Central Banks You Need to Know

The world’s central banks possess similar forms of operation and structure although their long term goals may vary.

There are eight major central banks within the world economy today:

1. US Federal Reserve Bank (USD)
2. European Central Bank (EUR)
3. Bank of England (GBP)
4. Bank of Japan (JPY)
5. Swiss National Bank (CHF)
6. Bank of Canada (CAD)
7. Reserve Bank of Australia (AUD)
8. Reserve Bank of New Zealand (NZD)

Federal Reserve Bank- United States

The Federal Reserve The most influential bank is the US Federal Reserve Bank because the US dollar is the most heavily traded currency. The Federal Reserve’s Federal Open Markets Committee (FOMC) decides on interest rates and is made up of 7 governors of the Reserve Board and 5 of the 12 district reserve presidents. The Federal Reserve meets 8 times a year and its key official is Ben Bernanke, the chairman of the Federal Reserve. Twelve regional Federal Reserve Banks were created so that the economic operations of the United States can be monitored efficiently.

The FOMC committee meets about every six weeks. The FOMC is comprised of members from the Federal Reserve Board that are both appointed and approved through joint efforts of the President, Congress and regional Federal Reserve Bank presidents. The decisions made by the FOMC are closely watched by investors both within and outside of the US because it gives traders an idea of the economic sentiment, which can be used to predict possible interest rate movements.

The European Central Bank

European Central Bank The European Central Bank was established after the creation of the Euro in 1998. It oversees the actions of the other member European central banks such as the Banque de France or Ufficio Italiano dei Cambi. The European Central Bank has a group similar to the Federal Open Markets Committee that helps decide on the changes that may need to be made to monetary policy. The committee is known as the Governing Council and is comprised of 6 members of the executive board of the European Central Bank in addition to all the governors of the national central banks from the countries which use the Euro. The Governing Council meets twice a week but only changes policy at 11 of these meetings. The key official associated with the Governing Council is Jean-Claude Trichet, who is the President of European Central Bank.

The Bank of England

Bank of EnglandThe Bank of England consists of a committee known as the Monetary Policy Committee. It is comprised of 9 members, which include a governor, 2 deputy governors, 2 executive directors and 4 outside experts. The main official associated with the Bank of England is a man by the name of Mervyn King who is the governor of the Bank of England. The Monetary Policy Committee meets once every month in order to discuss any policy changes.

The Bank of Japan

Bank of Japan The Bank of Japan also has a committee that consists of the Bank of Japan governor, two deputy governors along with 6 other members.

It meets once or twice a month and the key official associated with the Bank of Japan is Toshihiko Fukui who is the governor of the Bank of Japan.

The Swiss National Bank

Swiss BankThe Swiss National Bank has a very small committee that consists of just 3 people and is typically more conservative as far as interest rate movements are concerned.

The committee meets quarterly and the key official associated with the Swiss Bank is Jean-Pierre Roth who is the Chairman of the Swiss National Bank.

The Royal Bank of Canada

The Bank of Canada also has a committee which is known as the governing council. The governing council consists of the governor of the Bank of Canada, the senior deputy governor and four deputy governors. The committee meets about 8 times a year and the key official associated with the bank is David Dodge, who is the governor of the Bank of Canada.

The Reserve Bank of Australia

The Reserve Bank of Australia consists of a monetary policy committee which contains a central bank governor, deputy governor, the secretary to the treasurer and 6 independent members appointed by the government. The committee meets about eleven times a year and the key official for the Reserve Bank is Ian Macfarlane, who is the Governor of the Reserve Bank of Australia.

The National Bank of New Zealand

Finally, the National Bank of New Zealand unlike all the other banks has no committee. In fact, all the power of monetary policy lies in the hands of one individual: the central bank governor. The decision is made about 8 times a year by Alan Bollard who is the governor.