CGFS Report Looks at Sovereign Debt Crisis Implications for Central Banks

The Committee on the Global Financial System (CGFS) has released a report entitled ‘Interactions of Sovereign Debt Management with Monetary Conditions and Financial Stability: Lessons and Implications for Central Banks’. The report was prepared by a study group chaired by Paul Fisher of the Bank of England (BoE).

The financial crisis dramatically altered the environment in which debt managers and central banks operate. The report discusses the interactions of sovereign debt management (SDM) with monetary conditions and financial stability in these historically unusual circumstances.

In such circumstances, or where financial systems are still developing, there is benefit in debt managers taking a broad view of cost and risk. Central banks can likewise benefit from keeping abreast of SDM activities.

Recent experience confirms that medium-term strategic outcomes for the maturity structure and risk characteristics of outstanding debt do matter, for financial stability in particular. This underscores the importance of close communication among the relevant agencies, yet with each agency maintaining independence and accountability for its respective role, consistent with internationally agreed principles for sovereign debt management.

CGFS chairman Mark Carney said that the report would be a relevant and timely input to the national and international discussions about managing the current circumstances of economic and financial strain.


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