Earlier, even in the absence of the central banks, depositors were able to monitor and understand economic developments out of their own experience. The need for a central bank-like lender was raised initially to support small and undiversified banks which were in 'panic'. the Central Bank evolved as a response to the inability of the bank coalitions to cope with panics. The services rendered by the Central Banks shall never disappear from economic history. The purpose for which they were specifically created, has been achieved. Their functions range from the original task of being the Lender of Last Resort to managing their domestic economies.
Originally, central bank-like institutions were created to solve the 'panics' in the banking system caused by depositors. They were created to work for a particular situation, despite the existence of the governments.
Institutional set ups played the role of central banks, prior to the birth of the existing central banks. Though the origin of the `Central Bank' is difficult to trace or explain, it was formed mainly due to the panics and failures in the banking system. In earlier days, depositors created 'panic' in the banking system in the form of monitoring the position of their deposit money and the liquidity position of their banks. As a result, the banking system always put up with this disturbance.
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