Text 2. The Deutsche Bundesbank

The Deutsche Bundesbank (German Federal Bank) is the central bank of the Federal Republic of Germany and as such part of the European System of Central Banks (ESCB). Due to its strength and former size, the Bundesbank is the most influential member of the ESCB. Both the Deutsche Bundesbank and the European Central Bank (ECB) are located in Frankfurt am Main. It is sometimes referred to as "Buba" for Bundesbank

The Deutsche Bundesbank, being the central bank of the Federal Republic of Germany, is an integral part of the European System of Central Banks (ESCB). It shall participate in the performance of the ESCB's tasks with the primary objective of maintaining price stability, and shall arrange for the execution of domestic and international payments. In addition, it shall discharge the duties assigned to it under this Act or other legislation

Unlike other central banks such as the Bank of England and the U.S. Federal Reserve (but like the ECB), the Bundesbank is not officially responsible for maintaining the stability of the financial system and is not a lender of last resort. Based on the Bundesbank Act and the ECB Statute, the Bundesbank has four areas of activity, which it mostly handles jointly with the ECB:

the Bundesbank as a note-issuing bank;

the Bundesbank as the banks' banker (clearing house and bank supervision);

the Bundesbank as the state's banker;

the Bundesbank as the manager of currency reserves.

The Bundesbank as a note-issuing bank. As a note-issuing bank, the Bundesbank provides the economy with cash, and ensures the physical circulation of cash. It checks the cash delivered by banks and money transport companies, removes counterfeit money from circulation and hands it to the police. It changes D-Mark holdings still in circulation, without any time limit and replaces damaged or mutilated note. It also issues information on the safety mechanisms for notes and coins and issues a weekly bulletin on the volume of cash in circulation.

The Bundesbank as the banks' banker. In relation to the commercial banking system, the Bundesbank has two functions:

The Bundesbank is a refinancing source and clearing house for the commercial banks. The commercial banks can use what are known as "refinancing instruments" to cover their needs for central bank money through the Bundesbank and the ECB. The bank also helps to regulate commercial banks.