Transparency is fundamental for the accountability of independent central banks. Inasmuch as they have been given greater independence, transparency in these institutions is considered as a mechanism to provide society with the ability to evaluate if a central bank's actions are consistent with its constitutional or legal mandate. Also, it is well known that greater transparency in the formulation and implementation of monetary policy strengthens the credibility of the central bank, improves the efficiency of its policies, and contributes to the better operation of markets.
The legal and institutional organization of several countries including Colombia establishes a number of instruments that allow the actions by the national central banks to represent the interests of the society directly or indirectly, without compromising their independence. Its accountability to Congress is of utmost importance, as it represents the interests of the citizens and is also the entity to whom central banks submit management reports annually or biannually. Additionally, in order to ensure that central banks act within the limits of their
legal mandate, there exist control bodies that supervise their actions such as the legal control of issued regulations and disciplinary control of its officials’ behavior.
Banco de la República, which has technical, administrative, and budget independence since the Constitution adopted in 1991, strives to be transparent and to communicate the strategies, policy decisions, and other relevant issues clearly, effectively and in a timely manner, in accordance with the principles of accountability. These efforts take place in all aspects of the Bank’s operation, including those related to monetary policy as well as those linked to its cultural action, administration of international reserves, production of banknotes and coins, procedures for access to liquidity including emergency liquidity, the Bank’s work as a fiscal agent of the government, and its role as a promoter of optimal operation of the payment systems in the country.
The transparency mechanisms related to the design and implementation of the monetary, exchange and credit policy, which is a fundamental role of the Central Bank, encompass the actions described below:
- The objectives of the monetary policy are clearly established within the country's Constitutional and legal framework: the primary objective of monetary policy is to maintain the purchasing value of the currency in coordination with the general economic policy. This objective is clear, prioritized, and quantified: the Board of Directors of the Central Bank announces the quantitative objective of the monetary policy every year. Therefore, society can easily check what the monetary authorities pursue versus whether or not they are achieving their goal. This is consistent with the Constitution, according to which "the Central Bank shall report to the Congress on the implementation of the policies".
- The economic information used by the monetary authority is, almost in its entirety, known to the public. The Bank discloses the information that the technical staff presents to the Board for decision-making. Also, the public knows the type of models used by the staff, the projections, and the degree of uncertainty of the inflation forecasts, as well as the range for the economic growth forecast (for the current year and for the next unpublished quarter).
- The inflation targeting strategy is public, and the Central Bank is concerned with its wide dissemination and understanding by the public. (i) the quantitative objective is revealed, as well as the instruments and the rules of decision to define policy actions. (ii) immediately after the meeting of the Board, a statement is published communicating the most relevant issues considered for the decision. At the press conference held immediately after the Board’s meeting, it is also reported if the decision was reached unanimously or by majority. The reading of the statement and the press conference are transmitted in real time through our virtual channel. All the videos of the press conferences of the last twelve months are available on our Website and can be viewed freely. (iii)Two weeks after the Board's meeting, the minutes of the meeting are also published both in English and in Spanish, presenting the information collected by the technical staff and the considerations by the members of the Board in making their decision. (iv) The Inflation Report, which offers all public information used in the analysis of the economy and its prospects made by the technical staff and the Board of Directors, is published quarterly. The fundamental ideas of the report are presented by the Governor on national television (through the institutional channel), and the citizens can ask questions by telephone, face-to-face, and virtually
Every month, the Board of Directors of the Central Bank analyzes the following information in light of the Inflation Report:
- Series of consumer and producer prices
- Core inflation measures
- Production and expenditure Indicators
- Currency, credit, interest rate, and asset prices series
- International economic indicators: global growth and that of the country's major trading partners, liquidity, and external interest rates.
Specifically, the Inflation Report has the following objectives: (i) to inform the public the vision of the Board of Directors and of the Deputy Technical Governor of the Central Bank on recent developments and expected inflation, and the determining factors for the short and medium-term; (ii) to explain the implications of these factors for monetary policy within the framework of the inflation target; (iii) to explain the context and the analyses which underpinned monetary policy decisions during the quarter; and (iv) to provide information that contributes to the formation of economic agents' expectations regarding the future path of inflation and economic growth. In the Inflation Report, the Bank's technical staff analyzes the economy and the inflationary situation and its forecasts in the medium and long term. Based on it, the staff advices the Board of Directors on the monetary policy stance.
The Governor presents the Report in a free-entrance event, highlighting its most important sections. The presentation is broadcast live on the Institutional Channel and on our virtual channel. As with the videos of the press conferences, the most recent are available for consultation by demand on our Website.
- Complying with Article 5 of Act 31 of 1992, the Board of Directors of the Central Bank submits a report to the Congress of Colombia twice a year accounting for the behavior of the economy and its prospects. This report is delivered within ten working days following the starting date of the Congressional Sessions (i.e., in March and July).
En los The Reports of the Board of Directors to the Congress of the Republic present the assessment of the macro -economic outcomes observed, including careful analyses of the different shocks experienced by the economy. It explains the reasons why there might be a deviation from the inflation target, if it actually occurred; also, it presents the insights of the Central Bank as to where the economy is headed in the near future. Besides, these reports explain the rationale of the decisions on the monetary, exchange and credit policy made by the Board of Directors.
It also presents a description of the level of the international reserves and the financial situation of Banco de la República
The topics covered in the Report are:
- Economic Activity and Employment
- Monetary and Exchange Rate Policy
- Fiscal Policy
- Balance of Payments
- Level and Management of International Reserves
- Financial Situation of Banco de la República
In other words, the public as well as local and international markets are provided with all relevant information on the monetary policy decision-making process (the "inflation targeting strategy"), the assessment, and the rationale of policy decisions, as well as of the procedures followed. Additionally, an effort is made so that this information is understandable and timely. In this way, the Central Bank complies with its Constitutional and legal obligation to submit to the Congress of the Republic a report on its management twice a year, in virtue of the Central Bank's independence. The purpose of this is to guide the public's expectations regarding monetary policy, contributing to its efficiency and reducing unnecessary volatility in the markets.
As for transparency and accountability of the Bank regarding its other functions, the following information is relevant. The Report of the Board of Directors to the Congress of the Republic contains two chapters, one on the administration of the international reserves and another on the financial situation of the Bank. The chapter on the management of foreign reserves explains the management criteria and reports on the results obtained; the final chapter presents detailed information about the Bank's income and expenses as well as its balance sheet, duly audited. All this information is available for the Congress and the public in general. Members of Congress can comment and ask detailed questions on any subject of the Report.
On the other hand, the Bank periodically publishes the Payment Systems Report
(only available in Spanish) and the the Financial Stability Report
. The first one analyzes in detail the performance of payment systems and the actions taken by the Central Bank related to that function. The Financial Stability Report identifies the risks of the country's financial system associated with macroeconomic factors or to the behavior of the customers of the system (families, businesses, and government).
Por último, el Banco informa sobre decisiones y resultados administrativos, ambientales y sociales, a través de los llamados Sustainability Report
(only available in Spanish). Finally, the Central Bank reports on administrative decisions and outcomes and environmental and social aspects through the Sustainability Report. While private institutions also issue this type of report, the Central Bank considers that the concept makes sense in institutions such as central banks, as they are complex entities that intensively employ human, natural, and financial resources. As a result, the Bank's reports present the efforts and the results regarding the use of natural resources, protection of the environment, generation of knowledge, human capital formation, and many other aspects that comprise the vast majority of its activities.