Role of financial institutions and the central bank in kenya essay

All three types have the following things in common: The failure to do so may increase the level of noise and cause severe market failures.

With regards to developing economies and those in transition, the situation might differ.

The Role of Central Bank Essay Sample

Quarterly Journal of Economics, Vol. Generally speaking, investment banks are subject to less regulation than commercial banks. Development of the leading sectors of the economy such as agriculture, industry, foreign trade, etc.

The developing countries are susceptible to inflationary pressures mainly due to supply -in elasticities in the short period. While investment banks may be called "banks," their operations are far different than deposit-gathering commercial banks.

Insurance companies use statistical analysis to project what their actual losses will be within a given class. Everything from depositing money to taking out loans and exchanging currencies must be done through financial institutions.

The discussion showed that Central Bank is the pivotal element which provides the macroeconomic stabilization of a country by adjusting interest rates and undertaking the foreign currency exchange interventions. Once shares are issued, an investor may purchase them on the open market and sell them in the same way.

The role of institutional quality, Journal of International Economics, Vol. Hence, the objective of the Central Bank is to undertake stabilization measures which are consistent with the rational expectations of market agents.

The policy of inclusion had to be changed once again so that for the educational system to consider adults as people who were willing to learn and as people who were actually in need of further education.

Traditionally, investment banks do not deal with the general public. Hence, the sudden inflation scare might cause a dramatic short-term change of rates; induce a tightening of monetary policy and cause insolvency issue of the number of banks.

In other words, there is no day-to-day management of the portfolio.

The role of Central bank

The central bank performs the following developmental and promotional functions in the developing countries. A brokerage can be either full service or discount. Commercial Banks Commercial banks accept deposits and provide security and convenience to their customers. It showed that under certain conditions, Central Bank becomes the last ditch resort for banks which experience insolvency problems.

Certificate holders may redeem their certificates for a fixed amount on a specified date, or for a specific surrender value, before maturity. The developing and underdeveloped countries do not have well-developed banking system.

There are two types of management investment company: Discount brokers allow investors to perform their own investment research and make their own decisions. The Race Relation Amendment Act in sets guidelines for every school to have a policy which values diversity and challenges racism. In this case, if there is a controversy between intervention and prior activities of the Central Bank, market players can get confused and increase the overall noise on the market.

Types Of Financial Institutions And Their Roles

In other words, in periods of high interest volatility banks have to adopt a risk aversive approach. There are three fundamental types of investment companies: The discussion shows that this information is highly important for other market players and forecasting agencies as it reduces the information asymmetry.

At the same time, the paper stressed the importance of a prudential approach as excessive support might cause the effect of moral hazard and lead to an extensive financial crisis.

The national agenda and the reasons behind the changes of the inclusion policy One of the main reasons directing changes for the inclusion policy was the social changes that the UK has been going through over the past two decades.

Brokerages A brokerage acts as an intermediary between buyers and sellers to facilitate securities transactions. The Bank of Thailand started operations on December 10, Face amount certificate companies are almost nonexistent today. Such a combination creates various debates. Unit investment trusts sell a fixed number of shares to unit holders, who receive a proportionate share of net income from the underlying trust.

Establish or Support the establishment of payment system The BOT establishes or supports the establishment of payment system, electronics clearing system, and administers such systems for safety and efficiency.

Health care 7 percent ; Recreation and education 5 percentElectricity, fuel and water supply 5 percent and Apparel and footwear 3 percent.

American Economic Review, Vol. And it is optimal for commercial forecasters to modify their forecasts and adopt the data of Central Bank. Moreover, as a banker to the government, the central bank can provide funds for initiating investment in the public sector.

On the basis of this information, market agents might predict the future steps of Central Bank and adjust their strategies accordingly. In such an economy, the central bank should not only take measures to develop an integrated commercial banking system, but also should not hesitate undertaking directly the commercial banking functions.The role of Central bank in macroeconomic stabilization Chandavarkar ( cited in Geraats, ) claims that macroeconomic stabilization is the pivotal role of the Central Bank.

they claim that commercial banks and other financial institutions may overestimate the favourability of stable macroeconomic climate and the Central Bank. Read this essay on Role of Central Bank.

Come browse our large digital warehouse of free sample essays. (ii) whether the behaviour of financial institutions was optimal to the policy response. Central Bank of Kenya is the highest Banking institution in the country and responsible for ensuring the smooth working of banking sector and.

More about Role of Financial Institutions and the Central Bank in Kenya Why Banks Sometimes Seek to Merge other Banks or Financial Institutions Words | 14 Pages. We look at all types of financial institutions and see what role they play in the financial markets. An investment bank is a financial intermediary that performs a.

Bank Supervision Overview. The microfinance industry therefore plays a pivotal role in deepening financial markets and enhancing access to financial services by a significant proportion of the population. • Reporting of risk focused assessments to institutions. The Central Bank of Kenya’s RBS methodology is dynamic and will continue.

What are the important roles played by Central Bank in developing countries ?

The Central Bank The central bank is a financial institution that organizes the government’s finances, controls money and credit Show More Role of Financial Institutions and the Central Bank in Kenya.

Role of financial institutions and the central bank in kenya essay
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