reserve Bank to collect tax and make
payment when fiscal policy is implemented.
7. Bank of Bankers and the Government: Federal Reserve Bank is the last resort for the
commercial banks of United States and the government takes banking services from the Federal
Reserve Bank.




European Central Bank
The European Central Bank or ECB is the central bank for Euro Zone and it administers the
monetary policy for the region. It is one of the world's most important central banks and is one of
the seven institutions of the European Union (EU) listed in the Treaty on European Union. It is
situated in the Frankfurt, Germany and key decisions are made by the executive committee
which was formed by the governors of national central banks of the member countries.
History
The European Central Bank is the de facto successor of the European Monetary Institute (EMI).
The EMI was established at the start of the second stage of the EU's Economic and Monetary
Union (EMU) to handle the transitional issues of states adopting the euro and prepare for the
creation of the ECB and European System of Central Banks (ESCB). The ECB formally replaced
the EMI on 1 June 1998 by virtue of the Treaty on European Union (TEU, Treaty of Maastricht),
however it did not exercise its full powers until the introduction of the euro on 1 January 1999,
signaling the third stage of EMU.
Functions
1) Implementing Monetary Policy: The member countries of the Euro Zone use Euro as their
common currency. The monetary policies are decided by the executive body of the ECB and
implemented by the ECB. The objectives of monetary policies are to keep the price level stable
and controlling the inflation in the euro zone ( less than 2%).

2) External Operation:
As far as the external operations of the Eurosystem are concerned, Article 23 of the Statute of the
ESCB entitles the ECB and the NCBs:
Establishing relations with foreign central banks and international organizations
acquiring and selling spot and forward all types of foreign exchange assets and precious
metals;
managing the foreign assets they hold;
conducting all types of banking transactions with third countries and international
organizations, including borrowing and lending operations. (SCHELLER, 2004, p. 90)
4) Payment and Clearing Function: The Euro systems task to promote the smooth operation
of payment systems is substantiated in Article 22 of the Statute which entitles the ECB and the
NCBs to provide facilities to ensure efficient and sound clearing and payment systems within the
Community and other countries. (SCHELLER, 2004).

5) Issuing Euro Bank Notes and Coins: Under Article 106 of the EC Treaty and Article 16 of
the Statute of the ESCB, the Governing Council of the ECB has the exclusive right to authorize
the issue of banknotes within the euro area. The ECB and the NCBs are the only institutions that
are entitled to actually issue legal tender banknotes in the euro area. Under Article 106(2) of the
Treaty, the issuing rights of the euro area countries have been limited to coins, subject to
approval by the ECB of the volume of the issue. (SCHELLER, 2004, p. 98)

6) Collecting and Compilation of Statistics & Economic Research: European Central Bank
collects various statistical analyses and compiles them to make decision. High-quality research
has become an activity of growing importance in modern central banking. This applies in
particular to the ECB which has to cope with the unprecedented challenges associated with
conducting a single monetary policy in a multi-country area. (SCHELLER, 2004)

Central Bank of India: Reserve Bank of INDIA
The Reserve Bank of India is known as the central bank of the India and the monetary policy on
Rupee is controlled by this organization. The head quarter of this bank is situated in Mumbai,
India.
History
The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of
the Reserve Bank of India Act, 1934. Though initially RBI was privately owned, it was
nationalized in 1949.
Functions
1) Issuing Notes: Reserve Bank of India has the sole authority to issue all currency notes except
one-rupee note. The bank issues and exchanges or destroys currency notes and coins that are not
fit for circulation.
2) Function on Monetary Policy: The Reserve Bank of India is the main monetary authority of
the country and it formulates, implements and monitors the monetary policy as well as it has to
ensure an adequate flow of credit to productive sectors.
3) Regulator and supervisor of the financial system: The institution is also the regulator and
supervisor of the financial system and prescribes broad parameters of banking operations within
which the country's banking and financial system functions. Its objectives are to maintain public
confidence in the system, protect depositors' interest and provide cost-effective banking services
to the public.
4) Banker of Banks and Government: Reserve Bank of India acts as the banker of banks Every
Bank is under the statutory obligation to keep a certain minimum of cash reserves with the
Reserve Bank. It maintains and operates government deposits, collects and makes payments on
behalf of the government, helps the government to float new loans and manages the public.
Works Cited
A brief history of Federal Reserve Bank. (n.d.). Retrieved March 21, 2014, from time.com:
http://content.time.com/time/photogallery/0,29307,1947516_2012442,00.html
Lien, K. (2011, August 07). Get To Know The Major Central Banks. Retrieved March 24, 2014,
from Investopedia: http://www.investopedia.com/articles/forex/06/centralbanks.asp
SCHELLER, H. K. (2004). The European Central Bank: History, Role and Function. Frankfurt:
European Central Bank.