When the global financial crisis broke, central banks in both the US and the UK undertook massive asset purchase programmes which resulted in considerable increase in assets. Cross-border spillover effects were noted across global economies. Balance sheet adjustments may eventually gnaw at the profit-earning capacities of central banks, and in extreme cases, negative equity can manifest.
This updated book investigates a benchmark for comparing central banks. The author employs a unique and large set of metrics to gauge the quality of central banks and presents an argument to reflect upon international best practices covering 124 banks in this latest study. The study uses different criteria including the accounting body, research, presence of stress-testing exercises, inflation-targeting frameworks, staff efficiency, and languages of communication with the public, amongst others. The book begins by providing an overview of central banking, before exploring some stylized facts about central banks in unique detail. It then presents a ratings methodology for worldwide central banks to analyse the results. A backtesting exercise is included to validate the quality of the ratings obtained. The book concludes by offering insights into the comparison of central banks.
Author(s): Indranarain Ramlall
Edition: 2
Publisher: Palgrave Macmillan
Year: 2022
Language: English
Pages: 135
City: Cham
Preface
Contents
List of Figures
List of Tables
1 Introduction
1.1 Introduction
1.2 Brief History of Central Banking
1.3 Multi-Tasking Central Banks
1.4 Theoretical Underpinnings of Monetary Policy
1.5 Challenges Facing Central Banks
1.6 Establishing a Benchmark for International Excellence in Central Banking
References
2 An Overview of Central Banking in the World
2.1 Functions of Central Banks
2.2 Monetary Policy Transmission Mechanism
2.3 Forces That Drive Down the Transmission Mechanism of Monetary Policy
2.4 Research
2.5 Reserves Management
2.6 Sterilization and Its Implications for Central Banking
2.7 Special Drawing Rights
2.8 Reasons for Holding SDRs
2.9 Seigniorage
2.10 Currency in Circulation
2.11 Definitions of Money Supply
2.12 Electronic Money
2.13 Currency Board
2.14 Income/Expense Components of Central Banks
2.15 Central Bank Balance Sheets in Light of the Crisis
2.16 Covered Bond Purchase Programme
2.17 Special Central Bank Features
2.17.1 COVID-19 and Central Banking
References
3 Some Stylized Facts About Central Banks
3.1 Introduction
3.2 End of Period Reporting of Financial Statements
3.3 Continental Classification of Central Banks
3.4 Risk Management
3.5 Accounting Body
3.6 Central Bank Digital Currencies
References
4 Ratings Methodology for Central Banks Worldwide
4.1 Introduction
4.2 Significance of Ratings
4.2.1 Rating Methodologies for Banks
4.2.2 Morningstar Corporate Credit Rating Methodology
4.3 An Overview of European Union and US Institutional Differences
4.4 Ratings Methodology
4.5 Generating Scores and Rankings from the Ratings Methodology
References
5 Second and Third Division Rated Central Banks
5.1 Classification of Central Banks into Second and Third Categories
6 Results and Discussions
6.1 Results and Discussions
6.2 Rankings
6.3 Metrics Under Discussion
6.3.1 Research
6.3.2 Conferences/Workshops/Seminars
6.3.3 Financial Stability Reports
6.3.4 Late Reporting
6.3.5 Green Implementation
6.3.6 IMF Membership
6.3.7 Contact Information
6.3.8 Accounting Policy Used
6.3.9 Negative Z-Score Central Banks
6.3.10 Staff Efficiency
6.3.11 Risk Management
6.3.12 Inflation Targeting
6.3.13 Notes to the Accounts
6.3.14 Quality of Website
6.3.15 Stress Testing
6.3.16 Languages Used
6.3.17 Debt Management
6.3.18 Professional Accounting Body
6.3.19 IMF Age Membership
6.3.20 Consumer Price Index (CPI)
6.3.21 Power to Control Money Supply
6.3.22 Central Bank Independence
6.3.23 Bank Regulation and Supervision (3 Metrics)
6.3.24 Global Regulatory Framework for Banks Under Basel III
6.3.25 Worldwide Governance Indicators
References
7 Backtesting
7.1 Backtesting
7.2 Backtesting: Validation of the Central Bank Rankings with Other International Rankings
7.3 Sovereign Ratings and Central Bank Rankings
7.4 Regression-Based Analysis of Central Bank Ratings
8 Conclusion
8.1 Summary of Global Central Bank Ratings
8.2 Major Shortcomings to Be Addressed by Global Authorities
8.3 Policy Implications
8.4 Main Use of Global Central Bank Ratings
References
Index
