The recent financial crisis has raised a number of important questions concerning central banks' role in the prevention, management and resolution of financial crises. As the crisis unfolded, a number of central banks were confronted with unusually challenging circumstances, which required a sharp expansion in the use of traditional intervention tools and the introduction of entirely new ones. At the same time, the public debate about the appropriate role of central banks in the financial stability arena and their relationship with other relevant bodies intensified.
The Central Bank Governance Group recognised that such events were likely to lead to a reconsideration of the mandates of central banks in the area of financial stability and commissioned a Study Group to evaluate the specific governance implications of such a reconsideration. The resulting report explores the implications of the crisis for the financial stability mandates of central banks. This includes looking at the implications for autonomy and governance of allocating macroprudential responsibilities to central banks and changing their capacity to provide support to the financial system. A particular focus is the governance arrangements needed for the effective and sustainable conduct of core monetary policy functions in combination with the addition of an explicit mandate to contribute to the stability of the financial system.
Given that central banks differ significantly in the scope and nature of their functions, and in the political and economic conditions in which they operate, the report does not try to establish a set of best practices or recommendations. Instead, it constitutes a "roadmap" that discusses existing practices, highlights some of the limitations and strengths of such practices, and traverses some possible organisational solutions to specific challenges.
The new arrangements that are being put in place in a number of countries, and that are planned for others, neatly illustrate with live examples most of the range of possible organisational solutions that are identified and discussed. Accordingly, extensive coverage of these new arrangements is provided.