Theory and Practice of Central Banking Evolution · One-liners

1 Which is recognised as the world's first central bank and in which year was it established?

Sveriges Riksbank, Sweden, established in 1668.

2 In which year was the Riksbank endowed with the monopoly of note issue?

In 1897.

3 In which year was the Bank of England founded and under what instrument?

1694, under a Royal Charter of the United Kingdom.

4 By what nickname is the Bank of England popularly known?

The Old Lady of Threadneedle Street.

5 Who initiated the Bank of England and how much did he raise?

Scotsman William Paterson, who raised £1.2 million by subscription and lent it to the Government.

6 Which crisis did the Bank of England survive, marking the first practical lender-of-last-resort exercise?

The South Sea Bubble crash of the 1720s.

7 Which Act granted the Bank of England a monopoly of note issue in England and Wales?

The Bank Charter Act, 1844.

8 When was the Bank of England nationalised and when given operational independence?

Nationalised in 1946; granted operational independence in 1997 by Chancellor Gordon Brown.

9 When was the Banque de France established and where is it headquartered?

1800, headquartered in Paris.

10 For how long and where was the Banque de France first granted exclusive note-issue privilege?

In Paris for 15 years; extended to the whole of France in 1848.

11 When was the Banque de France nationalised and privatised?

Nationalised in 1946 and privatised in 1993.

12 In which year was the Banco de Portugal established?

1846.

13 When was the Reichsbank of Germany established and by which bank was it succeeded?

Established 1876; succeeded by the Bundesbank in 1957 under the Bundesbank Law.

14 In which year was the Bank of Italy founded?

1893.

15 Which Act established the US Federal Reserve System and in which year?

The Federal Reserve Act, 1913.

16 The Federal Reserve was established primarily in response to which event?

A series of financial panics, particularly the Panic of 1907.

17 What three monetary policy objectives does the Federal Reserve Act set?

Maximum employment, stable prices and moderate long-term interest rates.

18 Which two of the Fed's objectives are termed the dual mandate?

Maximum employment and stable prices.

19 How many members are on the Fed Board of Governors and what is a full term?

7 members; a full term is 14 years.

20 How many regional Federal Reserve Banks exist and how many presidents vote on the FOMC?

12 regional banks; only 5 presidents vote (NY Fed permanent + 4 rotating).

21 To whom does the Fed remit its annual profits and after what dividend?

To the US Treasury, after a 6% statutory dividend on member banks' capital and a surplus account.

22 How much did the Fed earn in 2020 and how much was remitted to the US Treasury?

Earned about $88.6 bn; remitted $86.9 bn to the US Treasury.

23 In which countries and years were reserve requirements first introduced as a direct monetary tool?

In the US from 1933 and in Germany shortly after WWII.

24 How many central banks existed at the turn of the 19th century versus today?

About a dozen (~12) then; 160+ central banks today.

25 What was the prime driver of early central banks?

War finance.

26 What does the mnemonic WIN-LORD stand for?

War finance, Internal value, Note-issue monopoly, Lender of last resort, Oversight, Regulation, Development.

27 What is Bagehot's dictum from Lombard Street (1873)?

In a panic, lend freely, at a high (penal) rate, against good collateral.

28 What problem does Bagehot's penal pricing address?

The moral hazard of complacent banks expecting bailouts.

29 What is Goodhart's Law (1975)?

Any observed statistical regularity tends to collapse once pressure is placed on it for control purposes.

30 What did Kydland-Prescott (1977) describe?

Time-inconsistency — discretionary policy gains short-run output at the cost of long-run inflation.

31 What modern triad supports central banking credibility?

Independence, transparency and accountability.

32 On what date did the world lose its monetary anchor and why?

15 August 1971 — the Nixon Shock, when the US delinked the dollar from gold, ending Bretton Woods.

33 When did India formally adopt Flexible Inflation Targeting?

In 2016.

34 What does the fiscal dominance problem refer to?

Financing fiscal deficits forces the central bank to create excess money, fuelling inflation.

35 Which two examples question the come-of-age view of central bank independence?

Two currencies in Iraq in the 1990s and the Bank of Japan's deflation episode.

36 In the UK, which body was set up in 2000 to take supervision outside the BoE?

The Financial Services Authority (FSA), 2000.

37 How was prudential supervision reabsorbed into the BoE post-GFC?

Via the Prudential Regulation Authority (PRA) within BoE in 2013.

