Monetary Law Blog

The role of central banks after the crisis

"The current crisis will have far-reaching consequences for the role and responsibilities of central banks. They will need to pay greater and more symmetric attention to financial considerations in framing their monetary policy. They will also need to play an important role in any macroprudential policy framework that is set up - even when they are not responsible for detailed implementation. But wider responsibility requires greater accountability. Strengthened governance arrangements must both ensure accountability and provide central banks with the autonomy needed to conduct monetary policy and financial stability policy."

Abstract of a speech by Mr Jaime Caruana, General Manager of the BIS, to the Observatory of the European Central Bank, on 19 January 2011.

For the full text of the speech, follow this link to the BIS website.

 

What Is A Useful Central bank?

On November 18, 2010 the Norwegian central bank (Norges Bank) held a conference discussing 'What is a useful central bank?'  with an international group of central bankers and academicians. The conference was structured around four topics:

• historical perspectives on central banking (long term perspective and the interwar years);
• perspectives from the emerging economies;
• theory and practice of central banking (fiscal dominance, and design and governance; and
• the future of central banking.

Follow this link for the conference papers and presentations.

 

Irish Central Bank Governor: “total loan losses about 55 per cent of this year’s GDP”

“I’m not sure that it is widely recognized just how big the actual and prospective loan-losses taken account of in the recapitalization of retail banks in Ireland has been.  … the total loan losses come to no less than €85 billion, or about 55 per cent of this year’s GDP.”

This is a quote from the address by Mr Patrick Honohan, Governor of the Central Bank of Ireland, at the International Financial Services Summit 2010, Dublin, 10 November 2010.

Central Banks and Their Role in Macroregulation and Financial Stability: Perspectives From Chile and Bolivia

Central banks’ contribution to financial stability – the experience of Chile
Speech by Mr Enrique Marshall, Board Member of the Central Bank of Chile, at the Central Bank of Bolivia's First Financial Workshop "Macroregulation and Financial Stability", La Paz, 29 September 2010.

The role of central banks in macroprudential regulation – the case of Bolivia
Opening remarks by Mr Gabriel Loza Telleria, Acting President of the Central Bank of Bolivia, at the Primera Jornada de Estabilidad Financiera, La Paz, 29 September 2010.

A changing role for central banks after this global financial crisis?

To what extent will the lessons learned from the global financial crisis started in 2007 affect or even alter the future role and tasks of central banks?  That is the question addressed in a speech by Mr Thomas J Jordan, Vice Chairman of the Governing Board of the Swiss National Bank, at the Welcome Event Master of Banking and Finance, St. Gallen, 22 September 2010.

Mr. Jordan takes a look at this question from three perspectives:

• the extent to which central banks need to undertake a fundamental review of their instruments and objectives in the light of recent events—in particular the effectiveness of the monetary policy strategies and instruments used to date, especially in periods of crisis;
• the regulatory response to deal with potential instabilities within the financial system, including strengthening macroprudential oversight; and
• institutional aspects in the restructuring of the regulatory environment.

 

Basel III: Post-Crisis Reforms to Banking Regulation and Supervision

Inaugural address by Dr. D. Subbarao, Governor, Reserve Bank of India at the FICCI-IBA Conference on ‘Global Banking: Paradigm Shift’ on September 7, 2010.

The role of central banks after the financial crisis

Speech by Mr Jose De Gregorio, Governor of the Central Bank of Chile, delivered at the Bank of Korea International Conference 2010 (Seoul, 31 May-1 Jun).

The mandate and roles of Asian central banks

At the Bank of Korea International Conference 2010 “The changing role of central banks” (Seoul, 31 May 2010), Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, gave a keynote speech on the development of mandates and roles of Asian central banks on a national and regional level.

East African Monetary Union

Opening remarks by Prof Njuguna Ndung'u, Governor of the Central Bank of Kenya, during the East African Legislative Assembly Workshop on the East African Monetary Union, Nairobi, 4 March 2010.

Towards a global financial stability framework

Speech by Hervé Hannoun, Deputy General Manager of the Bank for International Settlements, at the 45th SEACEN Governors'; Conference, Siem Reap province, Cambodia, 26-27 February 2010.

Abstract

A new global financial stability framework is needed to reduce the probability and severity of a future financial crisis. The financial stability framework needs to be global in the sense of being both worldwide and comprehensive, with contributions from prudential, monetary and fiscal policies. Market discipline and microprudential regulation alone cannot achieve financial stability. Monetary and fiscal policies need to contribute by leaning against the build-up of financial imbalances and by responding to busts in a symmetric fashion. Central banks are increasingly aware of the potential for trade-offs between price stability and financial stability in the short run, recognising that these objectives are complementary in the long run. Fiscal policy must be countercyclical and maintain buffers that provide the ability to respond in times of financial system stress. Enhancements to microprudential regulations to increase the resilience of individual financial institutions must be accompanied by macroprudential policies that address the stability of the financial system over time and at each point in time. The need to break with the leverage-led growth model is highlighted.