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Transparency is a key element of central bank accountability. Over the last two decades, central banks were granted broader mandates to pursue a range of new policy goals and a large degree of autonomy. As the diversity and complexity of central banks’ operational toolkits increased following the 2008 Global Financial Crisis and more recently the COVID-19 pandemic, the level of challenges over the use of unconventional monetary policy measures have increased. Consequently, these challenges prompted calls for greater public scrutiny, and highlighted the importance of balancing central bank autonomy with appropriate accountability and transparency arrangements. Transparency facilitates accountability by informing legislatures, markets, citizens, and other stakeholders on a central bank’s performance and compliance with its mandate and also can improve policy effectiveness.
The CBT consists of a five-pillar framework, covering every aspect of central banking. These pillars cover principles on a central bank’s: (i) transparency in governance (including, for example, its legal framework, governance, accountability arrangements, communications, and confidentiality); (ii) transparency in policies; (iii) transparency in operations; (iv) transparency in outcome; and (v) transparency in official relations. Pillars II, III, and IV relate to the key central bank functions, that is, monetary policy, foreign exchange (FX) management and administration, international reserve management, macroprudential policy, emergency liquidity assistance (ELA), financial integrity, and consumer protection.
The CBT allows central banks to map their transparency frameworks, enhance their accountability, contribute to policy effectiveness, and improve dialogue with their stakeholders. The CBT considers transparency as an institutional feature aimed at ensuring comprehensive public access to the information on the central bank and its activities, at the same time striking the appropriate balance between transparency and a legitimate need for confidentiality. Central banks could assess their existing transparency frameworks using the CBT, which allows for more informed central bank choices on transparency and more effective communication between the central bank and its various stakeholders. In doing so, a better understanding of the rationale for central bank autonomy, mandate, governance, policies, operations, outcomes, and official relations will reduce uncertainty and facilitate a public dialogue that can anchor public expectations and foster better policies.
Assessment Methodology
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CBT Reviews are based on the CBT Guidance Note. The Guidance Note is available on the CBT website. This document provides guidance and practical suggestions for conducting reviews of the Central Bank Transparency Code (CBT) to IMF staff and experts conducting reviews, as well as to the central banks participating or intending to participate in the CBT review. The Guidance Note is not intended to be a detailed or prescriptive manual for measuring transparency, nor is this the intention of the CBT. Instead, the reviewer(s) should use the note to guide their reviews, while maintaining sufficient flexibility for interpretation and country-specific circumstances.