Greater openness is crucial to the credibility of financial institutions, especially in the age of COVID-19
To ensure Canadians’ confidence in financial institutions and the government’s financial policy decisions, central banks must significantly improve their level of public engagement, according to Bank of Canada Governor Tiff Macklem.
In a webcast speech last week, Macklem called for a “sea change” in banks’ approach to the public, particularly in the areas of transparency and communication.
“We need to spend more effort speaking and listening to the citizens we serve,” Macklem said. “Diversifying our engagement improves our capacity to make better policy decisions and enhances our legitimacy as public institutions. That is more important now than ever as we grapple with COVID‑19 and its harsh economic consequences, which affect everyone. And it will be critical in the future as we tackle the impact of structural changes to our economies arising from the legacy of COVID‑19 and those it is amplifying, including digitalization, debt and inequality.”
Macklem said that the evolution of communications technology over the last 15 years has proven invaluable to financial institutions, but the advancements have also brought with them significant problems that need to be addressed right away.
“While the internet and social media have vastly broadened access to information, they are also awash with misinformation, echo chambers and conspiracy theories – often pushed by bots and trolls, sometimes for nefarious purposes,” Macklem said. “So, it is more important – yet harder – for central banks to be trusted sources of information and analysis.”
Macklem stressed that this is not an easy task, but it is a task vital to the survival of central banks as a whole.
“The imperative is to step boldly beyond market transparency and engage with the public to explain how our actions serve our economy-wide objectives,” Macklem said. “We can capitalize on this moment by enhancing our public communications through coherent, clear and relatable messages; by helping our citizens understand the broader forces at work in our economy; and by listening and understanding how our policies affect everyone. These efforts will help us to make better policy decisions, reinforce our legitimacy and cement trust with our citizens. The stakes are high, and this opportunity should not be missed.”
