Running the Bank of Central Banks

By Engelen, Klaus C. | The International Economy, May 2001 | Go to article overview

Running the Bank of Central Banks


Engelen, Klaus C., The International Economy


TIE contributing editor Klaus Engelen interviews Andrew Crockett, General Manager, Bank for International Settlements.

TIE: As general manager of the Bank for International Settlements, you are running what some call the "Bank of Central Banks, "an institution very much focused on monetary stability. As chairman of the Financial Stability Forum, your focus is on securing financial stability. What comes first, monetary of financial stability?

AC: There can, of course, be no debate about the importance of the twin goals of price stability, on the one hand, and the stability of the financial system on the other. What is less well understood is the relationship between them.

TIE: How do you define the relationship?

AC: It is an issue that is both important and timely. Important because we need to ensure that arrangements for the pursuit of price stability do not inadvertently endanger the stability of the financial system. And we need to ensure that financial system weaknesses do not impede the effective operation of monetary policy. Timely because the new Basel Capital Accord is focusing additional attention on the issue of systemic risk. Moreover, in a number of countries, responsibility for the supervision of financial institutions has been moved from the central bank to an independent regulatory authority, with the central bank itself retaining a more general responsibility for overall systemic stability. Australia and the United Kingdom are perhaps the clearest examples of such a shift, but similar moves have taken place in Korea, Hungary, and a number of other countries. These institutional changes have sparked a lively debate about the appropriate institutional framework for monetary and financial stability policies. I would argue that the terms of this debate are too narrow. What matters is not so much the institutional division of responsibilities. It is rather the nexus between monetary and prudential policies and how to devise a set of arrangements that can promote both. The channels of causation run in both directions and take many forms. In implementing prudential policies, supervisory authorities may require a keener recognition that some of the main roots of systemic instability have been macroeconomic. One common macroeconomic element behind overextension in the financial system has been misjudgements about the economy's potential growth rate--a major factor in Japan in the 1980's and in Southeast Asia in the mid-1990's. Another element is that financial market sentiment tends to move with the business cycle. Many of the dilemmas of policy arise because it is difficult in practice to distinguish what is cycle and what is trend.

TIE: What was your impression of the latest spring meetings in Washington?

AC: The meetings in Washington were very productive. The atmosphere was good and there was general agreement that medium term economic prospects were reasonably promising.

TIE: What do you consider to be the achievements of the Financial Stability Forum?

AC: I think the main achievement is that we have now created a permanent group in which all of those authorities and groupings responsible for financial stability meet on a regular basis. That is to say, the finance ministry, central banks, and top regulators of the G7 countries, along with the Basel Committee, the IOSCO, the IAIS, and the international organizations (IMF; World Bank and so on).

As to the nature of the Forum, former U.S. Treasury Secretary Larry Summers came up with the analogy to compare the Financial Stability Forum to the Working Party III of the OECD, a body that he chaired. The Working Party III doesn't take any decisions, but is a forum in which the representatives of the major countries can sensitize each other to concerns and developments that affect the macroeconomy, and particularly macroeconomic interactions through balance of payments and so on. I think it's a very useful forum in advance warnings of potential policy changes and financial policy issues on the macroeconomic level. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Running the Bank of Central Banks
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.