Editing Central bank (section)

==History==
{{See also|History of banking|History of central banking in the United States}}The widespread adoption of central banking is a rather recent phenomenon. At the start of the 20th century, approximately two-thirds of sovereign states did not have a central bank. Waves of central bank adoption occurred in the interwar period and in the aftermath of World War II.<ref name=":0">{{cite journal |last1=Eichengreen |first1=Barry |title=Interwar Central Banks: A Tour d' Horizon |date=2023 |url=https://www.cambridge.org/core/books/spread-of-the-modern-central-bank-and-global-cooperation/interwar-central-banks/BD45C3275703D3ED0D56334E0661C207 |journal=The Spread of the Modern Central Bank and Global Cooperation: 1919–1939 |pages=3–39 |editor-last=Kakridis |editor-first=Andreas |publisher=Cambridge University Press |doi=10.1017/9781009367578.003 |isbn=978-1-009-36757-8 |last2=Kakridis |first2=Andreas |series=Studies in Macroeconomic History |editor2-last=Eichengreen |editor2-first=Barry}}</ref>

In the 20th century, central banks were often created with the intent to attract foreign capital, as bankers preferred to lend to countries with a central bank on the gold standard.<ref name=":0" />

===Background===
{{main|History of money}}

The use of [[money]] as a unit of account predates history. Government control of money is documented in the [[ancient Egypt]]ian economy (2750–2150 BCE).<ref>[http://www.nbbmuseum.be/en/2012/05/nederlands-geldgebruik-in-het-oude-egypte.htm ''Monetary Practices in Ancient Egypt''] {{Webarchive|url=https://web.archive.org/web/20170425025052/http://www.nbbmuseum.be/en/2012/05/nederlands-geldgebruik-in-het-oude-egypte.htm |date=25 April 2017 }}. Money Museum National Bank of Belgium, 31 May 2012. Retrieved 10 February 2017.</ref> The Egyptians measured the value of goods with a central unit called ''shat''. Like many other currencies, the shat was linked to [[gold]]. The value of a shat in terms of goods was defined by government administrations. Other cultures in [[Asia Minor]] later materialized their currencies in the form of gold and silver [[coin]]s.<ref>Metcalf, William E. '' The Oxford Handbook of Greek and Roman Coinage'', Oxford: Oxford University Press, 2016, pp. 43–44</ref>

The mere issuance of [[paper currency]] or other types of financial money by a government is not the same as central banking. The difference is that government-issued financial money, as present e.g. in [[China]] during the [[Yuan dynasty]] in the form of paper currency, is typically not freely [[convertibility|convertible]] and thus of inferior quality, occasionally leading to [[hyperinflation]].

From the 12th century, a network of professional [[bank]]s emerged primarily in [[Southern Europe]] (including Southern France, with the [[Cahorsins]]).<ref>Collins, Christopher. ''The Oxford Encyclopedia of Economic History, Volume 3. Banking: Middle Ages and Early Modern Period'', Oxford University Press, 2012, pp. 221–225</ref> Banks could use book money to create [[Deposit (finance)|deposits]] for their customers. Thus, they had the possibility to issue, lend and transfer money autonomously without direct control from political authorities.

===Early municipal central banks===
[[File:Saló de contractacions - 45587886644.jpg|thumb|Interior of the [[Llotja de Barcelona]] where the city's ''Taula de canvi'' was operated]]

