Former Central Bank Governors gave an insightful view on the current financial situation of the country and global view of how central banks are coping with the ever changing landscape triggered by digitalisation and new economies.
The event hosted by Asia School Of Business saw the attendance of Professor Masaaki Shirakawa, Dr. Duvvuri Subbarao, Dr. Veerathai Santiprabhob, and Dr. Zeti Aziz former Governors of the Bank of Japan, Reserve Bank of India, Bank of Thailand, and Bank Negara Malaysia, respectively, who engaged in a conversation revolving around the timely topic of Central Banking in an Evolving International Financial System.
The main event saw the former Central Bank Governors discussing the topic in terms of past, present, and potential future perspectives. Dr. Veerathai explained the challenges confronted by central banks in small open economies in the face of quantitative easing and aggressive monetary policies adopted by central banks of major countries. He emphasized the importance of central banks having the flexibility and ability to employ a wide range of pre-emptive policy measures, including foreign exchange intervention, capital flow management measures, and macro-prudential policies, to counteract volatility and preserve financial stability.
“No country is an island” was the first of three learnings shared by Dr. Subbarao, highlighting the interconnectedness of economies worldwide and the impact of global events on individual countries, with the COVID-19 pandemic as a recent example. His second learning, which emphasized the unequal nature of international economics, where rules set by richer countries are usually to the detriment of emerging economies, segued into his final lesson on the importance of self-reliance for emerging economies as a means to thrive in an unequal global environment.
Professor Shirakawa drew on lessons learned during the Japan financial crisis in the early 1990ies, emphasizing on the importance of central banks as “lenders of last resort”, reinforcing the importance of coordinated efforts in preventing financial crises and highlighting the crucial undertaking of avoiding financial bubbles.
Dr. Zeti, having led her country’s central bank through numerous financial crises, spoke on the crucial need to build resilience to withstand unexpected shocks and disruptive development. She also cautioned practitioners and institutions to “not wait for a crisis to address your vulnerabilities” and instead have a national risk management and resolution framework in place at all times, stressing particularly the need for developing effective communication capabilities, especially in this age of social media.
When asked what current developments “keep (you) up at night”, the panellists expressed concerns about the multiple roles beyond their core mandates that central banks are increasingly expected to perform, and they also drew attention to financial and economic consequences of geopolitical tensions and the rapid rise of cryptocurrencies as major challenges facing central banks.
