Jerome Powell: Financial stability and central bank transparency

Speech by Mr Jerome H Powell, Chairman of the Board of Governors of the Federal Reserve System, at the "350 years of Central Banking: The Past, the Present and the Future", a Sveriges Riksbank anniversary conference sponsored by the Riksbank and the Riksdag, Stockholm, 25 May 2018.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you for inviting me here to celebrate this important milestone. Today is a special day for all of us, since the founding of the Riksbank 350 years ago marked the beginning of central banking.¹ As we meet to discuss the challenges and opportunities the future may hold, it is worth pausing to note that the three and a half centuries since the Riksbank’s founding have seen economic growth and dynamism the breadth and duration of which have been unprecedented in world history. The Swedish innovation we celebrate today, I believe, is a vital part of the financial foundations that support the continuation of rising prosperity.

In my comments today, I will explore the road ahead for public transparency and accountability of central banks in a time of intense scrutiny and declining trust in public institutions in many places around the world. As you know, the importance of transparency and accountability to monetary policymaking was recognized and became firmly entrenched in practice over the past few decades. The Riksbank has been a leader in this transparency revolution. Today I will focus on the less-often emphasized but critically important role transparency and accountability play in regulatory and financial stability policies.

To preview my conclusions, public transparency and accountability around both financial stability and monetary policy have become all the more important in light of the extraordinary actions taken by central banks in response to the Global Financial Crisis. Financial stability policymaking has evolved from managing individual crises as they arise to establishing a policy framework that emphasizes prevention. This framework now includes measures to increase the resiliency of the financial system; enhanced monitoring of financial institutions and of building risks to the system; and measures, such as resolution planning, that require firms to take steps today to better prepare for future episodes of stress. These innovations have placed special demands on transparency and accountability, and we have worked hard to explain them to the public. The framework is still evolving, and we will need to be open to making changes and to new ways to enhance transparency and accountability.