Many counties have the government and banks working closer to each other. The reason behind it is that the banks help in the economic development of a country. On the other hand, the government has to set rules that will make the economic development and bank sustenance possible.
Central banks play an influential role in the government. It works closely with the treasury and manages other banks. The treasury will have most suggestions especially those that have to do with fund management coming from the central bank.
There are specific roles that the banks play to assist the government achieve its mission. The government will also take specific actions to ensure that the bank operations are effective. Some of the things that banks and governments do to work together are as follows.
Development of policies
The government develops policies about how the banks will operate. It helps in making laws and certain provisions and conditions that the central banks will adhere to. The work of the central banks if to look at the policies and see if they can be implemented.
On the other hand, the central banks will come with policies that will govern bank operations. The role of the government in this case is to assess whether the policies are friendly and then approve them for implementation.
If there are any issues arising from the policies under implementation, it is the role of the two institutions to work together for a solution. A good consensus is one that will involve the two institutions at once.
Macroeconomic challenges management
We have the central bank and other institutions that serve as banks. Some of these macroeconomic institutions are those that have to do with the lending money. The role of the central bank is to propose rules to the government that will manage the whole lending process.
Both the government and the banks will work together towards the management of the lending institutions. Another thing that is likely to happen is that the central bank will help to manage the macroeconomic institutions.
They are responsible for monitoring of other small banks and institutions. In case the bank is experiencing challenges then the work of the central bank is to take control and implement immediate rescue measures.
Advisory services
The government and the central bank have to work closely and consult each other. Before the government implements anything, the central bank has to take an active role in advisory. The dame thing happens with the central bank as it has to consult the government.
In a way, the government has to implement measures that will serve the bank and itself. Bad measures will have a direct effect on both the government and the banks. when implementing measures, the government has to get the accurate information then take the measures as per advice.
Sharing of responsibilities
The government and the banks work together. Therefore, they share responsibilities and work together so that they together deliver a reliable performance. Central bank has to know the limits and the government has to know its limits too.
By doing so the service delivery remains excellent. The government has to use the bank accounts to keep its money. It is the role of the bank to know when the government needs to do something and ensure that they have the resources they need.
Sharing roles and working together as a team is good as it makes the processes flow. Chances of having minor challenges such as delayed payments and unknown procedures reduce when these institutions work together.
Development role of the bank
The bank has a role to play to manage the development activities by the government. At times the bank funds the government activities in agreement terms. Collection of revenue is another thing that involves the three bodies.
The revenue authority and the bank have to work together under a framework that the government provides. After collection and submission of reports the government gets to a point of doing its projects.
It can give directives to the central bank to ensure that the funds for the project are available. Such an agreement is good as it ensures that there is ethical use of funds.
Grouping of institutions
Financial institutions need grouping so that they become easier to identify. We have to know the large institutions and the small ones. You have to choose a criteria that serves the role. Under the governments direction the central bank manages to do so.
Each business is also classified at the right place so that they do effective business. The government puts all these institutions at a place that they will deliver. Such classification makes the process of tax collection effective.
When the government and the banks do classification of the institutions, central bank takes charge. It ensures that the institutions are serving as they are expected. It takes control of the functionality of the institutions making them deliver as the government expects.
Capitation monitoring
If the bank does not exercise capitation monitoring and balance, there are high chances that the bank will fail. The work of the central bank is to look at the smaller banks so that they do proper capitation balance. Capital balancing means that the banks will work under the directive of the central bank.
In case the bank does business that is not clear, the central bank takes over the bank. By doing so the chances of having the banks and other institutions falling lower. We will therefore have the banks surviving for the longest time.
Balancing the regions institutions
The central bank and the government have to ensure that the institutions are balancing. It is a measure that ensures that the citizens of a country have access to the institutions. Before a bank decides to open a branch in a part of the country it has to assess its importance.
Such assessment will help to ensure that each bank has a proper location. It will also ensure that one or more banks are not congested in one place. In most instances they will use the population to set the branches.
Areas with many people will have many branches as opposed to the areas that have fewer people. The government will use its demographics to help the central bank to do the distribution work. One good thing with the central bank is that it can assist the banks establish the various institutions and do the management until they are stable
Conclusion
The government and the bank have a role to play collectively for the success of a country. Each institution has a role to play that promotes the working and togetherness. As a result the bank and the government achieve success in running the development projects. Working together is also good as the citizens enjoy balanced and equal financial and economic rights.
