Dr. Solikin M. Juhro Executive Director, Head of Bank Indonesia Institute
Bank Indonesia Guest Speaker 6th International Accounting & Business Conference (IABC) Jakarta | August, 21st – 22nd 2019
POLICY CREDIBILITY AND FINANCIAL GOVERNANCE: A CENTRAL BANK PERSPECTIVE
A Central Bank Perspective
A traditional mandate given to the central bank as a policy agent generally takes the form of achievement of price stability or currency stability. Aftermath Global Financial Crisis, the central bank was also required to maintain financial system stability.
Central banks are not commercial banks. They do not seek profits, nor face the same financial constraints as private institutions.
Why is credibility important? Blinders (2000) state that with credibility a central bank could reassure the public that, through the policy measures taken, the policy goals will be achieved. Therefore, higher credibility at central bank is generally believed to enhance the implementation effectiveness of central bank policy. Degree of central banks credibility, determined by the central bank independent, transparency and accountability.in a broader policy perspective, the policy credibility and financial governance determine the effectiveness of central bank policy. They also have mutual relationship and mutually reinforce each other.
For modern central banks financial governance, financial sustainability, transparency and accountability go hand and strengthen public support for the independence and enhancing the policy effectiveness of the central bank.
Bank Indonesia is a central bank that has an independent committee to draw up Bank indonesia accounting standards.
Bank Indonesia successfully obtained unqualified opinion (WTP) from Supreme Audit Agency (BPK) 16 years in a row.
“The achievement is not taken for granted. It is a result of strong commitment and hard work to safeguard policy credibility and solid financial governance in supporting the Bank Indonesia policy effectiveness.”