Introduction

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Purpose and scope of the Central Bank Transparency Code (CBT)

• The CBT is an international code that allows central banks and their stakeholders to map transparency practices of the central bank to international best practices.
• Purpose: to enhance transparency and accountability of the central bank and contribute to policy effectiveness.
• The CBT is not intended as a governance code.
• The CBT is voluntary and applies only to central banks.
• When a central bank shares a function with other agencies, transparency of those agencies is not subject to the CBT.
• When a central bank is part of a monetary union, the CBT should be applied at both the level of the monetary union and of each national central bank where functions are delegated.

Rationale for updating the 1999 code

• An update of the IMF’s 1999 “Code of Good Practices on Transparency in Monetary and Financial Policies” (MFPT) was overdue because of:
  • advances in international financial policy standards since 1999;
  • monetary policy practices of many central banks since the 2008 financial crisis;
  • the broadening of mandates, Functions, and Powers—both de jure and de facto—of central banks in recent years;
  • 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;
  • 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 MFPT with the new Central Bank Transparency Code (CBT).

Changing central bank practices and challenges

• Events influencing central banking transparency and mandates:
  • the 2008 financial crisis;
  • the COVID-19 pandemic.
• Consequences and developments:
  • central banks expanded balance sheets significantly and often used unconventional monetary policies to support price stability Objectives.
  • central banks increasingly have a financial stability Mandate informing monetary policy actions.
  • Monetary Policy Instruments have expanded; financial stability Functions have broadened to include macroprudential oversight, crisis management, and resolution.
  • some central banks assume responsibilities such as anti-money laundering/countering the financing of terrorism (AML/CFT) supervision and Consumer Protection.
• Transparency remains critical to guiding decisions of economic agents, stabilizing market expectations and conduct, ensuring public accountability, and underpinning central bank Autonomy/Independence.

Design features and orientation of the CBT

• The CBT is a comprehensive set of principles and practices that apply to all central banks, regardless of mandates, governance frameworks, and institutional arrangements.
• The CBT’s approach:
  • geared toward facilitating the implementation of policy Objectives to support policy effectiveness and address macroeconomic risks;
  • recognizes diverse circumstances and levels of economic and financial development;
  • facilitates reviews that are outcome-focused, modular, risk-based, and proportional.
• The CBT allows central banks to:
  • review existing transparency frameworks against a range of practices;
  • articulate transparency choices shaped by domestic legal frameworks;
  • facilitate dialogue with stakeholders on governance, policy, operations, outcome, and official relations;
  • explain what the central bank does, how it does it, and what the results are, thereby improving accountability and informing future policy choices.

Balance between transparency and confidentiality

• The CBT recognizes that transparency cannot be indiscriminate or excessive because many central bank activities legitimately require confidentiality.
• Confidentiality is pertinent for market-sensitive information, financial stability considerations, and personal data—key areas include foreign exchange interventions, reserve management, supervisory decisions on individual institutions, and emergency liquidity assistance.
• Two-pronged approach to confidentiality under the CBT:

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 disclosure choices and legal obligations.

• The CBT stresses transparency of central banks’ legal frameworks, which shape the degree of transparency (e.g., personal data protections, commercial or trade secrecy provisions, or “freedom of information” laws).

Boundaries and exclusions

• 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 contains selected excerpts from these standards related to transparency for informational purposes only and is not to be used for reviewing central banks’ transparency practices in those sectors.

Structure of the CBT

• The CBT comprises five “Transparency Pillars”:
  • 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.
• Organization of the CBT document:
  • Section A: CBT principles.
  • Section B: descriptions of a range of practices, broken down by principle.
  • Section C: Glossary with key definitions.
  • Annex: selected transparency-related principles from international financial policy standards (informational only).

References

• Principles
• Practices
• Annex