The role of central banks has expanded significantly as a result of the financial crisis. Central banks were formerly engaged in regulation and monetary policy, and acted as financial advisors and fiscal agents for national governments. Today, these institutions have a broader mandate to ensure financial stability and create trust in the national economy. In the past, central banks took a largely indirect approach to maintaining market stability; now, this role has extended to the quantity as well as pricing of liquidity, including quantitative easing, and direct market intervention.
To fulfill their traditional and extended role, central banks have a broad and complex set of banking requirements. With the country's economy dependent on central banks' ability to act quickly, decisively and with full access to information, they need a banking partner with the comprehensive range of functionality from cash management, payments and collections through to investment of foreign exchange reserves and full securities servicing.
Balance Sheet Expansion
The past few years has witnessed explosive growth in central banks' foreign exchange reserves, particularly in Asia, allowing central banks to extend their focus from liquidity and preservation of capital to total returns. To achieve an appropriate balance of security and diversification, liquidity and return requires a disciplined approach to policy definition, the right selection of instruments and a robust, transparent and efficient investment process.
Optimize Securities Management
Central banks' long term investments in equity and debt instruments need to be managed responsibly and efficiently to increase market confidence. The increased focus on effective securities management is fuelling demand for robust, integrated securities and fund services, with flexible, transparent reporting.
Focus on Risk Management
The global financial crisis has accentuated the need for all market participants to take a proactive approach to managing risk. Central banks are taking a lead in investment policy definition, counterparty and financial risk management, compliance monitoring and efficient transaction execution, requiring effective, integrated investment solutions.
Controlling Costs, Maximizing Revenues
Like every public sector organization, central banks have an obligation to citizens, businesses and employees to demonstrate efficiency and cost control in their administrative and operational processes, maximizing the amount of cash available to conduct their external role. Conversely, central banks are striving to collect tax and other payments promptly and cost-effectively to maximize liquidity. This is particularly challenging in markets where cash and manual payment methods such as cash predominate.
