On the Growing Accountability of Central Banks for Financial Stability-the Macroprudential Perspective

Anna Matysek-Jędrych

doi:10.18559/ebr.2018.4.2

Abstract

The aim of this paper is to identify and assess, on a comparative, intra-country basis, the existing practices and developments in central bank accountability for financial stability, from a new-macroprudential policy-perspective. The paper aims to contribute to the ongoing debate on institutional arrangements for macroprudential policy. The debate as to whether the combination of monetary policy and financial supervision within one institution is not new. Nevertheless it is far from being resolved. The paper points to the need to establish clear, formal and robust mechanisms of central bank involvement in the process of executing macroprudential policy, at least as a data collection and analyzing institution.

Highlights

It is not surprising that the most important changes to economic policy and central banking as a part of it, tend to occur after the most significant and costly financial crises
While macroprudential policy tools were used in a number of countries well before the global financial crisis, the creation of a dedicated macroprudential policy framework seems to be prompted by the crisis experience
The principal objective of this paper is to identify and assess, on a comparative, intra-country basis, existing practices and developments in central banks’ involvement and accountability for financial stability, from a new – macroprudential – perspective

Summary

Introduction

It is not surprising that the most important changes to economic policy and central banking as a part of it, tend to occur after the most significant and costly financial crises. The period following the Great Inflation was the period of concentration on qualitative aspects of central banking, i.e. independence, accountability, transparency and credibility (Capie, Goodhart, Fischer & Schnadt, 1994; Elgie & Thompson, 1998; Wood, 2005). There is a growing consensus in the post-crisis reality, among both economists – academics and policymakers, that there was at least one missing element of the financial safety net during the Global Financial Crisis. This element, which will probably improve the financial stability (or protect against financial instability) is the macroprudential orientation in regulatory and supervisory frameworks (Evanoff, Kaufman, Leonello & Manganelli, 2017; Mizen, Rubio & Turner, 2018). While macroprudential policy tools were used in a number of countries well before the global financial crisis, the creation of a dedicated macroprudential policy framework seems to be prompted by the crisis experience

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