Central Bank of the Future Conference Closing Keynote Conversation (Day 2)

So we're going to

have the inevitable task I think
of trying to sum up everything that

we've learned in everything these 2
distinguished gentlemen have learned over

their entire careers in in the final
49 minutes of the conference

and I appreciate their willingness to
engage in this wide ranging conversation

is a way of closing out more
activities for the last day and a half.

Let me just start maybe on a more personal

note not the personal to me
the personal to you both.

Governor and to do.

Studied in Sweden got a Ph d.

in Sweden and those who has
spent time reaching out to and

having conversations with Governor
governor and for many years and

I wonder whether you all might start by
just saying a little bit about how you.

Begin to connect and
what you learn from each other.

Thank you very much sir for
me as an owner let me say that

I'm actually I see the output
from composite view to my Sida

that's how I found myself in Sweden and
so my school life was.

Sweet.

And it continues to do that in Africa so
I always tell everyone that I'm actually

see doubt and I'm going to continue
actually building capacity and

opposite doesn't stop there even when we
go to institutions that are require we had

us read those institutions we also have
to lead in terms of building capacity so

the 1st time I met Stefan was when I
became governor into those and 7 and

there when we started talking I have I can
say that I have benefited from clearly s.

And of course continue talking
about other areas the fasting was.

Meant by talked about coming to the
Central Bank and the question was How does

Central Bank actually do its own business
with this massive cost central bank

had only 4 branches in in Kenya and
everybody was trying to get currency

from the central member central banks to
have the monopoly of issuing currency so

one of the things one of the discussions
was the fun was how do I get

the kinds of money meant an event
that the modern board management so

that I can actually introduce
currency sent us in Kenya

we introduced 3 currency sent us and
then of course the usual.

Thing about Kenya is that everybody wanted
more I don't know it hasn't happened since

then but we had marked out when I was very
happy that even the system that the system

of even vote management we feel borrowed
from Sweden The 2nd thing was that we had

now a large bid after M.P.'s a success
the right to write debate was how do you

conduct mantra policy when 1st
of all move away from them and.

Targeting that is.

Targeting base money and we have to move
out because actually the basic assumptions

are drying that base
money targeting was that

the money most pro was changing
the rules it was changing so

in the sense I wanted him to infringe they
stuff that can govern us and we had a big

conference Nick give a keynote
address on on inflation targeting and

actually how Sweden has succeeded
in that information targeting and

it works very well and
finally I had to make a visit to Sweden so

many times because I needed to understand
how we can intrinsic mantra policy

that is communicating mantra policy making
decisions I think Kenya had already

the central bank of Kenya had written
moved into having an executive mantra

policy committee and obviously we started
even the structural models of forecasting

information than the next thing is how
do you actually uncle expectations and

that one of them was a communication
is the same thing about even M.P.'s and

all that So those 3 areas I have benefited
and I think it has made the central

bank of Kenya what it was 80 as of been
there and that lingering experience and

even the reforms that I introduce us to so
I trust

attribute most of those to Stephan and
my relationship with we but

I've found that also my relationship
around this institution so

it's all motivated by the fact that I'm
actually a Swede see the output and

that is why a capacity building
is still in my d.n.a..

Thank you well just to add to
that I mean in the Central Bank

community there aren't that many other
central bankers to talk to at home.

Because usually there is
only one sense of back and

you just don't go to the bankers and
talk about your troubles.

Just doesn't work that way so so you
sort of constantly try to talk to other

central bankers about what you're doing
and how you go about doing things and

you ask questions and then all of
us regularly actually at the global

level that tend to say
the same type of meetings so

in addition to kind of bilateral
work we just meet and we discuss

various issues that we find of interest
for all of us and going to the i.m.f.

the World Bank to be I have other types of
other types of meeting because that's what

that is the only thing that you belong
to and that's where you kind of quietly

can reflect on things without the whole
thing ending up in the newspapers and

many of the things that you actually
discuss are very practical and

what has struck me over the years given
that I've done this now for many quite

a quite a quite a number of years is that
when you get into central banking many

central banks are sort of approaches
from the macro side monetary theory or

doing macro monetary policy inflation
targeting but all of a sudden

when you end up being the governor you
have sort of like a 1000 people or

more than that reporting to you and
your job is to run things.

To actually make sure that other people
do things that you want them to do.

And that's kind of a perennial issue among
central bankers that you always discuss

when you meet and and some are ahead and
some are behind what all of

us have in common and this is a constant
struggle is that all the other ones in

your own country know that the central
bank that's where the money comes from and

there's always somebody also
want to get your money.

