What aspect of banking does a central bank oversee?

The central bank plays a crucial role in overseeing the performance of commercial banks, which is essential for maintaining financial stability in the economy. This oversight includes monitoring the soundness of commercial banks, ensuring that they adhere to regulatory standards, and managing monetary policy to influence interest rates and liquidity in the banking system. By overseeing commercial banks, the central bank helps to ensure that they operate efficiently and can meet their obligations to depositors, thereby fostering trust in the financial system.

The responsibilities of the central bank may also extend to regulating the broader banking system by conducting stress tests, providing guidance on risk management, and acting as a lender of last resort during times of financial distress. This oversight helps to mitigate systemic risk and prevent banking crises, which can have profound impacts on the economy.

Regarding the other choices, while the central bank does influence the pricing of goods and services indirectly through monetary policy, it does not manage the pricing itself. Additionally, the regulation of stock markets and the management of fiscal budgets are typically handled by other government entities, such as securities regulatory authorities and fiscal policy agencies, respectively. Therefore, the central bank's primary focus is indeed on the performance and stability of the commercial banking sector.