Thursday, April 03, 2003

Policy issues for central banks

The BIS has just released the report: Policy issues for central banks in retail payments. As situations differ in quite some countries, the Working Group that made the report has defined some base line options for as well as possible further actions that a central bank can take (assuming it has the legal competence). In general central banks ought to pursue efficient payment systems and:

1-address legal/regulatory impediments to market development and innovation,

2-foster competitive market conditions and behaviours,

3-support the development of relevant standards and infrastructure arrangements,

4-provide their own bank services in the manner most effective to the particular market.

As I observed earlier in this log; it is a pity that the report does not deal with cash payments. Todays provision of cash is often free (which means alternative means of payment may not find a business case) and results in quite some crime. In some countries there may be an urgent need for a debate on the pricing structure of cash and perhaps on scenario's to start eliminating it from the economy. And can it be expected that central banks will be the first to start such a debate? Not as long as issuing bank notes remains the prerogative (and the income source) for central banks.