Central Bank Governance and Challenges Posed By the Crisis

In the first section of this paper, it will be explained that though generalizations are misleading, some of the central banks, especially among the advanced and systemically important economies, may have to take some, though not entire responsibility, for causing the global financial crisis. The second section elaborates that central banks have acquitted themselves well in avoiding a financial collapse through support of respective governments, and coordination at global level enabled them to do so. The fiscal authorities were leading the coordinated actions towards managing the crisis and embanking on the stimulus on multiple fronts. It is likely that the transparency and accountability processes are also unconventional. The third section postulates that in regard to exit policies, central banks face pressures in terms of coordination among them and with fiscal authorities as well as other regulators within each country. The fourth section briefly mentions select issues arising out of reforms under contemplation in financial sector, as a consequence of the crisis. The fifth section lists the need to revisit governance issues in central banks in the light of experience with the crisis. The concluding part focuses on governance issues of special relevance to central banks in developing countries.