How would a country design and implement its own banking system?
Banking
Asked by Question Bot01/Jan/20161 answer
1 Answer
F
Faisal Khan
Answered 01/Jan/2016
In recent years when new countries emerged, the first and foremost tasks is to setup a monetary authority: a central (or reserve) bank.
BIS (Bank of International Settlements) in Basel, Switzerland is one such place many countries go to, to help them define the framework for establishing the central bank, based on the Basel II and now Basel III framework.
Some countries in their infant stages, opt to co-share central banking functions with a neighboring central bank, till such time they are mature enough to host one of their own. Examples of such are Eurosystem in the ECB, Eastern Caribbean Central Bank that provides reserve banking to eight island nations, Central Bank of West African States which provides the same to eight countries in Africa, etc.
The framework is extremely important as it sets the ground rules as to what the various banking functions are, who does what, etc. These are supplemented by various laws and regulations so that licensee (i.e. banks who wish to establish themselves under the umbrella of the central bank) know which rules to follow.
The next step is to have association with other central banks so that ledgers (for wealth/value) can be exchanged with other countries.
Furthermore, central banks would need to have themselves or the banks they regulate connected to various payment services networks (like SWIFT), Visa/MasterCard, Interbank networks, etc.
In most cases one of the primary functions of the central bank would be settlement, this could be an RTGS system or some form of net deferred settlement. The central bank could do this themselves or designate one of the licensee bank to run the settlement system till such time the RTGS function comes back to the bank.
BIS (Bank of International Settlements) in Basel, Switzerland is one such place many countries go to, to help them define the framework for establishing the central bank, based on the Basel II and now Basel III framework.
Some countries in their infant stages, opt to co-share central banking functions with a neighboring central bank, till such time they are mature enough to host one of their own. Examples of such are Eurosystem in the ECB, Eastern Caribbean Central Bank that provides reserve banking to eight island nations, Central Bank of West African States which provides the same to eight countries in Africa, etc.
The framework is extremely important as it sets the ground rules as to what the various banking functions are, who does what, etc. These are supplemented by various laws and regulations so that licensee (i.e. banks who wish to establish themselves under the umbrella of the central bank) know which rules to follow.
The next step is to have association with other central banks so that ledgers (for wealth/value) can be exchanged with other countries.
Furthermore, central banks would need to have themselves or the banks they regulate connected to various payment services networks (like SWIFT), Visa/MasterCard, Interbank networks, etc.
In most cases one of the primary functions of the central bank would be settlement, this could be an RTGS system or some form of net deferred settlement. The central bank could do this themselves or designate one of the licensee bank to run the settlement system till such time the RTGS function comes back to the bank.