A central bank is the premier financial institution in an economy.  Its primary functions are to formulate and implement monetary policies and to exercise discretionary control over the monetary system.  Monetary policies are designed to achieve various objectives namely, sustained and stable economic growth; a high level of employment; stability in the purchasing power of the local currency; and a viable balance of payments position.  In small, open developing countries like Solomon Islands, these objectives could be conflicting and often time involve some trade-offs.

Central Bank of Solomon Islands (CBSI) was established in February 1983 under the Central Bank of Solomon Islands Act 1976 which was amended in 1985 to, amongst other things, strengthen the Bank’s supervisory capabilities and expand its central banking functions.  Besides being charged with the responsibility of acting as Banker to the Government and Commercial Banks, the Central Bank, as agent for the Government, is responsible for conducting monetary policy.

The Central Bank of Solomon Islands Act states that it shall be the duty of the Bank:

• To regulate the issue, supply, availability and international exchange of money;
• To advise the Government on banking and monetary matters;
• To promote monetary stability;
• To supervise and regulate banking business;
• To promote a sound financial structure; and
• To foster financial conditions conducive to the orderly and balanced economic development of Solomon Islands