Webinar on the importance of central bank balance sheets

To promote the Masters Degree in Central Banking and Financial Regulation, from the Unversity of Warwick co-sponsored by the Bank of England. We will be holding a webinar on 20th May 2020.

Central bank balance sheets are not well understood – but not only do they define the central bank, they are the most powerful weapon in it’s armoury.

It’s balance sheet enables a central bank to set interest rates, issue bank notes, act as lender of last resort, underpin the banking payments system and control the supply of base money.

In the context of Covid-19, it is the CB balance sheet that is being used to support the real economy, through monetary expansion and the supply of cheap credit. This has echoes for the policy support during the Great Financial Crisis and the sluggish recovery.

If you have questions about what central banks are doing, this is the time and place to ask.

Important Speech by Guy Debelle, Reserve Bank of Australia on climate change and the economy

Not many central bankers have yet tested the (rising) waters by speaking about monetary policy in the context of climate change. Benoit Coeure, ECB, made some references in November 2018, mostly in relation to ECB operations. That speech is available here: https://www.ecb.europa.eu/press/key/date/2018/html/ecb.sp181108.en.html.

But Guy Debelle – Senior Deputy Governor of the RBA – has put the topic firmly on the central banking map with a great speech covering the ground comprehensively. Its available at the following link https://www.rba.gov.au/speeches/2019/sp-dg-2019-03-12.html

What makes this a particularly important intervention is that some in Australia, particularly the vested interests of the coal industry, would treat climate concerns as a political issue, in order to resist the necessary changes. But APRA and RBA are showing that it is a mainstream economic and financial risk issue that the relevant authorities need to tackle, consistent with their existing remits.

Update on Climate Risks

One of the main risks from climate change is the transition risk caused by government policy changes.  Until recently we only knew that European Governments had promised to act, but we didn’t know what they would do.  Since policy changes tend to affect relative asset values at the very least, this was a big risk.  We are now beginning to find out.  The EC published its legislative proposals on 24 May to implement some of the action plan arising from the work report of the High-Level Experts Group on Sustainable Finance.  In the UK the Government has accepted at least the first of the recommendations from its Green Finance Task Force and the Green Finance Institute has now been announced.  This is only the start of course, much more needs to follow.