Role of central banks has changed significantly over the years, says BIS Report

May 19, 2009: The Bank for International Settlements (BIS) has released Issues in the Governance of Central Banks, a report that was prepared by the Central Bank Governance Group under the guidance of its then Chairman, Guillermo Ortiz, now Chairman of the Board of Directors of the BIS.

Given that central banks differ significantly in the nature of their functions and in their socioeconomic environments, the report does not intend to set out a single set of “best practices” but instead seeks to present information that will help decision-makers set up governance arrangements that are most suitable for their own circumstances.

The report highlights that the role of central banks has changed significantly over the years. Changes have often taken place in response to persistent policy problems or severe crises. For example, the need to deal with chronic inflation in the 1970s and 1980s prompted the identification of price stability as a formal central objective and led to a significant reworking of governance arrangements. The current global financial crisis could well have equally important implications for central banks, particularly with respect to their role in fostering financial stability. Although it is far too early to know how central banking will change as a result of the crisis, the report takes an important first step in identifying some of the governance questions that the crisis poses.



Commenting on the report, Stanley Fischer, the new Chairman of the Governance Group, highlighted the importance of having central bank governance arrangements that are adapted to modern economic and financial realities and that contain an effective mixture of independence, transparency and accountability.

The report draws on a large body of information on the design and operation of central banks that the BIS has brought together since it initiated work on central bank governance in the early 1990s. Through a new survey conducted specifically for this report, the central banks and monetary authorities that belong to the Central Bank Governance Network provided updates of essential data.

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