Central Banks: Challenges of Their Roles

in Financial Transparency and Banking

Accountability
Abrar Hamim Apon, 106
  Idea of a central bank originated in 17th century England with
the establishment of the Bank of England.
 They act as the bank for the banks and the government.
Central Banks  They require all other banks to keep some deposits with them.
 “Lenders of last resort” for all other banks.
  They act as regulating bodies for all financial institutions.
 They are charged with the responsibility of maintaining money
Modern-day supply within the economy.

Central Banks  Growth, stability, inflation, interest rates, unemployment etc.

are among their concerns.
 They maintain the foreign currency reserve of a country.
  The financial crisis in 2008 is widely believed to be a result of
inadequate financial supervision.
2008 Financial  New, complex and wider roles started to be taken by central
Crisis and its banks all over the world since then.

Aftermath  New challenges, as a result, started to get surfaced.

 Challenges those led to the crisis were also there to be handled.
  Lack of banking accountability and financial
transparency is widely attributed to the

Financial financial crisis that occurred due to the lack

of liquidity followed by standardization of

Transparency subprime mortgages in the United States.

 Ensuring financial transparency and banking
and Banking accountability became among the most

Accountability
important jobs to be done by central banks
whether in developed economies or the
emergent ones.
  The roles of ensuring financial transparency and banking
accountability are carried out by central banks through various

Roles tools.
 Certain standards and procedures to be followed by financial
institutions are set by the central banks.
  They create legal provisions for the disclosure of financial
statements.
 They act decisively in cases of breach or fraudulent behavior.
 They create regulatory and procedural rules for banks.

Tools Used  Capital deposits and statutory compliance-necessity help them

to use force, if necessary, to ensure accountability.
 They implement national and international policies like Basel
Accord etc.
 Auditing and supervision are done.
  The first: Power.
Banks and other large financial institutions are owned and
directed by powerful men- powerful politically, economically and
socially.
 The second: Lacking.
Central banks usually lack adequacy and independence in terms
Challenges in of finance, technical capability and human resource. Corruption

the Roles within the bank itself is also a big challenge.

 The third: Politics.
Central banks lack political autonomy. In most cases, the
governors are appointed by political leaders through discretion.
Moreover, they are becoming politically more and more important
with time. Clashes of interest with politicians are expectable.
  Many central banks lack the technical and human resource
capability to follow all cases of breach of law with regards to
transparency.

Challenges:  A lack of proper database exists in most countries.

Specific Focus  Sometimes no action can be taken due to political and/or other
factors.
on Transparency  Legal and procedural loopholes are exploited by culprits and
are difficult to address.
  Politically powerful boards of banks sometimes go beyond the
reach of the central bank.
Challenges:  Political interference from the government can disrupt the
Specific Focus accountability mechanism.

on Banking  Their decisions are sometimes sabotaged by other powerful

groups within the regime.
Accountability  Lack of capability and corruption within can also be big
impediments.
  The roles of central banks keep widening and diversifying with
time.
 Ensuring financial transparency and banking accountability
In Conclusion within the economy are two of the major tasks vested in a
central bank in these days.
 There are challenges in carrying out these roles.
Thank You Good day!