Hence, the key policy functions of a central bank should perforce be geared towards the attainment of its primary objective and all systems, within and outside, should be aligned to ensure it. It is, therefore, necessary to review and monitor the working of the key policy functions of a central bank continuously in order to diagnose the impending risks and take appropriate prescriptive measures. This function requires a special type of auditing of the key policy functions of a central bank. The irresponsible use of a central bank’s discretionary powers Central banks are privileged institutions in the sense that they can acquire assets by creating liabilities at their own discretion. No other organisation enjoys that kind of a discretionary power. If others are desirous of acquiring assets by assuming liabilities (in other words, by borrowing from others), they have to go along a tedious path. They have to do so by establishing their creditworthiness before prospective lenders and after complying with tedious legal and market-established procedures. The lenders too would lend them not because of being subject to any compulsion, but upon their free will, having assessed the risk and the profitability of the transaction involved. But, central banks could acquire assets just by making book entries. They could issue currency and get others to part with their assets in exchange for that currency.
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