Statement of the European Commission
- Susana Almuina, Ian McCarthy, Gabriel Sensenbrenner, and Justin Zulu
- Published Date:
- December 1995
We have learned from experience that in market-based economies we need highly professional and independent central banks to achieve the stable macroeconomic environment that is essential for sustained growth in output and employment. The central banks of the Baltic countries, Russia, and other countries of the former Soviet Union thus have a pivotal role to play in the transition process, particularly by ensuring sound money and the health and efficiency of the financial system as a whole. To fulfill this role, they are undertaking a range of important institutional strengthening and restructuring measures. To help them do this, the European Commission, working through its program on Technical Assistance to the Commonwealth of Independent States (TACIS), is providing technical assistance in close coordination with the IMF and cooperating central banks.
TACIS participation in the overall assistance effort is mainly in three areas that the European Commission regards as having strong complementarity with the macroeconomic responsibilities of the beneficiary central banks.
Technical assistance for training is particularly important. In the first place, training is needed to enable central banks to absorb technical assistance in other areas effectively. But, it is also a long-term investment in providing the necessary in-house skills and expertise to enable the central banks to define and implement policy effectively. It also enables them to carry out new operational tasks with a high level of efficiency, initially in the context of the economic transition, but taking into account also the increasing sophistication of markets that forces central banks continually to update their expertise.
A large emphasis is placed on technical assistance to help achieve improvements in domestic and interstate payments mechanisms. Such improvements are necessary for a number of reasons: for instance, to remove an important impediment to trade, both domestic and interstate; to encourage more confidence in the banking system and promote wider use of banking facilities by companies as well as by the saving public, thus increasing the intermediary role of banks; and to enable monetary policy to work more quickly and effectively. Improvements in payments mechanisms involve both the central banks and the commercial banks so that, to be successful, there needs to be good communication, transparency, and consistency of approach between the two sectors.
The existing chart of accounts was designed for the former U.S.S.R. Gosbank in 1989, but the structure, functions, and practices of the banking system have changed substantially since then. TACIS technical assistance has helped in drafting a new chart of accounts that we hope will be implemented in the near future as part of establishing an appropriate regulatory and supervisory framework for the banking industry. This is an urgent task bearing in mind the dramatic development in the number of banks and banking activities over the past five years in an environment of high inflation.
To conclude, three additional points can be made.
To be fruitful, technical assistance to central banks in the areas mentioned above needs to be accompanied by adequate progress in other domains. For example, for modern central banks an adequate standard of statistical reporting is very important for them to be able to carry out monetary policy effectively; the legal framework, administrative practice, and so forth are also important.
Technical assistance will complement, but will not substitute for, the implementation of appropriate macroeconomic policies by the fiscal and monetary authorities.
The beneficial results of technical assistance will be all the greater if the central banks of the Baltic countries, Russia, and other countries of the former Soviet Union continue to develop and maintain close cooperation. Cooperatively, they can share experiences and information about how to use technical assistance effectively and can develop consistent statistical, accounting, and regulatory standards and operational procedures, among other areas.
Thank you for your attention.