The [[Taula de canvi de Barcelona]], established in 1401, is the first example of municipal, mostly public banks which pioneered central banking on a limited scale. It was soon emulated by the [[Bank of Saint George]] in the [[Republic of Genoa]], first established in 1407, and significantly later by the [[Banco del Giro]] in the [[Republic of Venice]] and by a network of institutions in [[Naples]] that later consolidated into [[Banco di Napoli]]. Notable municipal central banks were established in the early 17th century in leading northwestern European commercial centers, namely the [[Bank of Amsterdam]] in 1609<ref>{{Cite book |last1=Quinn |first1=Stephen |url=https://www.cambridge.org/core/product/identifier/9781108594752/type/book |title=How a Ledger Became a Central Bank: A Monetary History of the Bank of Amsterdam |last2=Roberds |first2=William |date=2023 |publisher=Cambridge University Press |isbn=978-1-108-59475-2 |doi=10.1017/9781108594752|s2cid=265264153 }}</ref> and the [[Hamburger Bank]] in 1619.<ref>Quinn, Stephen; Roberds, William (2006), [http://papers.ssrn.com/sol3/papers.cfm?abstract_id=934871 "An Economic Explanation of the Early Bank of Amsterdam, Debasement, Bills of Exchange, and the Emergence of the First Central Bank"] {{Webarchive|url=https://web.archive.org/web/20110503180739/http://papers.ssrn.com/sol3/papers.cfm?abstract_id=934871 |date=3 May 2011 }}, [[Federal Reserve Bank of Atlanta]], Working Paper 2006–13</ref> These institutions offered a public infrastructure for cashless international payments.<ref>Collins, Christopher. ''The Oxford Encyclopedia of Economic History, Volume 3. Banking: Middle Ages and Early Modern Period'', Oxford University Press, 2012, p. 223</ref> They aimed to increase the efficiency of international trade and to safeguard monetary stability. These municipal public banks thus fulfilled comparable functions to modern central banks.<ref>Kurgan-van Hentenryk, Ginette. ''Banking, Trade and Industry: Europe, America and Asia from the Thirteenth to the Twentieth Century'', Cambridge University Press, 1997, p. 39</ref>

===Early national central banks===
[[File:Thomas Malton after Sir Robert Taylor PrincipalFront ofBankofEngland1791.jpg|thumb|The [[Bank of England]] in 1791]]

The Swedish central bank, known since 1866 as [[Sveriges Riksbank]], was founded in [[Stockholm]] in 1664 from the remains of the failed [[Stockholms Banco]] and answered to the [[Riksdag of the Estates]], Sweden's early modern parliament.<ref>[http://www.riksbank.com/templates/Page.aspx?id=9159 History of Sveriges Riksbank] Riksbank.com {{webarchive|url=https://web.archive.org/web/20080504165055/http://www.riksbank.com/templates/Page.aspx?id=9159|date=2008-05-04|df=y}}</ref> One role of the Swedish central bank was lending money to the government.<ref>Bordo, M. (December 2007), [http://www.clevelandfed.org/research/commentary/2007/12.cfm "A Brief History of Central Banks"] {{Webarchive|url=https://web.archive.org/web/20080203115046/http://www.clevelandfed.org/research/Commentary/2007/12.cfm |date=3 February 2008 }}, Federal Reserve Bank of Cleveland.</ref>

The establishment of the [[Bank of England]] was devised by [[Charles Montagu, 1st Earl of Halifax]], following a 1691 proposal by [[William Paterson (banker)|William Paterson]].<ref>{{cite book|url=https://books.google.com/books?id=EkUTaZofJYEC&q=British+Parliamentary+reports+on+international+finance|title=Committee of Finance and Industry 1931 (Macmillan Report) description of the founding of Bank of England|quote="Its foundation in 1694 arose out the difficulties of the Government of the day in securing subscriptions to State loans. Its primary purpose was to raise and lend money to the State and in consideration of this service it received under its Charter and various Act of Parliament, certain privileges of issuing bank notes. The corporation commenced, with an assured life of twelve years after which the Government had the right to annul its Charter on giving one year's notice. Subsequent extensions of this period coincided generally with the grant of additional loans to the State."|access-date=10 May 2010|isbn=9780405112126|year=1979|publisher=Arno Press |archive-date=1 July 2023|archive-url=https://web.archive.org/web/20230701075449/https://books.google.com/books?id=EkUTaZofJYEC&q=British+Parliamentary+reports+on+international+finance|url-status=live}}</ref> A [[royal charter]] was granted on {{date|1694/07/27}} through the passage of the [[Tonnage Act 1694|Tonnage Act]].<ref>H. Roseveare, [https://books.google.com/books?id=V1MkAQAAIAAJ The Financial Revolution 1660–1760] (1991, Longman), p. 34</ref> The bank was given exclusive possession of the government's balances, and was the only limited-liability corporation allowed to issue [[banknote]]s.<ref>{{cite book|last=Bagehot|first=Walter|title=Lombard Street: A Description of the Money Market (1873)|date=5 November 2010|publisher=Henry S. King and Co. (etext by Project Gutenberg)|location=London|url=http://www.gutenberg.org/ebooks/4359|access-date=24 January 2013|archive-date=9 May 2012|archive-url=https://web.archive.org/web/20120509060631/http://www.gutenberg.org/ebooks/4359|url-status=live}}</ref>{{page needed|date=October 2015}} The early modern Bank of England, however, did not have all the functions of a today's central banks, e.g. to regulate the value of the national currency, to finance the government, to be the sole authorized distributor of banknotes, or to function as a [[lender of last resort]] to banks suffering a [[liquidity crisis]].

