Other parts of this series:
- Building a digital monetary authority for a digital age
- Next-gen central banking | Pillar 1: Harness the power of data
- Next-gen central banking | Pillar 2: Enable and drive innovation
- Next-gen central banking | Pillar 3: Drive efficiency
- Next-gen central banking | Pillar 4: Communicate effectively
- Next-gen central banking | Part 5: Building the workforce of the future
Pillar 4: Communicate effectively
Communication is critical in ensuring that central banks can carry out their mandates effectively on a range of topics. These include: regulation and monetary policy, consumer protection, fraud and Anti-Money Laundering (AML), the national economic outlook, the financial sector’s outlook (for international agencies and global regulators), emerging technologies and innovation (for fintechs), and supervisory and regulatory frameworks (for financial institutions).
Doing so effectively requires that central banks put data at the heart of this process and that they can hear from and collaborate with their stakeholders. This, in turn, requires a transparent and consistent communication approach, leveraging the available tools and technology to communicate the right material in the right manner to the right audiences, both external and internal. Aside from technology, central banks must also define the channels that will support collaboration and communication.
Communicating effectively additionally requires that central banks redefine how they engage with the entities they regulate, as well as with the end-consumer. This necessitates that their objective shifts to become customer-centric, while their mindset changes from one of enforcement to one of enablement and awareness-generation, which makes for easier compliance.
Internal communication: Collaboration is key
Communicating well internally ensures consistency across different functions within the central bank in terms of strategies, policies and regulations as well as ensuring the bank is well-informed and equipped to understand new technologies, trends and markets. In this way, it can anticipate change with the right regulations and policies. Internal communication focuses on establishing a core enterprise capability of collaboration and knowledge management to eliminate knowledge silos and to support continuous improvement initiatives.
Central banks are, after all, knowledge-based organizations, with that knowledge held in numerous forms including global and macro-economic analysis, internal and external reports, regulatory returns, and company and industry documents, as well as from audit, investigations and others. They also hold enormous amounts of data from various sources. Organizing and sharing such knowledge in an accessible and comprehensive manner across the organization is critical.
Knowledge-sharing is core to collaboration within central banks, with different functions able to find and manage content, share it and work together effectively. A good collaboration framework, such as that outlined below, covers components that in return bring higher productivity with more effective and creative outcomes.
External audiences: A two-way channel
When it comes to communicating with financial institutions (FIs), the approach taken is often fragmented and inconsistent. Different areas of the central bank communicate on aspects like licensing matters, reporting and compliance issues, and do so via monolithic platforms that are unfit for purpose. In addition, the flow of information has a one-way focus, which makes for a slow turnaround.
What FIs need are reliable services and consistent interfaces, consistent and transparent communication and a two-way channel. That can be achieved by using digital services, flexible platforms, and omnichannel and two-way communication.
Communicating with the broader financial services (FS) industry, meanwhile, requires that central banks provide systematic and structured information tailored to specific groups. It’s also important that they facilitate collaboration. Like FIs, the FS ecosystem needs prompt, transparent and consistent communications on subjects from risk and compliance to regulations and monetary policy, fraud and AML, consumer protection, emerging technologies and the economic outlook.
Two-way channels are crucial here too, as these allow central banks to hear the concerns of sector players like banks, insurance companies, fintechs and others. Social media analytics tools are also useful as they can provide close to real-time feedback on perceptions of decisions as well as information about market players and events.
The approach of Singapore’s regulator to communication is exemplary, with services for businesses that are created with input from firms—which ensures they are more relevant to firms’ needs—and that provide a secure and reliable environment in which to communicate. The Bank of England is another. It is seeking to transform how it hosts and uses regulatory data over the next decade, for example, in part to decrease firms’ regulatory burden.
Other regulators and government authorities comprise the third part of the external audience, with effective communication central in building proactive and collaborative relationships. Growing interest in, for instance, central bank digital currencies (CBDCs) saw the European Central Bank and five other central banks along with the Bank for International Settlements (BIS) create a group in early 2020 to share their findings as they assess how useful CBDCs might be in their home markets. The BIS leads in its approach to central bank collaboration, with, for example, its Innovation Hubs developing insights into key trends in financial technology, and acting as a focal point for innovation experts at central banks globally.
For the general public, it’s key that central banks provide information that is easy to understand and that is disseminated through multiple channels. The Bank of Italy, for example, drives financial inclusion and financial literacy by educating people via websites, online tools, campaigns and museums. When it comes to monetary policy announcements, the Reserve Bank of India, the Reserve Bank of Australia, the Bank of Canada and the US Federal Reserve are among those that do so via live press conferences or webcasts. Those events are also posted on their websites.
Our next blog will look at the platform that underpins the four pillars: helping to transition the financial sector’s workforce for a digital future while also transitioning the central bank’s workforce, and strengthening its internal delivery capabilities by, for example, leveraging automation and using lean processes.