Communications Can Help to Get Financial Stability Off the Ground
IMF Blog, February 22, 2018
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- Authors: Olga Stankova
- Published: February 22, 2018
Overview
- Communications is an essential complement to sound financial stability policymaking; without it, authorities risk reduced traction and adverse public reactions.
- Since the global financial crisis, central banks and supervisory agencies have enhanced capacity to identify and monitor systemic risks and have developed new policies to mitigate them.
- Official agencies are increasingly publishing financial stability work, including stress tests, asset quality reviews, and financial stability reports.
- Andy Haldane: “The most recent chapter in central banks’ evolutionary history has been increased openness and transparency about their actions, monetary, macro- and micro-prudential.”
Why communicating financial stability is challenging
- Even in advanced economies with deep, liquid financial markets and higher financial literacy, communicating financial stability policies is complex and demanding.
- Challenges are greater in low-income countries and emerging markets because:
- Central banks may have less hands-on experience handling financial crises.
- Economic media may have less depth and capacity.
- Public financial literacy is generally lower.
- Social media and messaging systems can amplify rumors and speculation.
- Efforts to increase financial inclusion (expanding access to credit to segments of the population that may be less financially literate) can add to financial stability risks.
Case studies demonstrating success
- National Bank of Moldova (2016):
- Context: public concern following bank failures in 2014.
- Action: strengthened governance in some banks and explained actions to a broader audience.
- Outcome: managed public reaction well; Moldova agreed on a financial program with the IMF shortly thereafter.
- Hong Kong Monetary Authority (2010 onward):
- Context: sharp housing price increases and perceptions that macroprudential measures to tighten mortgage lending were failing.
- Action: formed an inter-departmental communications team to collect public opinions and design a communications strategy for macroprudential and monetary policies; launched a multi-faceted media campaign.
- Message emphasized: mortgage lending measures were aimed at strengthening banking system resilience, not controlling property prices.
Recommendations and practical steps
- Make communications an integral part of financial stability work:
- Communications should not be an afterthought; incorporate it from the outset to gain broader buy-in from market participants, experts, the press, and the public.
- Build a comprehensive plan to develop communications capacity:
- In many countries improvements may take three to five years because domestic labor markets may lack needed skills.
- Official agencies will often need to train communications staff in-house and help them gain experience.
- Engage in cross-learning from other institutions:
- Countries can accelerate progress by engaging institutions that bring international experience and structured approaches.
- The Fund has developed a framework for building up financial stability communications that includes the full range of established communications tools—interviews, press conferences, background briefings, and communications via digital platforms—and has been working with some central banks on strengthening their communications.
Key messages and outlook
- Neglecting communications can undermine policy implementation and provoke adverse reactions through misinterpretation.
- Building communications capacity now will provide authorities with “two wings to fly in any weather conditions,” as IMF Managing Director Christine Lagarde urged policymakers to “repair the roof while the sun is shining.”
- Financial stability risks are building globally, with rising debt and high asset valuations, as highlighted in the IMF’s recent Global Financial Stability Report.
Olga Stankova — February 22, 2018
Content in this bundle
- 良好沟通有助于金融稳定; IMF 博客; 2018年2月22日
- A comunicação pode ajudar na decolagem da estabilidade financeira
- Общественные коммуникации могут помочь поднять финансовую стабильность на должную высоту
