Advanced Search
MyIDEAS: Login

The role of central banks in crisis management – how do financial crisis simulation exercises help?

Contents:

Author Info

  • Lívia Sánta

    ()
    (Magyar Nemzeti Bank (central bank of Hungary))

Registered author(s):

    Abstract

    The fundamental task and responsibility of central banks is to maintain and promote the stability of the financial system. In order to achieve this, central banks strive to prevent crises using all the instruments at their disposal. If a crisis occurs, central banks play a significant role in efficient crisis management and the crisis resolution process. In spite of the crisis prevention activity of the authorities – including central banks – crisis events can not be avoided. The crises potentially emerging in modern banking systems are basically the consequence of the imperfect functioning of financial markets. In addition, external shocks can trigger crises as well. In order to support the stability of the financial intermediary system and to help restore market confidence, there may be a need for central banks to carry out aggregate liquidity increasing measures which affect the market as a whole and for emergency liquidity assistance based on individual consideration, in line with the ‘lender of last resort’ function. Continuous development of crisis management work and the related instruments is needed in order to ensure quick and efficient central bank decisions. One of the most important elements of crisis management is the organisation of crisis simulation exercises. Within the European Union, special emphasis has been placed on the development of a crisis management framework aimed at promoting more efficient co-operation between the competent authorities, since a significant number of cross-border banking groups have been formed throughout Europe recently. A potential crisis in a parent bank’s country affecting a larger banking group may jeopardise the stability of the financial intermediary system in the countries of subsidiary banks as well, through the interrelationships within the group. This article outlines the significant assistance that these exercises can provide for central bank decisions and for the development of co-operation between authorities.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://english.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbszemle/mnben_msz_200711/santa_en.pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by Magyar Nemzeti Bank (the central bank of Hungary) in its journal MNB Bulletin.

    Volume (Year): 2 (2007)
    Issue (Month): 2 (November)
    Pages: 31-38

    as in new window
    Handle: RePEc:mnb:bullet:v:2:y:2007:i:2:p:31-38

    Contact details of provider:
    Web page: http://www.mnb.hu/
    More information through EDIRC

    Related research

    Keywords: central bank; emergency liquidity assistance; crisis management; crisis simulation exercise; financial stability.;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:mnb:bullet:v:2:y:2007:i:2:p:31-38. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maja Bajcsy).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.