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Central Bank

A central bank is an institution that manages the currency and monetary policy of a state or formal monetary union, and oversees their commercial banking system. Central banks are sometimes referred to as a reserve bank or monetary authority.

In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in a financial crisis. Central banks may either be centralized or decentralized by design. Most central banks also have supervisory and regulatory powers to ensure the stability of member institutions, to prevent bank runs, and to discourage reckless or fraudulent behavior by member banks.

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