It is unlikely to make sense to have 15 (and certainly not 25) teams of economists analysing the causes of changes in the velocity of euroM4. But I do not wish to give the impression that EMU, even if it comes about on something roughly approaching the current timetable, will be the ‘end of history’ as far as European central banking is concerned. I suspect that central banks in Europe will continue to display great diversity, and will continue to evolve in different directions, and at different speeds, in response to the characteristics of their local habitat. What is important is that they should be responsive, learning and self-critical organisations, ready to react quickly to changing circumstances. They must also, in my view, display their accountability, perhaps more so than in the past. With the greater responsibilities which European central banks, East and West, have assumed in recent years, comes a greater need to explain the basis on which decisions are made, and to account for the resources deployed in making those decisions. That accountability runs partly to the Treasury, who exercise financial discipline over us, partly to Parliament - whose growing interest in our affairs we welcome - and partly to the broader community. I see this series of lectures fitting within that context, and have been pleased this evening to have the opportunity to set out some more recent reflections, from within the Bank, on the way we exercise our functions on the people’s behalf.
Whereas monetary policy requires a highly trained but small cadre of economists in the head office of the central bank, large numbers of supervisors are needed, often spread across the country, to deal with a multitude of new banks with poor quality accounts. And the skills of assessing risk and the quality of management have not always come easily to staff from a bookkeeping background whose instincts are to tick boxes rather than make judgements. Staff who have acquired the skills needed are frequently enticed away to work for commercial banks at higher salaries. (iii) Managing government debt Another field in which central and eastern European central banks are generally more heavily involved than their western counterparts is in the management of government debt. (Hungary, where there is a separate debt office under the Ministry of Finance, broadly on the Irish model, is again an exception.) Under the old regimes governments relied on their state banks for finance, but the new statutes of the central banks - usually following an IMF model limit the provision of finance to government. Ceilings are mostly around 5% of government revenues, though in Estonia and Lithuania they are zero. With monetary financing restricted, new methods of financing governments have had to be developed and nearly all the central banks have taken a leading part in this process. Even where the government’s own financing needs have been small, as in the Czech Republic, central banks have been keen to establish markets in short-term paper in which they can conduct monetary operations.