In the early 18th century, a major experiment in national central banking failed in [[France]] with [[John Law (economist)|John Law]]'s [[Banque Royale]] in 1720–1721. Later in the century, France had other attempts with the [[Caisse d'Escompte]] first created in 1767, and [[Charles III of Spain|King Charles III]] established the [[Bank of Spain]] in 1782. The [[Russian Assignation Bank]], established in 1769 by [[Catherine the Great]], was an outlier from the general pattern of early national central banks in that it was directly owned by the Imperial Russian government, rather than private individual shareholders. In the nascent [[United States]], [[Alexander Hamilton]], as Secretary of the Treasury in the 1790s, set up the [[First Bank of the United States]] despite heavy opposition from [[Jeffersonian Republicans]].<ref>Federal Reserve Bank of Minneapolis. "A History of Central Banking in the United States" [https://www.minneapolisfed.org/about/more-about-the-fed/history-of-the-fed/history-of-central-banking online] {{Webarchive|url=https://web.archive.org/web/20180929233339/https://www.minneapolisfed.org/about/more-about-the-fed/history-of-the-fed/history-of-central-banking |date=29 September 2018 }}</ref>

===National central banks since 1800===
[[File:BankofFinlandSuomenPankkiFinlandsBank.jpg|thumb|The [[Bank of Finland]] in [[Helsinki]]]]
[[File:Marriner S. Eccles Federal Reserve Board Building.jpg|thumb |The [[Eccles Building]] in [[Washington, D.C.]] houses the main offices of the [[Board of Governors of the Federal Reserve]].]]
[[File:People's Bank of China.jpg|thumb|Head office of the [[People's Bank of China]] in [[Beijing]]]]

