Introduction

Central bank transparency is important for effective monetary and financial policies. Transparency is critical to guiding the decisions of economic agents and stabilizing market expectations and conduct, both of which boost the effectiveness of monetary and financial policies. Transparency is also key to ensuring public accountability of central banks and their Autonomy/Independence, with the latter underpinning the operational effectiveness of central banks. Effective central bank transparency arrangements are one of the sound principles of monetary policy.¹
The impact of the 2008 financial crisis, reinforced by the COVID-19 pandemic, has heightened the importance of central bank transparency and broadened bank mandates, Functions, and Powers—both de jure and de facto. Central banks’ response to the crises has altered many of the norms that undergird traditional transparency principles related to monetary and financial policies. Central banks have expanded their balance sheets significantly, often using unconventional monetary policies to support price stability Objectives. Increasingly, they have been given a financial stability Mandate that informs their monetary policy actions and decisions. In addition to the expansion of Monetary Policy Instruments, many central banks have seen their financial stability Functions broadened to encompass macroprudential oversight, crisis management, and resolution. In general, central bank mandates vary widely, with some central banks assuming responsibility for areas such as anti-money laundering/countering the financing of terrorism (AML/CFT) supervision and Consumer Protection.
Transparency is a key element of central bank accountability. Transparency refers to the flow and accessibility of information from the central bank to its stakeholders and the public. They rely on that information to inform their judgment of the performance of the central bank and compliance with the central bank’s Mandate. Transparency is also a key plank in the central bank’s broader governance and accountability framework.
An update of the International Monetary Fund’s code on central bank transparency was overdue. The 1999 IMF “Code of Good Practices on Transparency in Monetary and Financial Policies”² (MFPT, one of the Key Standards developed by the IMF),³ identified desirable transparency practices for central banks and other financial agencies. However, an update of the MFPT was needed, given (i) advances in the development of international standards for financial policies since 1999; (ii) monetary policy practices of many central banks since the 2008 financial crisis; (iii) the broadening of mandates, Functions, and Powers—both de jure and de facto—of central banks in recent years; (iv) the 2017 IMF “Review of the Standards and Codes Initiative” recommendation to gear the Fund’s transparency guidance toward facilitating the implementation of policy Objectives; and (v) the Fund’s enhanced approach to good governance issues.
On April 29, 2019, the Executive Board of the IMF endorsed a staff proposal to replace the 1999 Monetary and Financial Policies Transparency Code (MFPT) with a new Central Bank Transparency Code (CBT). The CBT is a comprehensive set of principles and practices that apply to all central banks, regardless of their mandates, governance frameworks, and institutional arrangements. The CBT’s five-pillar framework comprises transparency on central bank governance, policies, operations, outcome, and official relations, covering transparency in every area of central banking.
The CBT better reflects the new realities of central banking. Instead of focusing mostly on the disclosure of operational processes, the CBT is geared toward facilitating the implementation of policy Objectives to support policy effectiveness and at addressing macroeconomic risks. The CBT recognizes that central banks operate under diverse circumstances and levels of economic and financial development. This recognition facilitates reviews of transparency that are outcome-focused, modular, risk-based, and proportional.
The CBT will allow central banks to shape their accountability and increase their policy effectiveness. Central banks could review their existing transparency frameworks using the CBT. This will allow for more informed central bank choices on transparency—or will allow central banks to highlight choices they are faced with, for instance due to their domestic legal frameworks. These choices will facilitate discussions between the central bank and its various stakeholders on the rationale for central bank governance, policy, operations, outcome, and official relations. Such a dialogue will reduce uncertainty, for instance, about the central bank’s Mandate, its confidentiality policy, its interaction with stakeholders, and its operations in various areas. Accordingly, central bank transparency will help to explain what it is the central bank does, how it does it, and what the results are. Not only will this allow the central bank to be held accountable for its actions, it will also feed back into the policy choices the central bank makes—allowing for a continued improvement.
The CBT recognizes that applying transparency in a central bank context cannot be indiscriminate or excessive, as many central bank activities have a legitimate need for confidentiality. As the MFPT noted: “Transparency is not an end in itself, nor is transparency a substitute for pursuing sound policies; rather, transparency and sound policies are better seen as complements.”⁴
The degree of a central bank’s transparency is shaped by its Legal Framework. Some central banks might be subject to domestic legal and regulatory frameworks that restrict central banks’ ability to be transparent about specific information (e.g., personal data or information subject to commercial or trade secrecy provisions). Alternatively, other domestic laws and regulations could require the central bank to be transparent, for example, in the form of “freedom of information” laws. Also, obligations stemming from membership in a currency union or other international official requirements might subject central banks to additional information-sharing agreements.
The CBT strives to strike a balance between transparency and the legitimate needs for confidentiality. The CBT views confidentiality in the context of market-sensitive information, financial stability considerations, and personal data. Confidentiality is particularly pertinent in key areas, including foreign exchange interventions, reserve management, supervisory decisions on individual institutions, and emergency liquidity assistance. The CBT recognizes that a diversity of transparency practices across jurisdictions reflect different legal, structural, and cultural backgrounds. Therefore, the CBT follows a two-pronged approach:

