Maja Kadievska-Vojnovik: Recent developments in central bank governance, accountability and transparency as core drivers for effective financial supervision and the importance of board effectiveness for banks and central banks Speaking note by Ms Maja Kadievska-Vojnovik, Vice-Governor of the National Bank of the Republic of Macedonia, at the Conference “Central Bank and Supervisory Governance”, organized by the Netherlands Bank, Amsterdam, 12 February 2016. *  *  *  At the beginning of 2016, the global economy looks set to enter another challenging year ahead. The risks for policymakers remain multifaceted as global transitions continue with adjustments happening on multiple fronts. First source of vulnerability is China as it transits from earlier main engine of global economic growth to a new phase of growth rebalancing, that is almost certain to result in a major slowdown internally and adverse spillovers externally through the trade linkages and prices of commodities. As second, is the protracted period of low commodities prices straining growth prospects for commodities exporters, including some major emerging markets like Brazil, Russia and South Africa. Third front is Europe that along with the debt crisis, now faces another challenging struggle to effectively manage the migrant crisis that has brought to a test the EU’s absorption capacity and the political system. Fourth, the US FED has launched the normalization of monetary policy leading to a policy divergence in advanced economies and building fears of potentially tighter financing conditions and declining capital flows that may adversely affect emerging market economies.

The international community response to the crisis in the Middle East and the risks of potential Brexit are additional factors that add to the geopolitical risks. Global growth prospects remain cloudy again, with IMF now (WEO, January 2016) expecting more gradual pick up in global growth from the estimated 3.1% in 2015 to 3.4% in 2016 and 3.6% in 2017 (as compared to 3.6% for 2016 and 3.8% for 2017 in October 2015, WEO). Risks continue to weigh on the downside and are particularly prominent for the emerging and developing economies given their higher vulnerability to sudden switches in global confidence, reversals in capital flows and financial markets volatility. The challenging world translates into challenging environment for monetary policy making. Continuous vigilance on multiple fronts, while successfully juggling between difficult trade-offs in decision making is what has become the new art of central banking nowadays. The main challenge for monetary authorities, not only today, but for years back, is how to deliver the most appropriate policy mix that will support demand and activity, while safeguarding against macro-financial risks. Recent crisis has brought financial stability to the fore acknowledging the importance of central banks in financial stability, a task which they have historically performed, though to a varying degrees. According to a BIS study (2009) central banks’ arrangements for financial stability as they stood before the crisis have differed widely across countries, both for normal and crisis times.