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Symposium 2013

The Future of Central Banking and Financial Market Reform

The Challenge

The global financial crisis has revealed regulatory failure in financial markets and demonstrated the urgent need for reform. In particular, it is now widely accepted that in addition to established microprudential policies, macroprudential policies aimed at increasing the stability of the financial sector as a whole are imperative. But an active debate has emerged over what role the central bank should play with this augmented set of policies.

What is the role of unconventional monetary policy in overcoming financial crises and economic slumps. Under what circumstances can it lead to a revival of sustainable long-term growth? How can the associated threat of asset price inflation be avoided?

The traditional pre-crisis view was that monetary policy and financial regulation were separate tasks and should be conducted by separate institutions.

In the post-crisis period, there is disagreement over whether central banks should be actively involved in monitoring and regulating the banking system. What is the scope of monetary policy?

What are the desirable short- and long-term objectives of central banks? Should financial market supervision be located at central banks? How should the central bank deal with potential conflicts of interest if trade-offs between different policy goals arise? Does the additional mandate make central banks more prone to political influence? How can the independence of central banks be effectively protected? Will the additional mandates enhance or endanger the credibility of central banks in maintaining price stability? What extra instruments could central banks use to regulate the financial sector?

This session is part of the issue cluster "Fiscal and Financial Sustainability" and organized in cooperation with Project Syndicate.

    Solutions

    Solution
    Symposium 2013

    Macroprudential regulation should be located at central banks

    Macroprudential regulation should be located at central banks

    Macroprudential regulation should be located at central banks

    Polity, Academia, Business, Civil Society
    Solution
    Symposium 2013

    Central banks should increase the transparency of their decision-making to deal with increased uncertainty and maintain their credibility

    Central banks should increase the transparency of their decision-making to deal with increased uncertainty and maintain their credibility

    Central banks should increase the transparency of their decision-making to deal with increased uncertainty and maintain their credibility

    Polity, Academia, Business, Civil Society
    Solution
    Symposium 2013

    Unconventional policy measures such as quantitative easing should be communicated as temporary measures rather than a paradigm shift

    Unconventional policy measures such as quantitative easing should be communicated as temporary measures rather than a paradigm shift

    Unconventional policy measures such as quantitative easing should be communicated as temporary measures rather than a paradigm shift

    Polity, Academia, Business, Civil Society
    Solution
    Symposium 2013

    Acknowledge the limitations of monetary policy

    Acknowledge the limitations of monetary policy

    Acknowledge the limitations of monetary policy

    Polity, Academia, Business, Civil Society

    Proposals

    Proposal
    Symposium 2013

    The Art of Central Banking: A Proposal on Collateralization & Re-hypothecation

    Summary: To avoid another crisis global monetary authorities should be focusing on expanding the collateral base with assets that have intrinsic value while limiting the ability to re-hypothecate pape ...

    Summary: To avoid another crisis global monetary authorities should be focusing on expanding the collateral base with assets that have intrinsic value while limiting the ability to re-hypothecate paper assets which are nothing but third-party liabilities and which have no intrinsic value. Central banks have been increasing reserves but the velocity of money has been declining. Unless the latter reverses course the global economy may be set on a path of dismal growth if not catastrophic collapse. Dismal real growth rates endanger employment, incomes, and the ability to meet inelastic obligations. We know that the epicenter of modern monetary theory and

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2013

    China’s experience in capital account liberalization

    In February 2012, the PBOC released two policy research reports, in which there are four arguments deserving noticing. First, China is in a period of "strategic opportunity" for capital account libera ...

    In February 2012, the PBOC released two policy research reports, in which there are four arguments deserving noticing. First, China is in a period of "strategic opportunity" for capital account liberalization and hence China’s capital account liberalization should be accelerated. Why? This is the time that “China can take advantage of lower valuations for Western companies”.1 Second, there will be no large risks, if China opens its capital account. In an interview, the author of the reports told the correspondent that "(t)he risk to take the move is not big," citing little likelihood of currency mismatch in commercial banks' assets

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2013

    Research on Complementary currencies

    Much of the main stream economic academia seem to have ignored the fact, that millions of people are using complementary currencies which are based on demurrage instead of interest rates. These curren ...

    Much of the main stream economic academia seem to have ignored the fact, that millions of people are using complementary currencies which are based on demurrage instead of interest rates. These currencies speed up circulation of money and create more social wealth by reducing scarcity phenomena attached to common interest based money. Especially Bernard Lietaer has continuously promoted these new cooperative currencies which more easily link unused resources with unmet needs, creating a more equal distribution of wealth, more social capital and less growth pressure. Lietaer also  promotes dual currency systems, where “normal” money circulates together with “interest free money”.

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2013

    Making central banks serve the real economy

    Central banks should use their ability to create new money and channel it into meaningful investments. Central banks shall supply money for the economy by supplying money for banks. The paradox here i ...

    Central banks should use their ability to create new money and channel it into meaningful investments. Central banks shall supply money for the economy by supplying money for banks. The paradox here is that they lack influence on what banks do with the money. The problem with low key interest rates is that they are not targeted. Quantitative easing measures (QE), such as the purchases of securities by central banks, can help the financial sector in systematic liquidity and solvency problems. QE can also reduce government debt servicing costs by lowering the sky-high interest rates of state bonds. However, the

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2013

    Why banking supervision and monetary policy must be separated

    The global banking crisis exposed the inability of current microprudential policies to prevent systemic financial failure. We urgently need new policies and new institutions to safeguard the overall s ...

    The global banking crisis exposed the inability of current microprudential policies to prevent systemic financial failure. We urgently need new policies and new institutions to safeguard the overall stability of the financial sector. Policymakers agree that the need for macroprudential regulation is imperative but disagree on who will implement it. The core of the current debate is what role the central bank should play within this augmented set of policies and instruments. Should monetary policy and banking supervision be conducted by separate institutions? Or should both tasks be assigned to the central bank? In our view, the arguments in favor

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2013

    Macroprudential Policy: Getting the Architecture Right

    Summary: While there is widespread agreement in the aftermath of the global financial crisis on the need for macroprudential policies, there is little agreement on how to structure or organize it, in ...

    Summary: While there is widespread agreement in the aftermath of the global financial crisis on the need for macroprudential policies, there is little agreement on how to structure or organize it, in general and in Europe in particular. In the wake of the global financial crisis, there is widespread agreement on the importance of macroprudential policies. The traditional approach of supervising individual banks and nonbank financial firms (microprudential supervision) needs to be urgently supplemented, according to this new consensus, by macroprudential supervision in which the correlations among individual risks and systemic consequences are properly taken into account. Failure to do

    Polity, Academia, Business, Civil Society