a.Transparency requirements throughout the CBT are qualified for market sensitive information, financial stability considerations, and personal data.

b.Central banks should articulate a clear confidentiality policy to explain and justify their choices on the disclosure of sensitive information, as well as those emanating from legal and other obligations.
The CBT is a voluntary code, intended to help central banks review their transparency frameworks and facilitate informed dialogue with their stakeholders. The CBT will help central banks map their transparency against a range of practices, allowing for more informed central bank choices on transparency arrangements. The CBT also stresses transparency of central banks’ legal frameworks, as these play a role in shaping the central banks’ degree of transparency. The CBT will facilitate informed discussions between the central bank and its various stakeholders on transparency choices. It will, for example, assist central banks in explaining that the absence of information or a lag in its publication (relating to foreign exchange interventions, for instance) does not necessarily imply a lack of transparency or mean that transparency should always be absolute. On the other hand, the CBT calls for a stronger commitment to transparency commensurate with central banks’ mandates.
The CBT applies only to central banks. When a central bank shares a function with one or more other agencies (such as a financial supervisor), transparency of those agencies would not be subject to the CBT. When a central bank is part of a monetary union, national central banks may have delegated individual Functions to other members of the monetary union, while other Functions continue to be the responsibility of individual national central banks. In such a case, the CBT should be applied to the transparency framework both at the level of the monetary union and of each national central bank.
The CBT will not review central bank Functions like micro-prudential supervision (banking or insurance), securities regulation, resolution, or financial market infrastructure responsibilities. These areas already have established international standards. The Annex presents selected excerpts from these standards that relate to transparency, for informational purposes only. The Annex is not to be used for reviewing central banks’ transparency practices and does not describe practices on the transparency of banking, insurance, and securities sectors’ supervisors, resolution authorities, and financial market infrastructures. The transparency issues in the Annex will not be reviewed in the context of the CBT, but rather by respective reviewers in banking, insurance, securities, resolution, and financial market infrastructures.
The CBT comprises five “Transparency Pillars,” each representing different transparency elements (Figure 1):

Pillar I. Transparency in governance, covering institutional issues.
Pillar II. Transparency in policies, including its framework and decision-making process.
Pillar III. Transparency in operations, highlighting how policy decisions are implemented.
Pillar IV. Transparency in outcome, focusing on how the outcome of central bank policies and other actions are reported to stakeholders to facilitate accountability.
Pillar V. Transparency in official relations, covering central bank interactions with the government and other domestic agencies, and international relations and commitments.

Figure 1. Central Bank Transparency: Five-Pillar Framework

Source: IMF Staff

The rest of this document is organized as follows: The CBT principles are presented in section A. Section B provides descriptions of a range of practices, broken down by principle. Key definitions are presented in the Glossary in section C. Finally, the Annex contains selected transparency-related principles from international financial policy standards, which are included for informational purposes only.

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Introduction

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IMF’s Work

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

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For Journalists

Press Center

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KEY SERIES

IMF NOTES