Central banks were established in many European countries during the 19th century.<ref>{{cite book|author=Clifford Gomez|title=Banking and Finance: Theory, Law and Practice|url=https://books.google.com/books?id=_4Nkye6tpWcC&pg=PA100|year=2011|publisher=PHI|page=100|isbn=9788120342378|access-date=29 September 2018|archive-date=1 July 2023|archive-url=https://web.archive.org/web/20230701075943/https://books.google.com/books?id=_4Nkye6tpWcC&pg=PA100|url-status=live}}</ref><ref>{{cite book|author1=Michael D. Bordo|author2=Marc Flandreau|author3=Jan F. Qvigstad|title=Central Banks at a Crossroads: What Can We Learn from History?|url=https://books.google.com/books?id=cZ0rDAAAQBAJ&pg=PA2|year=2016|publisher=Cambridge UP|pages=1–17|isbn=9781107149663|access-date=29 September 2018|archive-date=1 July 2023|archive-url=https://web.archive.org/web/20230701075943/https://books.google.com/books?id=cZ0rDAAAQBAJ&pg=PA2|url-status=live}}</ref> Napoleon created the [[Banque de France]] in 1800, in order to stabilize and develop the French economy and to improve the financing of his wars.<ref>{{cite book|author=Michael Stephen Smith|title=The Emergence of Modern Business Enterprise in France, 1800–1930|url=https://books.google.com/books?id=zs26hd5keYkC&pg=PA59|year=2006|publisher=Harvard UP|page=59|isbn=9780674019393|access-date=29 September 2018|archive-date=1 July 2023|archive-url=https://web.archive.org/web/20230701080153/https://books.google.com/books?id=zs26hd5keYkC&pg=PA59|url-status=live}}</ref> The Bank of France remained the most important Continental European central bank throughout the 19th century.<ref>{{Cite web |date=2023-07-30 |title=Exploring the Currency of 19th Century France: A Glimpse into the Economic Landscape – 19th Century |url=https://19thcentury.us/19th-century-french-currency/ |access-date=2023-11-02 |website=19thcentury.us |language=en-US}}</ref> The [[Bank of Finland]] was founded in 1812, soon after Finland had been taken over from Sweden by Russia to become a [[Grand Duchy of Finland|grand duchy]].<ref>{{cite web|url=http://www.suomenpankki.fi/en/suomen_pankki/tehtavat/Pages/history.aspx?hl=history|title=History|publisher=Bank of Finland|access-date=28 October 2014|url-status=dead|archive-url=https://web.archive.org/web/20141028111153/http://www.suomenpankki.fi/en/suomen_pankki/tehtavat/Pages/history.aspx?hl=history|archive-date=28 October 2014}}</ref> Simultaneously, a quasi-central banking role was played by a small group of powerful family-run banking networks, typified by the [[Rothschild family|House of Rothschild]], with branches in major cities across Europe, as well as [[Hottinguer family|Hottinguer]] in Switzerland and [[Oppenheim family|Oppenheim]] in Germany.<ref>Niall Ferguson, ''The House of Rothschild: Volume 1: Money's Prophets: 1798–1848'' (1999).</ref><ref>Gabriele Teichmann, "Sal. Oppenheim jr. & Cie., Cologne." ''Financial History Review'' 1.1 (1994): 69–78, [https://www.cambridge.org/core/journals/financial-history-review/article/sal-oppenheim-jr-cie-cologne/2F1E283B5C787E2FC508A7F1ABA24A34 online in English] {{Webarchive|url=https://web.archive.org/web/20180929194901/https://www.cambridge.org/core/journals/financial-history-review/article/sal-oppenheim-jr-cie-cologne/2F1E283B5C787E2FC508A7F1ABA24A34 |date=29 September 2018 }}.</ref>

The theory of central banking, even though the name was not yet widely used, evolved in the 19th century. [[Henry Thornton (reformer)|Henry Thornton]], an opponent of the [[real bills doctrine]], was a defender of the bullionist position and a significant figure in monetary theory. Thornton's process of monetary expansion anticipated the theories of [[Knut Wicksell]] regarding the "cumulative process which restates the Quantity Theory in a theoretically coherent form". As a response to a currency crisis in 1797, Thornton wrote in 1802 ''[[An Enquiry into the Nature and Effects of the Paper Credit of Great Britain]]'', in which he argued that the increase in paper credit did not cause the crisis. The book also gives a detailed account of the British monetary system as well as a detailed examination of the ways in which the Bank of England should act to counteract fluctuations in the value of the pound.<ref>Philippe Beaugrand, ''Henry Thornton, un précurseur de J.M. Keynes'', Paris: Presses Universitaires de France, 1981.</ref>