38 Which body conducts financial supervision within the RBI?

The Board for Financial Supervision (BFS).

39 What are the four classical pillars of a modern central bank?

Monetary policy, banker to banks, banker to the Government and developmental function.

40 What two values of currency does note-issue monopoly aim to maintain?

Internal value (purchasing power) and external value (exchange rate).

41 How does the currency-to-deposit ratio differ between developing and developed economies?

Up to about 80% in some developing countries versus less than 10% in developed economies.

42 How do central banks prevent moral hazard in lender-of-last-resort operations?

By rigorous balance-sheet scrutiny and support only at a penal rate of interest.

43 What does the 4 + 3 Function Stack comprise?

4 classical (monetary, banker to banks, banker to Govt, developmental) + 3 modern (financial stability, payment-system oversight, currency issuance including CBDC).

44 For most of 1970 to October 1979, what operating target did the Fed rely on?

The federal funds rate.

45 What is the latecomer's advantage of transition economies?

They could choose from multiple frameworks and start on a clean slate (post-1990 Eastern Europe).

46 Which Act governs the RBI and when did the RBI commence operations?

The Reserve Bank of India Act, 1934; operations commenced on 1 April 1935.

47 Which commission recommended the establishment of the RBI?

The Hilton-Young Commission, 1926.

48 When was the RBI nationalised?

On 1 January 1949, under the RBI (Transfer to Public Ownership) Act, 1948.

49 Which section introduced Flexible Inflation Targeting in the RBI Act and what is the target?

Section 45ZA (2016 amendment); CPI target of 4% with a tolerance band of ±2%.

50 How many members are on the Monetary Policy Committee and how are they split?

6 members — 3 RBI and 3 Government-nominated; Governor has the casting vote.

51 Under which section of the RBI Act does the BFS function and from when?

Section 58A; the BFS was set up in 1994.

52 What did the 2008 GFC add as a co-equal objective for central banks?

Financial stability, alongside price stability.

53 Name examples of unconventional monetary policy tools deployed post-GFC.

Quantitative easing (QE), forward guidance and negative interest rates.

54 Which Indian banks are designated as D-SIBs?

SBI, HDFC Bank and ICICI Bank.

55 On what dates did the RBI launch wholesale and retail e-Rupee pilots?

Wholesale on 1 November 2022 and retail on 1 December 2022.

56 When did the RBI join the Network for Greening the Financial System (NGFS)?

In April 2021.

57 When was the RBI Framework for Acceptance of Green Deposits issued?

In June 2023 (effective 1 June 2023).

58 From which financial year do climate-related disclosures apply for SCBs and large NBFCs?

From FY 2025-26 onwards under the Disclosure Framework on Climate-related Financial Risks, 2024.

59 Distinguish physical risk from transition risk in climate finance.

Physical risk = floods/heat-waves damaging collateral; transition risk = policy/technology change stranding carbon-intensive assets.

60 What is the BIS and where is it located?

The Bank for International Settlements, Basel — the central bank of central banks.

61 Which body is the post-G20 (2009) coordinator of global financial standards?

The Financial Stability Board (FSB).

62 Which IMF code (1999) covers transparency in monetary and financial policies?

The IMF Code of Good Practices on Transparency in Monetary and Financial Policies.

63 What is the RBI repo rate as of June 2026 and when was the last cut?

5.50%, following a 50 bps cut on 6 June 2025, held steady with a neutral stance.

64 What are the SDF and MSF rates around the repo corridor?

SDF 5.25% and MSF 5.75%, a symmetric ±25 bps corridor.

65 What are the current CRR and SLR levels?

CRR at 4.00% (after a 50 bps phased cut from December 2024) and SLR at 18.00%.

66 Who chairs the MPC as of June 2026 and when did he take office?

Governor Sanjay Malhotra, who assumed office on 11 December 2024.

67 For which block was the 4% ± 2% CPI target last renewed before the 2026 review?

For FY 2021-22 to FY 2025-26 (renewed March 2021).

68 What change did the Banking Laws (Amendment) Act, 2025 enable for accounts?

Up to four nominees per account.

69 What do the ECB and RBNZ have as their primary objective, unlike the Fed's dual mandate?

A single objective of price stability.

70 What is the RBI's post-2016 objective per the amended RBI Act?

Price stability while keeping in mind the objective of growth.

One-linersTheory and Practice of Central Banking Evolution