Financial Management - Bank of England
11 Pages3908 Words184 Views
Added on 2020-01-07
Financial Management - Bank of England
Added on 2020-01-07
ShareRelated Documents
Financial Managementand Institutions
Table of ContentsINTRODUCTION.....................................................................................................................................21. Role of central bank in implementing monetary policy....................................................................22. Current economic environment of Bank of England and effects of monetary policies on financial market....................................................................................................................................................33. Negative rate impacts on central bank effectiveness.........................................................................44. Global issues effect on monetary policy and budget of UK..............................................................55. How authorized deposit institution deal and corporation of Basel Accords with credit, liquidity, operating and interest rate risks in UK ................................................................................................6CONCLUSION..........................................................................................................................................7REFERENCE.............................................................................................................................................7INTRODUCTION Central bank of any country is a financial institution which provides monetary and managementon nation's bank facilities for government of the nation. It is tool to making plans and monitoring onmonetary policies same as issues currency of country. This report is to understand central bank
functions and regulatory monetary policy relations with financial institutions of UK. Bank of Englandis world's second largest central bank of UK. The bank issues currency and regulates monetary policyand responsible for management of all commercial banks. This report will present economicenvironmental effects during fluctuations in interest and tax rates. With the help of Basel Accordssolution for reduction in interest risks and techniques for economic development would be able toexpress through this project report. Therefore, the report will provide an overall review on Bank ofEngland that how the bank face global issues as well management of currency and monetary policyimplementation. A great knowledge would be acquired related to financial markets of United Kingdomand Central bank's interfere and manner to sustain its position worldwide. 1. Role of central bank in implementing monetary policyMonetary policy of UK refers to process in which Bank of England makes plans to manage supply of currency and takes action for adjustment during flexibility in inflation rate or tax rates. It aims to price stability and global financial growth. Bank makes decision by analyzing GDP and proceeds to business expansion for all organizations of the country (Schularick. and Taylor, A., 2012). The central bank of UK provides limit to financial institutions for interest rates same as maintain UK economic market. Monetary policy has instruments involves short term interest rates and banks reserves. It plays great role to implement monetary policy of UK.To gain price stability:- Bank of England manages supply of money and issue currency of UK.By analyzing all aspects regarding pricing and economic terms, central bank leads to decisionmaking process for supply of pounds. On focus upon stability of price during inflation ordeflation bank makes planning strategies for economic balance. It is helpful to monitor financialflexibility (Galí, J., 2015). Through open market operation approach, institution tries to adjustsupply and sources of money. The central bank plays role to create and follow a structuralframework to short term interest rates at repos. During inflation, bank reduces and provideguidelines to other financial institutions to decrease interest rates (Jiménez. and et.al., 2014). Assimilar, during deflation time, it increases or guide other banks to improve interest rates.Therefore, it remains helpful to price and economic stability of UK financial market.Monetary management:- In management of currency and money related planning Bank ofEngland plays vital role to plan and monitor over monetary issues. Through monetary policyrules and regulations, bank create a positive environment to maintain monetary issues as permake highest position in international market. Money related terms involves CRR, SLR, reporate and reverse repo rate are manged by central bank of UK. According to market situations, tohandle inflation or deflation, bank changes in rates and reserve rates for other commercial anddeveloping banks of the country. Hence, a stability occurs economically considers beneficial for
all financial institutions including business enterprises and all kinds of entities. To maintain foreign exchange policy:- Monetary policy consists helpful to create a structureregarding exchange rate regime (Gertler. and Karadi., 2015). Dynamics in foreign exchange rateis useful for supporting in proper structure to balance economy of the nation. More fluctuateexchange rate influences high level of economic stability. On behalf of financial balance, somecountries do not fix foreign exchange rate to create balancing atmosphere through systematicmonetary decisions.To bridge BOP Deficit:- BOP deficit refers to disturbance in balance of payment (Auerbach, A.and Gorodnichenko., 2012). It occurs due to increase in spending and decrease in outcomes orearnings. Therefore, it leads to economic instability of UK production and profit. Bank ofEngland plays role to reduce the issue by increase in exports and decrease in imports. Forfinancial development and constant growth of UK in international market, central bank ofcountry focuses to make bridge between spending and gaining of productions. It proceed toimprove monetary structure of the world as well tries to create link and healthy and positiveenvironment globally.Thus, Bank of England of UK market plays a vital role to implement monetary policy and results toeconomic stability of country. The central bank concentrates on above mentioned factors for financialgrowth for all UK institutions.2. Current economic environment of Bank of England and effects of monetary policies on financialmarketEconomic environment of any country is on the basis of financial stability (Arrow, K. andKruz., 2013). Effect of monetary factors as interest rates and tax rates decided by central bank of UKcreates atmosphere of inflation and deflation. Market position involves production and distribution ofsupply of money and price strategy of goods and services depends on demand (Hansen, A., 2013).Consumer demand effects fluctuation of money supply. Analysis of economic environment presentsfinancial position of nation. Environment of UK is fluctuated by recognition of past years economy andlatest financial position. Recently, the economic condition of the country seems at downwardsdirection. The country is suffering from inflation that is raise in price situation. It is due to imbalance inproductivity and profitability of resources obtained in UK market. Day by day price of goods andservices and increasing in imports. Recently, the bank rate of UK is cut down to 0.5% which was0.25% in August. The Bank of England determines the additional cause of the problem is
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
Deflation Threat in Australian Economy: Role of RBA and Monetary Policylg...
|14
|2987
|241
Role of Reserve Bank of Australia in Managing Deflationlg...
|14
|3046
|419
Economics Assignment - Global Financial Crisislg...
|10
|2964
|455
Economic Assignment: Inflation, Interest Rate and Monetary Policy Committee in UKlg...
|14
|2797
|421
RBA and Monetary Policy: Role, Effects, and Risk Managementlg...
|9
|3252
|90
Monetary Policy and the Australian Economy: An Analysis of the Reserve Bank's Decisionlg...
|18
|3642
|349