In the United Kingdom until the mid-nineteenth century, commercial banks were able to issue their own banknotes, and notes issued by provincial banking companies were commonly in circulation.<ref>{{cite web|title=£2 note issued by Evans, Jones, Davies & Co.|url=https://www.britishmuseum.org/explore/highlights/highlight_objects/cm/others/%c2%a32_note_issued_by_evans,_jones.aspx|publisher=British Museum|access-date=31 October 2011|archive-url=https://web.archive.org/web/20120118104053/http://www.britishmuseum.org/explore/highlights/highlight_objects/cm/others/%c2%a32_note_issued_by_evans,_jones.aspx|archive-date=18 January 2012|url-status=dead}}</ref> Many consider the origins of the central bank to lie with the passage of the [[Bank Charter Act 1844]].<ref name="lse" /> Under the 1844 Act, [[bullionism]] was institutionalized in Britain,<ref>Anna Gambles, ''Protection and Politics: Conservative Economic Discourse, 1815–1852'' (Royal Historical Society/Boydell Press, 1999), pp. 117–18.</ref> creating a ratio between the gold reserves held by the [[Bank of England]] and the notes that the bank could issue.<ref name="Poovey">[[Mary Poovey]], ''Genres of the Credit Economy: Mediating Value in Eighteenth- and Nineteenth-Century Britain'' (University of Chicago Press, 2008), p. 49.</ref> The Act also placed strict curbs on the issuance of notes by the country banks.<ref name="Poovey" /> The Bank of England took over a role of lender of last resort in the 1870s after criticism of its lacklustre response to the failure of [[Overend, Gurney and Company]]. The journalist [[Walter Bagehot]] wrote on the subject in ''[[Lombard Street: A Description of the Money Market]]'', in which he advocated for the bank to officially become a [[lender of last resort]] during a [[credit crunch]], sometimes referred to as "Bagehot's dictum".

The 19th and early 20th centuries central banks in most of Europe and [[Bank of Japan|Japan]] developed under the international [[gold standard]]. [[Free banking]] or [[currency board]]s were common at the time.{{citation needed|date=July 2023}} Problems with collapses of banks during downturns, however, led to wider support for central banks in those nations which did not as yet possess them, for example in Australia.{{citation needed|date=July 2023}} In the United States, the role of a central bank had been ended in the so-called [[Bank War]] of the 1830s by President [[Andrew Jackson]].<ref>Bray Hammond, "Jackson's Fight with the 'Money Power{{'"}}. ''American Heritage'' (June 1956) 7#4: 9–11, 100–103.</ref> In 1913, the U.S. created the [[Federal Reserve System]] through the passing of [[The Federal Reserve Act]].<ref>Miklos Sebok, "President Wilson and the International Origins of the Federal Reserve System – A Reappraisal." ''White House Studies'' 10.4 (2011): 424–447.</ref>

Following [[World War I]], the [[Economic and Financial Organization of the League of Nations|Economic and Financial Organization]] (EFO) of the [[League of Nations]], influenced by the ideas of [[Montagu Norman]] and other leading policymakers and economists of the time, took an active role to promote the independence of central banks, a key component of the economic orthodoxy the EFO fostered at the [[Brussels Conference (1920)]]. The EFO thus directed the creation of the [[Oesterreichische Nationalbank]] in [[Austria]], [[Hungarian National Bank]], [[Bank of Danzig]], and [[Bank of Greece]], as well as comprehensive reforms of the [[Bulgarian National Bank]] and [[Bank of Estonia]]. Similar ideas were emulated in other newly independent European countries, e.g. for the [[National Bank of Czechoslovakia]].<ref name=DeCecco>{{cite web |title=Central Banking in Central and Eastern Europe: Lessons From the Interwar Years' Experience |author=Marcello De Cecco |year=1994 |publisher=International Monetary Fund |url=https://www.elibrary.imf.org/view/journals/001/1994/127/article-A001-en.xml |location=Washington DC}}</ref>

[[Brazil]] established a central bank in 1945, which was a precursor to the [[Central Bank of Brazil]] created twenty years later. After gaining independence, numerous African and Asian countries also established central banks or monetary unions. The [[Reserve Bank of India]], which had been established during British colonial rule as a private company, was nationalized in 1949 following India's independence. By the early 21st century, most of the world's countries had a national central bank set up as a [[public sector]] institution, albeit with widely varying degrees of independence.

