Training on banking policy formulation and management helps one to understand the bank’s policy formulation mechanism in the context of its auditing the broader monetary policy strategy, touching on the choice of the monetary policy/exchange rate regime, monetary policy objectives and instruments, operational goals, and the functioning of the monetary policy transmission mechanism.

Bank policy formulation should focus on the practicalities of implementing operational policy including its effects on the central bank’s balance sheet. Discussing auditing fiscal and monetary policy instruments, factors affecting short-term money market liquidity, forecasting liquidity, the conduct of open market operations, and the role of required reserves, standing facilities, and central bank communication.

Target Audience:

These central bank courses are aimed at Middle Management to Senior-level officials in central banks responsible for monetary policy analysis and policy formulation or the conduct of monetary policy operations; Bankers, Financial analysts and ministries of finance/economy with an interest in gaining a deeper understanding of monetary policy implementation.

Course Outcomes:

Upon completing this workshop on training on banking policy formulation and management, the delegates should be able to:

• Understand the link between bank policy, what can generate tension with central banks’ other objectives because bank reserves play other important roles in the economy
• Central bank training will help to understand the important to understand the tension between the daylight and overnight need for reserves and the potential problems that may arise.
• Develop an understanding of the demand for reserve balances will vary inversely with the market interest rate, since this rate represents the opportunity cost of holding reserves
• Outline best practices for a financial institution’s policy audit function through central bank courses; Provide a framework for performance and promotion of a broad range of policy audit activities
• Establish the basis for measuring performance in the policy audit function and indicate how the work of the policy audit function can improve the financial institution’s processes and operations

Course Content on Training Banking Policy Formulation and Management

Course Introduction

Monetary policy: leaning against or with the wind?

• Assessment of dilemmas, conflicts and trade-offs between monetary operations and the financial stability mandate
• Implications for central banks’ independence and accountability
• Overview of key factors and dynamics that will shape the framework for monetary policy operations in the years to come
• Discussion: future of monetary policy in the delegates’ home jurisdictions

Digital currencies and monetary policy: implications for monetary policy, central banks and central banking

• Taxonomy of Central Bank Digital Currencies (CBDCs), stable coins and crypto assets
• Impact and implications of CBDCs for markets and portfolios
• Opportunities and risks of CBDCs for monetary policy implementation
• Discussion: will Covid-19 speed the transition to digital currencies?

The new toolkit for optimizing monetary policy operations

• Evolution of approaches for managing domestic liquidity and monetary policy operations
• Frameworks for tackling challenges at both strategic and day-to-day level
• Key features of the modern monetary operations toolkit

Central Bank Training: Liquidity management in different regimes

• Liquidity management and exchange rate regime: different means and different goals
• Corridor vs. floor systems: implications for liquidity management and forecasting
• Market volatility and the regulatory demand for liquidity
• Liquidity forecasting tools and techniques

International monetary policy spillovers and responses

• Examples of monetary policy spillovers from advanced to emerging market economies
• Overview of measures taken in emerging markets in response to these effects
• Spillover implications of the monetary policy tightening
• Discussion: how do monetary policy spillovers get tackled in the delegates’ home jurisdictions?

The balancing act of policy solvency

• The concept of “solvency” for central banks
• Consequences of financial weakness
• Distribution mechanisms and recapitalization
• Assessing capital adequacy – a forward looking approach

What (not) to say to markets, when and how?

• The role of communication with markets in monetary policy design and implementation
• Forward guidance as a policy tool
• Examples of frameworks and processes ensuring that central banks’ messages are consistent and context-sensitive
• Practical examples: how to communicate in time of market stress or volatility

What next for central bank balance sheets?

• Quantitative easing: a remedy for liquidity problems
• Benefits and drawback of the shift to a floor system of money market operations
• Key components of quantitative easing as a generalized expansionary policy
• Discussion: the future of central bank balance sheets and money market operations