Central banks need to step up digital game
The governor of the Central Bank of the UAE highlighted the important role of central banks in mitigating the repercussions of the Covid-19 pandemic in economies and underlined the structural trends in the banking and financial industry accentuated by the present crisis.
Abdulhamid M. Saeed Alahmadi, who participated as a lead speaker at a virtual meeting of governors from major emerging market economies organised by the Bank for International Settlements, also stressed the importance of further digitalisation and the delivery of financial services through new channels.
The meeting was attended by governors from across the globe to discuss policy response and medium-term challenges arising from the Covid-19 pandemic in emerging markets.
Alahmadi also highlighted that while capitalising on the benefits of digitalisation, countries in emerging markets also need to address financial inclusion and ensure that traditional banking channels remain available for people of determination and elderly people.
He discussed that central banks in emerging markets need to think strategically about the adequacy of their power to address crises such as the Covid-19 pandemic. Policy space may be more restricted in emerging markets, which calls for a close policy coordination between fiscal and monetary authorities. An additional discussion point included the broader issue of exiting from the temporary regulatory relief measures developed to support the economy during the pandemic.
Once economies are in a position to recover, central banks need to act in a careful and phased manner, in order to avoid a sharp deterioration of credit supply. Alahmadi closed his statement indicating that as a regulator, monitoring credit quality and provisioning international best practices shall remain the focus of central banks yet thriving for innovation to continue to promote financial stability and protect the economy.