In this episode of the HNB Podcast we are joined by Marko Škreb, former CNB governor and one of the most renowned Croatian experts in the field of monetary policy, to discuss a series of his lectures entitled “What keeps central bank governors up at night?” and the challenges of the governor’s function.
Sections:
01:07
The challenges are numerous, ranging from the re-emergence of inflation, a loss of confidence in central banks, digitalisation and the development of new forms of payment to geopolitical changes and climate risks. All this has created a new, more complex context, which is why small banks such as the CNB need to carefully choose priorities and align themselves with global trends.
03:03
Crypto-assets are speculative assets, regulated only partially, and insufficiently, so there is no need for central banks to invest in them. One of the main roles of central banks is to preserve the stability of prices and the value of money within the scope of their mandate, and crypto-assets are typically characterised by high price volatility.
04:46
The notion of central bank independence is multifaceted, but it essentially means that a central bank is free to decide how to meet the objective set by the legislator, which in Croatia implies maintaining price and financial system stability. An independent central bank must be able to take decisions in accordance with its mandate and legal objectives, irrespective of the wishes of policymakers, the government or the ministry of finance.
08:21
A lot has changed as the CNB is now part of the Eurosystem and the CNB Governor regularly participates in the meetings of the ECB’s Governing Council on an equal footing with other governors and the members of the Executive Board. The CNB implements ECB’s decisions in Croatia, participates in the issuance of the euro and the supervision of large European banks, manages cash flow and combats counterfeiting, while continuing to independently conduct macroprudential policy, safeguard financial stability, supervise payment systems, collect statistical data and act in its advisory role.
10:19
Differences are significant: the Fed was founded to stabilise the banking system and introduce the single currency and, in addition to maintaining price stability, it also has a full employment mandate, while the primary objective of the ECB is price stability. Also, the ECB has a higher degree of institutional independence than the Fed, although the Fed has also been highly independent in practice. Occasional political pressures in the US are most often temporary and related to electoral cycles, rather than the structure of the system.
14:53
The digitalisation of payments is not only a technological change, but also implies a deep structural transformation of the financial system. From cash and checks, we have switched to digital wallets, instant payments and virtual currencies. The digital euro is strategically important as more than two thirds of EU card payments are today processed by US companies. Europe has to have its own payment infrastructure.
20:28
The topics, which are very current, from the digital euro and crypto-assets to the green transition and climate challenges, share a common characteristic: these are the issues that continue to “keep up at night” central bank governors from all over the world.
22:58
The finest and most intense period of my professional career was during the post-war years. Particularly noteworthy is the process of peaceful reintegration of the Croatian Danube region, when, following the signing of the Erdut Agreement and the establishment of the UNTAES, monetary integration was to be implemented, that is, the Yugoslav dinar had to be replaced with the kuna.