===Colonial, extraterritorial and federal central banks===
[[File:COLLECTIE TROPENMUSEUM Kantoor van de Javasche Bank in Batavia TMnr 60047649.jpg|thumb|Head office of the Bank of Java in Batavia, early 20th century]]

Before the near-generalized adoption of the model of national public-sector central banks, a number of economies relied on a central bank that was effectively or legally run from outside their territory. The first colonial central banks, such as the [[Bank of Java]] (est. 1828 in [[Batavia, Dutch East Indies|Batavia]]), [[Banque de l'Algérie]] (est. 1851 in [[Algiers]]), or [[Hongkong and Shanghai Banking Corporation]] (est. 1865 in [[Hong Kong]]), operated from the colony itself. Following the generalization of the transcontinental use of the [[electrical telegraph]] using [[submarine communications cable]], however, new colonial banks were typically headquartered in the colonial metropolis; prominent examples included the Paris-based [[Banque de l'Indochine]] (est. 1875), [[Banque de l'Afrique Occidentale]] (est. 1901), and [[Banque de Madagascar]] (est. 1925). The Banque de l'Algérie's head office was relocated from Algiers to Paris in 1900.

In some cases, independent countries which did not have a strong domestic base of [[capital accumulation]] and were critically reliant on foreign funding found advantage in granting a central banking role to banks that were effectively or even legally foreign. A seminal case was the [[Imperial Ottoman Bank]] established in 1863 as a French-British joint venture, and a particularly egregious one was the Paris-based [[National Bank of Haiti]] (est. 1881) which captured significant financial resources from the economically struggling albeit independent nation of [[Haiti]].<ref>{{cite web |website=The New York Times |title=The Ransom: How a French Bank Captured Haiti |author1=Matt Apuzzo |author2=Constant Méheut |author3=Selam Gebrekidan |author4=Catherine Porter |date={{date|2022/05/20}} |url=https://www.nytimes.com/2022/05/20/world/french-banks-haiti-cic.html}}</ref> Other cases include the London-based [[Imperial Bank of Persia]], established in 1885, and the Rome-based [[National Bank of Albania]], established in 1925. The [[State Bank of Morocco]] was established in 1907 with international shareholding and headquarters functions distributed between Paris and [[Tangier]], a half-decade before the country lost its independence. In other cases, there have been organized currency unions such as the [[Belgium–Luxembourg Economic Union]] established in 1921, under which Luxembourg had no central bank, but that was managed by a national central bank (in that case the [[National Bank of Belgium]]) rather than a supranational one. The present-day [[Common Monetary Area]] of Southern Africa has comparable features.

Yet another pattern was set in countries where federated or otherwise sub-sovereign entities had wide policy autonomy that was echoed to varying degrees in the organization of the central bank itself. These included, for example, the [[Austro-Hungarian Bank]] from 1878 to 1918, the U.S. [[Federal Reserve]] in its first two decades, the [[Bank deutscher Länder]] between 1948 and 1957, or the [[National Bank of Yugoslavia]] between 1972 and 1993. Conversely, some countries that are politically organized as federations, such as today's Canada, Mexico, or Switzerland, rely on a unitary central bank.

===Supranational central banks===
[[File:Frankfurt EZB.Nordwest-2.20141228.jpg|thumb|The [[European Central Bank]]'s main building in [[Frankfurt]]]]

In the second half of the 20th century, the dismantling of colonial systems left some groups of countries using the same currency even though they had achieved national independence. In contrast to the unraveling of [[Austria-Hungary]] and the [[Ottoman Empire]] after [[World War I]], some of these countries decided to keep using a common currency, thus forming a [[monetary union]], and to entrust its management to a common central bank. Examples include the [[Eastern Caribbean Currency Authority]], the [[Central Bank of West African States]], and the [[Bank of Central African States]].

The concept of supranational central banking took a globally significant dimension with the [[Economic and Monetary Union of the European Union|Economic and Monetary Union]] of the [[European Union]] and the establishment of the [[European Central Bank]] (ECB) in 1998. In 2014, the ECB took an additional role of banking supervision as part of the newly established policy of [[European banking union]].