A new publication which I contributed to was published last month. “Key challenges facing central banks” was a pretty big team effort with contributions from Deloitte professionals from all corners of the globe – Hong Kong, Singapore, Madrid, New York, Dublin, Oslo, Cali, Frankfurt, Moscow, Pittsburgh, Richmond, London, Tokyo and New York.

Here are two selected quotes from the publication. Note that the text below is copyright (c) Deloitte Global Services Limited

Under “Valuation challenges” -

“Other valuation issues may result from situations where the central bank sets interest rates, and is, in substance, behaving as the clearing house or the ‘market’ for certain asset classes. Arguably, the rates the central bank earns on its own assets may be considered to be ‘market rates’ because the central bank ‘is’ the market. This becomes more of a risk for central banks operating in smaller economies where there is weak-form market efficiency and an illiquid market with a low volume of trades. Under these circumstances, a potential for mis-pricing of assets may exist. In developing economies, central banks’ internal systems and processes may not be robust or reliable enough to accurately price securities.”

Under the “Conclusion” -

“Global and local jurisdictional regulatory reforms are moving forward. How these regulations will affect the global financial services industry and the role of central banks is yet to be seen. One thing is certain – the previously well-understood nature of central banks will need to change, and central banks will need to adapt to a new era. Central banks around the world will not only need to expand their toolkits of monetary policy in order to deal with financial contagion at the macroprudential level, but will also need operational effectiveness and expertise to deal with financial uncertainty.”

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