What is the role of a central bank in maintaining financial stability?

The role of a central bank in maintaining financial stability is crucial. Central banks play a pivotal role in ensuring the stability of a country's financial system by implementing various policies and measures. They monitor and regulate commercial banks, ensuring their soundness and adherence to regulations. Central banks also act as lenders of last resort, providing emergency funding to banks during liquidity crises and maintaining overall financial market stability. They conduct monetary policy, controlling interest rates, and managing inflation to promote economic stability. Additionally, central banks supervise payment systems, manage foreign exchange reserves, and provide essential economic data and analysis to policymakers. Ultimately, by maintaining financial stability, central banks foster confidence in the financial system, encourage economic growth, and protect the overall well-being of the nation's economy.