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Who does a bank turn to when it runs out of cash? Another bank. But what happens when every bank panics at once? That's why we have central banks. The idea grew slowly. Sweden's Riksbank, founded in 1668, is the oldest still running. In 1694, the Bank of England was created to lend money to the government for war. Over time, it became the bank for banks. In 1873, the writer Walter Bagehot set out the rule for a crisis: lend freely to sound banks, against good collateral, at a high rate. That is the lender of last resort. America learned the hard way. After the Panic of 1907, it created the Federal Reserve in 1913. India's Reserve Bank opened in 1935. Today, central banks issue currency, set interest rates, and keep the system standing when trust shakes. Free lesson: Basics of Banking, Topic 8, at Malla Banking Academy. Next: The Gold Standard and Bretton Woods.