Banks’ Roles in Averting or Resolving Financial Crises

Banks are the main financial intermediaries not only in the national but also in the global economy. Accordingly, the progressive development of the international economic system with all its connections and interdependencies depends on how stably and efficiently their activities are organized. To prevent financial crises and create conditions for an effective exit from them, central banks often take on financial obligations to ensure the liquidity of the banking system and prevent the collapse of economies due to the lack of resources. In many models of regulation, the central bank is a monetary authority in the strict sense, and the powers of banking regulation and supervision are entrusted to another authority. Therefore, the absence of proper coordination and information exchange is an obstacle to the way out of economic decline, and the empowerment of central banks as universal systems of monetary regulation plays an essential role in averting or resolving financial crises.

The role of the Federal Reserve Bank is also essential in solving the issue of the financial crisis. Due to the deduction of a certain percentage of the amount of attracted deposits by private banks to the Bank’s reserve account, funds are formed, which the Federal Reserve System can use to combat the crisis. This bank can control money injections into the market and coordinate lending rates, thereby directly influencing the stability of the treasury. Measures to reduce taxes, increase the profitability of specific companies, and other operations are part of the scope of the Federal Reserve Bank’s activities. Thus, this authority can also have a significant impact on the prevention or resolution of financial crises in the case of competent and timely steps.

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StudyCorgi. (2023, May 24). Banks’ Roles in Averting or Resolving Financial Crises. https://studycorgi.com/banks-roles-in-averting-or-resolving-financial-crises/

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StudyCorgi. (2023) 'Banks’ Roles in Averting or Resolving Financial Crises'. 24 May.

1. StudyCorgi. "Banks’ Roles in Averting or Resolving Financial Crises." May 24, 2023. https://studycorgi.com/banks-roles-in-averting-or-resolving-financial-crises/.


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StudyCorgi. "Banks’ Roles in Averting or Resolving Financial Crises." May 24, 2023. https://studycorgi.com/banks-roles-in-averting-or-resolving-financial-crises/.

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StudyCorgi. 2023. "Banks’ Roles in Averting or Resolving Financial Crises." May 24, 2023. https://studycorgi.com/banks-roles-in-averting-or-resolving-financial-crises/.

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