A central bank is fundamentally a chief bank of a given nation.

The essential responsibilities of the central

bank include issuing and maintaining a stable influx of currency, ensuring optimal employment, and
keeping inflation under control. The primary goal of central banks is to provide their
countries'currencies with price stability by controlling inflation. A central bank also acts as the regulatory
authority of a country's monetary policy and is the sole provider and printer of notes and coins in
circulation. Other tasks of the central bank consist of holding deposits on the reserves of other banks, as
well as overseeing lending and exchange practices of commercial lenders.

The origin of central banking system can be traced back to 1694 when the bank of England came into
being as the first ever central bank. The bank was established to help King William III out of his
government's financial crisis.
Earlier the functions of the central bank included the issue of currency notes, would be performed by
several commercial banks separately. Every bank's notes were different from each other's in color, size,
value and even market good will. That is,the notes lacked uniformity, producing an immense chaos in the
smooth running of the trade. Consequently, the paper currency system was unstable, unreliable, and used
to yield to gold and silver currencies. However, the metallic currency system could not keep pace with the
industrial revolution and later the fast industrialdevelopment and fast pace of trade and industry
phenomenon and resultant commercial banking role spurred the need for a bank to centrally issue
currency notes. So this function fell into the central bank. The shift of this function strengthened the
concept of the financial and economic aspects of the paper currency, uniformity and public confidence.
In the beginning the central bank was mainly confined to issuing paper currency, but at later stages it was
entrusted with other crucial functions like credit control, clearing house, management of public debts,
rediscounting of bills, custodian of foreign exchange, and the like.
History: of BSP

In 1948, the Central Bank of the Philippines was established through Republic Act No. 265, the Central
Bank Act of 1948. Over the years, changes were introduced to make the charter more responsive to the
needs of the economy. Subsequent changes sought to enhance the capability of the Central Bank, in the
light of a developing economy, to enforce banking laws and regulations and to respond to emerging
central banking issues. Thus, in the 1973 Constitution, the National Assembly was mandated to establish
an independent central monetary authority. Later, PD 1801 designated the Central Bank of the
Philippines as the central monetary authority (CMA). Years later, the 1987 Constitution adopted the
provisions on the CMA from the 1973 Constitution that were aimed essentially at establishing an
independent monetary authority through increased capitalization and greater private sector
representation in the Monetary Board.
In accordance with a provision in the 1987 Constitution, President Fidel V. Ramos signed into law
Republic Act No. 7653, the New Central Bank Act, on 14 June 1993. The law provides for the
establishment of an independent monetary authority to be known as the Bangko Sentral ng Pilipinas, with
the maintenance of price stability explicitly stated as its primary objective. The law also gives the Bangko
Sentral fiscal and administrative autonomy which the old Central Bank did not have. On 3 July 1993, the
New Central Bank Act took effect.