Definition
- Central bank
- A central bank is the organisation responsible for conducting monetary policy and ensuring that a country's financial system operates smoothly.
- Not to be confused with: Commercial bank
- A commercial bank is a financial intermediary that takes deposits from savers and lends to borrowers, bringing the two together.
Test yourself
What is the difference between central bank and commercial bank?
A commercial bank serves households and firms for profit; a central bank serves the banks and the government and answers for the whole system.