While the oldest central banks in the world claim a lineage stretching back to the late 1600s, central banking in the modern sense is a relatively recent phenomenon, making its first appearance in the second half of the nineteenth century. Even then, not that many central banks were around. In 1900, there were no more than eighteen (Capie 2003: 373). By that time, what constituted a central bank had come to be defined by a common set of core functions. These included a responsibility for monetary (i.e., price and exchange rate) stability, support for financial stability (if necessary, by acting as lender of last resort), and, in some cases, the domestic note-issuing monopoly. The rise and spread of modern central banking was closely intertwined with the process of nation building and political emancipation throughout the nineteenth and twentieth centuries. As new nation-states were created, setting up a central bank was often part of defining their identity. By the beginning of the twenty-first century, the number of central banks had reached almost 180, nearly as many as there were independent states, and ten times as many as 100 years earlier.

Central bank cooperation is as old as modern central banking itself. To be sure, the mandate of each central bank – to preserve monetary and financial stability – is by definition a domestic one. But in an increasingly interdependent world economy, the international dimension plays a key role, particularly for the smaller economies.