## Transparency Makes Central Banks More Effective and Trusted

_IMF Blog, July 30, 2020_

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## Bibliographic details
- Authors: Tobias Adrian, Ghiath Shabsigh, Ashraf Khan
- Published: July 30, 2020

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### Overview
- Publication: "Transparency Makes Central Banks More Effective and Trusted"
- Authors: Tobias Adrian, Ghiath Shabsigh, Ashraf Khan
- Date: July 30, 2020
- Context: Since the 2008 global financial crisis, central bank roles and mandates have broadened and become more complex; unconventional and large-scale interventions (as seen again during the COVID-19 pandemic) have increased scrutiny and demands for transparency and accountability.

### Accountability and effectiveness
- Central banks have expanded responsibilities, including supervision and other financial stability functions.
- Transparency is presented as an instrument to facilitate accountability by allowing the public to better understand how central bank actions serve public interest and are consistent with mandates.
- The increasing responsibilities and significant expansion of balance sheets drive demand for clearer explanations of what central banks do, how, and why.
- "In central bank parlance, transparency and accountability become the collateral guarantee of independence."

### The Central Bank Transparency Code: purpose and structure
- Developed by the IMF to help member countries meet demands for greater transparency, increase trust and support, and facilitate more effective communication between central banks and stakeholders.
- Nature: voluntary code.
- Scope: allows central banks to measure transparency in five key areas or "pillars":
  - governance
  - policies
  - operations
  - outcomes
  - official relations
- Under each pillar, the code provides a list of best practices categorized as "core" to "expanded" to "comprehensive" for key functions such as monetary or macroprudential policy.
- The code is designed to accommodate the diversity of the IMF’s 190 members central banks in legal frameworks, governance arrangements, and levels of economic and financial development.
- The code is explicitly not a ranking tool and avoids expressing preferences or making recommendations about mandates, institutional setups, or governance procedures.
- The code recognizes that transparency is not an absolute goal and includes qualifications for legitimate reasons to delay or withhold publication.

### Confidentiality and legitimate exceptions
- Central banks have legitimate reasons for confidentiality, including:
  - market sensitive data
  - financial stability considerations
  - personal data
- Specific areas where confidentiality is particularly relevant:
  - foreign exchange interventions
  - reserve management
  - supervisory decisions on individual institutions
  - emergency liquidity assistance
- The code outlines the general principle that central banks should develop clear policies explaining and justifying what is kept confidential.

### Dialogue with stakeholders and development process
- Preparation involved extensive consultations with central banks, monetary unions, international financial institutions, and standard-setting bodies.
- Input included contributions from 73 central banks representing diverse regional and economic development backgrounds.
- An advisory panel of eminent academics and former governors provided additional perspective and practical experience.
- The code was designed to be applicable across countries regardless of income level, exchange rate regime, or geographical location.
- Assessments using the code can be performed in full or with a subset of principles and practices applicable to specific circumstances.
- IMF staff can assist with evaluations; assessments can be used as diagnostic tools for designing targeted capacity development programs.
- Several pilot assessments are planned to help implementation over the coming years.

### Reception and endorsement
- IMF Executive Board members commended the code’s flexibility and attention to individual circumstances.
- On approving the code in mid-July, the Executive Board said in a statement that it is a "timely and useful tool for central banks to guide their transparency practices and strengthen accountability, ensuring more effective policy outcomes and better-informed dialogue with stakeholders."

### Conclusion and policy implication
- The IMF transparency code, developed with and for central banks, aims to help central banks maintain and strengthen stakeholder and societal support while performing crucial roles.
- As central banks are called to step up actions, building trust and credibility with citizens is highlighted as critical.

*Source: IMF blog post "Transparency Makes Central Banks More Effective and Trusted", July 30, 2020.*

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## References

- [عربي](https://www.imf.org/en/blogs/articles/2020/07/30/.https://www.imf.org/ar/News/Articles/2020/07/30/blog-transparency-makes-central-banks-more-effective-trusted)
- [https://www.imf.org/zh/News/Articles/2020/07/20/blog-the-covid-19-gender-gap](https://www.imf.org/zh/News/Articles/2020/07/20/blog-the-covid-19-gender-gap)
- [日本語](https://www.imf.org/ja/News/Articles/2020/07/30/blog-transparency-makes-central-banks-more-effective-trusted)
- [Central Bank Transparency Code](https://www.imf.org/en/Publications/Policy-Papers/Issues/2020/07/29/The-Central-Bank-Transparency-Code-49619)
- [stronger demand for central banks](https://blogs.imf.org/2019/11/25/central-bank-accountability-independence-and-transparency/)
- [statement](https://www.imf.org/en/News/Articles/2020/07/30/pr20258-imf-executive-board-approves-new-central-bank-transparency-code)

_Source: https://www.imf.org/en/blogs/articles/2020/07/30/blog-transparency-makes-central-banks-more-effective-trusted_