The Bundesbank has played a leading role in central bank cooperation for 30 years Key issues remain – shift in focus
Birth of bilateral central bank cooperation
In the aftermath of the political and economic upheaval in eastern Europe 30 years ago, particularly the states of the former Soviet Union requested assistance from the Bundesbank, which served as a model in the necessary transmission process. The Bundesbank responded to demand and helped to set up market-oriented two-tier banking systems consisting of an independent central bank which is primarily geared to the objective of monetary stability and private commercial banks.
The bilateral central bank cooperation still exists today and has undergone quite dynamic changes over the years, both geographically and in terms of content. While the emphasis was initially on genuine development aid in the successor states of the former Soviet Union, the focus then shifted in the mid-1990s to the countries of central and south-eastern Europe. In particular, the Bundesbank partnered with the Baltic states, Poland, the Czech Republic and Slovakia in their integration into the European Union. All topics related to the development of modern central banks and banking supervisory systems were in demand. The 2008/2009 financial crisis also increased the need for a bilateral and multilateral exchange of views among central banks worldwide in the area of banking supervision and financial stability. Nowadays, the Bundesbank cooperates intensively with the monetary authorities of around 100 countries, with a focus on the G20 countries. Many new topics such as big data, digitalisation, green finance, central bank digital currency or central bank communication are currently on the agenda, alongside more traditional central bank topics such as monetary policy or cash management.
Pooling scarce resources
Demand for Bundesbank expertise grew rapidly. In the first few years up to 1996 already, 500 training measures were carried out with over 4,000 participants and these had to be pooled in order to meet demand. The new format of international central banking courses was already created back in 1995. Initially, the focus was on training junior staff from around the world on general and fundamental central bank topics, providing theoretical knowledge regarding the role and function of central banks in market economies. However, the courses soon evolved into high-level international forums for exchanging expertise and experience. Young central bank employees and professionals with many years of experience alike now view them as an excellent opportunity to cultivate valuable contacts in an international specialist environment.
Cooperation within the ESCB
Since 2000, the providers of central bank cooperation within the ESCB have been exchanging ideas in what is known today as the Working Group on Central Bank Cooperation (formerly Task Force on Central Bank Cooperation). In order to support the stabilisation process in (potential) candidate countries and in the neighbouring countries of the EU, large-scale EU-financed partnership projects were primarily carried out in consortium with the Western Balkans Six. The Bundesbank, which has been represented on this committee from the outset, took over the Chair of the Working Group from the European Central Bank in 2016. Under its leadership, steps were taken to revive the ESCB’s joint projects and draw up “best practices” of central bank cooperation as well as to advance the evaluation of activities in this area.
New challenges posed by the coronavirus pandemic
In 2020, central bank cooperation was presented with completely new challenges. Overnight, the Bundesbank had to transform its events from face-to-face to virtual formats. It thankfully succeeded in maintaining the number of activities (239 in 2020 compared with 254 in 2019) and participants (3,713 in 2020 as against 4,149 in 2019) alike at a high level. In 2020, 80% of cooperation took place virtually as online courses, video conferences or telephone conferences. Thanks to this success, virtual formats will remain a permanent fixture of the CIC’s range of services even after the end of the pandemic. There is, however, an international consensus that, despite the undisputed organisational advantages (e.g. the elimination of travel time and costs, availability at short notice), these formats will only be able to replace face-to-face events to a limited extent.
Text: Silke Schrupp