BCC’s areas of support

BCC’s support is tailored to the specific needs of partner central banks, by working with them across 2-3 priorities among 6 thematic areas: Monetary policy analysis and implementation, Macroeconomic accounting and statistics, Financial stability, Financial sector development, Operational risk management, and Human resource management.

Central Reserve Bank of Peru

Central Reserve Bank of Peru

Why we work
with central banks

Central banks have always played an important role for macroeconomic stability. In the aftermath of the global financial crisis, however, their role has evolved; now playing an even more important role for policy making. Their decisions influence almost everyone in a society, shape individual preferences and corporate investment decisions, and in aggregate play a significant role in determining the overall well-being of an economy. Many central banks pursue the ultimate goals of strong sustainable economic growth and full employment by preserving price stability and promoting financial stability:

PRICE STABILITY. The experiences of high inflation in advanced and developing economies alike during the 1970s and 1980s led academic and policy research to focus on the benefits of providing a low and stable inflation for societies. These efforts culminated in many major central banks adopting price stability as their primary goal.​

FINANCIAL STABILITY. Equally influential has been the experience of recent global financial crises. This has led many central banks to re-calibrate their regulatory architecture and account for financial stability considerations in their decision making process. This process remains far from complete.

However, central banks differ significantly in what is legally mandated of them, their operational independence, what policy instruments are available to them, their legacy, and the political economy environment in which they function. Hence, identifying a universally applicable code of “best practices” is difficult.

Our areas of work

Monetary policy and implementation

Monetary policy influences the economy after a time lag. It is therefore important for central banks to be able to forecast the likely future path of the economy with and without certain policies. This requires models and tools that can describe how major sectors and variables in the economy are related to each other, and how they react to external shocks and policy interventions. Such tools encourage a better understanding of price dynamics, and ensure that policies target and minimise sources of inflation. BCC’ emphasis is to improve the analytical tools available to the central bank and promote best practises associated with implementation. Best-practices allow to anchor inflationary expectations, thus promoting stability and credibility.

Conducting surveys and compiling data to inform policy

Central banks use a wide range of data on economic and financial activity to perform their tasks including monetary policy formulation, financial stability, and oversight of payment systems. Hence, it is critical to ensure the quality and consistency of the domestic and international data they rely on. Responding to the broad needs of BCC’s partner central banks, and in particular to those operating in data-poor environments, BCC assists them in improving their data quality to match international standards.

Institutional Research

Strategically relevant research can help the bank advance its internal priorities by strengthening their models or gaining deeper insights into underlying dynamics affecting their national economy. BCC helps Central Banks strengthen the institutional structure and operational aspects of how research is conducted at the banks, including on how to link research to central banks priorities. BCC supports researchers conduct high-quality research, both through the CP/VP programme and by strengthening in house processes. BCC also works with the banks and researchers on how to enhance the communication (internal and external) of their research to inform decision making and market awareness.

Financial Stability

Stability in financial markets is part of a wider goal of achieving macroeconomic stability. There is a close interlink between monetary and financial stability, and the objective of financial stability is becoming increasingly important for central banks in the aftermath of the financial crisis. BCC provides technical assistance on how to identify current and emerging financial risks, build country-specific early warning indicators, and operationalize stress-tests that are specific to country contexts.

Financial Inclusion

Financial inclusion is defined as the availability and equality of opportunities for individuals and businesses to access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.[1] BCC works with partner central banks in improving their understanding of the gaps to financial inclusion and of how to address these gaps.

[1] https://www.worldbank.org/en/topic/financialinclusion/overview

Payment systems

The structure of financial markets has a direct impact on the effects and effectiveness of monetary policy. The transmission of monetary policy relies on how the banking system, the payment system, the foreign exchange market, and bond and equity markets react to policy changes, and the central bank therefore is directly concerned with their development. BCC supports its partner central banks in the development of their country’s financial sector.

Environmental Sustainability

Most central banks are coming to the realisation that environmental sustainability is not a force that is foreign to their realm of work. Climate change can lead to draught, floods, and other issues that have direct economic impact on the country. BCC helps countries understand these effects and assess how to address them.

Resilience / Risk management

Operational – or nonfinancial – risk management is an essential element of good governance of central banks. Operational risks are linked to failures in internal processes, infrastructure, information systems, staff, legal, communications or external events.
BCC works with partner central banks in improving their preparedness to face critical operational risks such as an earthquake, an outbreak of infectious epidemics, or a cyber-breach.

HR & International Cooperation

Ultimately, the strength of a central bank depends on the quality of its staff. Therefore, managing human resources effectively is a critical element in maintaining an effective and credible central bank. As large complex organisations, central banks often face multiple challenges related to recruitment, training, retention and talent management. Underscoring the need to build a sustainable pool of talent in its partner central banks, BCC offers tailored advice on best practices in the area. Similarly, managing multiple relations at bilateral, regional and international spheres can be overwhelming and lead to an underutilization of the potential benefits these relations can bring. BCC provides support on how to strengthen cooperation.