5  All speeches are available online at www.bankofengland.co.uk/news/speeches  5  The changes adopted by many central banks around the world in the late 1990s effectively narrowed their focus, reflecting the belief that price stability was the best contribution a central bank could make to macroeconomic stability, and by extension to the broader public good. Although there were tremendous innovations during this period, this reductionist vision of a central bank’s role was structurally flawed. In particular, this narrow focus failed to recognise that financial stability is as important an objective of macroeconomic policy as price stability. Central banks have a vital role in maintaining financial stability because of the deep underlying connection between it and monetary stability. Both are fundamentally about maintaining the public trust and confidence in money and the financial intermediation that is essential to oil the wheels of commerce. That trust and confidence can be undermined through a loss of certainty about the future value of money, a loss of confidence in financial intermediaries, or ultimately a loss of faith in the financial system. The financial crisis was a powerful reminder of the imperative of financial stability. After years of low and stable inflation, it became obvious that central banks had won the war only to lose the peace. The costs were enormous. The complete loss of confidence in private finance that occurred in 2008 could only be arrested by public support that totalled $ trillion in bail-outs, government guarantees of bank liabilities and special central bank liquidity schemes.
On a daily basis, moreover, the Central Bank of Malta liaises closely with the NECC, the Malta Bankers’ Association and other entities which for years now have been participating in joint technical meetings covering key operational areas, including the functioning of money and capital markets, payment systems and the gathering of statistical data. The Bank also has an internal plan, encompassing some 200 different tasks as well as time frames within which they need to be completed, for an orderly transition to the euro. This plan was drawn up using a bottom-up approach, with each department developing its own programme for adapting structures and procedures to the policy and operational requirements of EMU. Plan implementation is on track. Steps have already been taken to align the monetary operations, accounting and financial reporting frameworks with those of the Eurosystem. The Bank has also completed most of the necessary upgrades to its IT hardware and operating systems to ensure that it can exchange information and settle transactions with the Eurosystem in a seamless fashion. As far as the Cash Changeover Plan is concerned, this too is on schedule. The physical facilities for the storage and distribution of cash have been completed, the test run for the minting of Malta’s euro coins has commenced and arrangements for the procurement of euro notes are about to be finalised.