Introduction

The first central bank was established in Sweden in 1668, and since then most countries, whether developed or developing, have set up their own central banks.1 The inception of central banks has often been linked with certain tasks delegated to them by their governments, but the role of those banks in stabilising financial markets has been far from clear. This conundrum — how central banks contribute to financial stability — has come under the spotlight again because of the far-reaching effects of the global financial crisis (GFC). Through the mechanism of a comparative study, this book will examine how the GFC has challenged the role played by central banks in maintaining financial stability; it argues that this crisis has, amongst other things, changed central bank regulation2 to strike an improved balance between government and the market.