Central banks enjoy significant ‘franchise value’ through their monopoly to print money. Thus some researchers state that currency at the central bank plays a financial role very similar to capital.
A Central Bank's Financial strengths is defined as 'a net income position and balance sheet that do not undermine the pursuit of its policy commitments’, https://www.imf.org/external/pubs/ft/wp/2014/wp1487.pdf (Andrew Swiston et al). Its policy commitment is to safeguard the macroeconomic stability of the country. The Central Bank usually generates income from stocks, treasury bills, commissions received on foreign exchange transactions, interest earned on foreign currency securities and deposits. Its balance sheet looks different from that of a commercial bank: with liabilities (Bank Notes, Commercial Bank reserves and Capital and reserves) and as assets (Net Foreign Assets, Net Government Balances, Net Central Bank Operations and Net other Items), see balance sheet of the Bank of England https://www.bankofengland.co.uk/-/media/boe/files/ccbs/resources/understanding-the-central-bank-balance-sheet.
As long as the Central Bank can oversee the commercial banking system, manages the currency, the money supply and interest rates so that the inflation is under control and growth is achieved, it is doing well. As key drivers for the financial strength of the Central Bank one can look at the balance sheet components: e.g. the management of Bank Notes and reserves (liabilities) and Foreign Assets and Net Government Operations (assets). There must be a healthy balance sheet and net income position (profit is not required), but also a sound policy, capable bank governors, qualified personnel and a good working relation with the central government.
Dear Olatunji A Shobande in the explanation of your question, you specifically ask wether currency plays the financial role very similar to capital.
There are two kinds of currencies: domestic currency and foreign currency. It is the domain of the Central Bank to print domestic currency, so in theory it can create capital, but must take into account inflation, the interest rate and the growth of the macro economy. With its domestic currency, which is part of its capital, it can buy or exchange for foreign currency if the bank is strong enough. Capital which can be turned into foreign currency plays the role of capital.
In theory a Central Bank doesn't need capital to function, but because it operates in the field of political economy where credibility and influence play a big role, having capital means having a certain level of independence and therefore having credibility and being able to exert influence and function.
Not really, many factor are involved. The presence of global predictors are major drivers. The currency is useless without that main predictors (see International fisher effect transmission mechanism).
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