The executive board of the International Monetary Fund (IMF) have approved the new IMF Central Bank Transparency Code (CBT).
The development of the CBT follows on the board’s direction in April 2019 to update the 1999 Monetary and Financial Policies Transparency Code, and bring it in line with the recommendations of the 2017 Joint Review of the Standards and Codes Initiative, indicating the need for risk-based assessments to support policy effectiveness and address macroeconomic risks.
The accompanying paper outlines the CBT’s 5-pillar framework and the proposed application of the CBT. It also notes that the CBT, its principles and the detailed practices, were developed after extensive consultation with relevant stakeholders.
The preparation of the CBT benefited from guidance from a high-level advisory panel, consisting of eminent former central bank governors and academics, and input from an extensive consultation process with central banks and other relevant international organizations. These engagements will help ensure that the CBT can provide strong, clear, and detailed guidance to central banks regarding their own transparency.
The paper also notes the importance of the CBT for policy effectiveness and accountability in light of the wide-ranging policy measures undertaken by central bank in recent years in response to extraordinary shocks, including from the COVID-19 pandemic.
The CBT will be applicable, on a voluntary basis, to all IMF members, including less-developed economies. The modular, risk-based, and proportional set-up is well-suited to taking into account country-specific circumstances. This will also enable the CBT to serve as a tailored diagnostic tool in IMF capacity development and facilitate the voluntary use of the CBT in Financial Sector Assessment Programmes and IMF surveillance, such as Article IV consultations, and in an IMF‑supported programme context.
A guide for central banks on transparency
Directors welcomed the opportunity to consider the staff proposal for the Central Bank Transparency Code (CBT) and broadly endorsed its general principles. They noted that the role of central banks–in terms of expanded mandates, unconventional policy actions and complex operations–has evolved considerably in response to the 2008 financial crisis and the COVID‑19 pandemic, and agreed that these changes have heightened the need for enhanced transparency.
Directors noted that the CBT is a timely and useful tool for central banks to guide their transparency practices and strengthen accountability, ensuring more effective policy outcomes and better‑informed dialogue with stakeholders.
Directors welcomed the voluntary nature of the CBT and its relevance for all member countries, including less‑developed economies, recognising that central banks operate in diverse environments, as highlighted in the descriptions of the range of practices for the CBT principles. They appreciated that these practices are not intended to be a tool for ranking the transparency choices of central banks and welcomed the revised practice labels.