The Next-Generation #CentralBanking

Central banks’ key functions have remained largely unaltered since the first was established in the mid-17th century. These include: setting monetary and financial policy; acting as lenders of last resort; ensuring the stability of the financial system; and supervising the financial industry. The pace of digitally driven change across the #FinancialServices Industry (FSI) has triggered central banks and regulators* to review their approach in supervisory and policymaking.

The fact is that central banks are not immune from the changes brought by #digitization. Those changes fall into four main areas:

1.         New entrants such as #fintech that have permanently altered the financial services’ (FS) landscape;

2.         New technology such as #blockchain, #artificialintelligence, cloud, quantum computing and #analytics – much of which lacks definitive market standards;

3.         Heightened and changed customer demands and expectations;

4.         The growing sophistication of security threats, the volatility of global economy that comes with the increased volume of regulations, compliance etc. to ensure financial and economic stability.

Time of crisis emphasized the need of a resilient financial infrastructure underpin by a nationwide digital infrastructure as key enabler to ensure stability to the financial sector. In short, central banks need to review their approach given that financial institutions are adopting new technologies, data is becoming more crucial and security threats are more pronounced. At the same time, those who are regulated expect a more consistent service. To continue to meet their mandate – and to do it better – central banks must become digital regulators. That means focusing on four pillars and a strong foundation to build capabilities and stay relevant:

Pillar 1: Harness the power of data to sharpen the surveillance of risks, strengthen financial oversight, drive regulatory compliance, and boost monetary and financial policymaking;

Pillar 2: Enable and drive innovation internally and externally to promote a vibrant digital economy;

Pillar 3: Drive efficiencies and develop a secure, resilient, future-ready infrastructure for both the central bank and the financial services sector;

Pillar 4: Improve communication and engagement with industry using more holistic digital services and two-way communications;

Foundation: The four pillars won’t function unless the central bank transitions its workforce for a digital future. Additionally, central banks must strengthen their internal delivery capabilities in terms of robust operations – such as leveraging automation and using lean processes – and help to transition the financial sector’s workforce.

Thanks: Accenture. For more central banking related information, contact Levarus

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