You don't want to just do that and

then there are different ways of
dealing with that particular issue.

That's great so I want to.

Switch to a topic that we've been
discussing a lot which is innovation and

wonder if you could each reflect
1st on the role of the central

bank in being an actual innovator
in terms of use of technology

changes in procedures changes in
regulatory approaches so how do you.

Do you foster innovation from within.

Maybe just start from from there and
then out broaden it out

I think it I think we took it all
depends on where you starting from and

I didn't want to follow up
what Stephan and said But

I think in the canyon Central Bank when I
just when I went there after so many years

of training economists in the University
of Nairobi and and even including a c.

African Economic Research Consortium and

even government think tank I couldn't
get economist I can talk to and

I the question was how how how do you get
3 seconds in the research department.

Because it's so painful when.

The head of the research department
tells you that we fight information and

we use base money and then you ask and
what is the divisions between basemen and

information and he has no answer so
what 70 saying is that I wasn't

sitting back and waiting for everybody
to work I had actually had to write

those develop those models together and
then changed the way they asked How do you

I asked him how do you get people into
the research department economist or

we advertise for management trainees and
when we see in your c.v.

you have studied economics we push
you to research this disaster when we

actually say the next time you advertise I
want you to advertise economist are known

economists don't jump in management
training they're not what they do is that

you said I want to market economies I want
a microcosm if I want finance guy and

then you find them and all of a sudden
the 1st bike we got was about 97 p.h.d.

Another us very senior master's and
all of a sudden now I could sit back and

just say what we didn't need to do and.

So that's the 1st thing about.

The outcome of managing a transition
the next thing is they know visions

that came in one of the things of course
I didn't want to rubber it is even

being confronted by the market
participants that would like to bring this

product into the market the next
thing would you tell them

that it cannot work they have tested it
can work so the 1st thing is a let's do

a pirate in the meantime you actually
preparing your team to try and

understand how to do this work and
what are the intricacies or

even risks that may come with it and that
is where you could say that the regulator

becomes innovative because he's
accommodative in terms of what he can do.

And that's why when I talk about
some of the areas that we have

changed in terms of the ways and
the things and

all that is because of trying to see that
we can actually pirate something and

give the market the confidence that if it
doesn't want to wrong the lines would like

to we can always close that is
perhaps an innovation in terms of.

Us in the sentiment trying to understand
things that this can work in fact when I

talked about 7 introducing me to even
trying to introduce currency money

the idea of having currency sent us even
among his Kenyans was not very clear and

the politicians were good at it and saying
oh you don't mean opening central banks

in those regions No I said no not branches
and those currency centers one house by

commercial banks the Swedish mores that
commercial banks were distributing

arise in a way our moral was that you
actually central bank issues currency So

essentially what you do you take your
currency into a currency center and

you are given space by a commercial
bank and so I argue that over time

we were transferred this function that
fought for me that was innovation but

then the market so there are some
areas that we guided the market but

there are some areas
where the market gave us.

And for our Should I say our brains and
then we had to actually risk this or

to Best Buy and
then see what what kind of.

These communications can we adopt so that
we don't want to stifle what we're trying

to do but at the same time we
don't want to bring something

that if you bring something up you
introduce something in the market and

it feels the regulator is not forgiven so
is the market is forgiven so

easily but not that area yeah.

One of the issues when you run a central
bank is and this is I think one for

in many many countries that you can you
have the privilege of hiring the best and

the brightest and
many many highly educated people

but it's a constant managerial
challenge to get these people to

actually do things that
you want them to do and

that's quite quite quite a challenge
with us it's quite a difference between

coming from the academic field for
academia and sort of think about things.

That's quite different compared to having
to let's say implement just for the sake

of the argument inflation targeting and
that's a challenge to sort of realize

that now it's not about how many articles
on inflation targeting you have read.

It's actually about when this
is going to be implement and

who is going to talk to whom and how
do we explain this to our superiors and

how do we actually get this thing done and

what has struck me having worked for many
years now with many many talented people

is that a good number of them
are actually quite risk averse and

that means that when it comes to crunch
time you have to choose between a and b.

they sort of it bothers them and they
just can't choose that's left to me and

then I say Well guys you need you need to
understand that I'm paid to decide things

so either you tell me what's right or
wrong or I decided anyway because my job

is to decide and I can't leave the room
you can leave but I can't and.

So let's work together on on on this and

this is a sort of a constant constant
challenge when it comes to running running

the central bank another challenge and
this is completely different compared to

when you are in that in the private sector
let me use the concept time to market.

You can build the best cell phone in the
world from an sort of an engineering point

of view but if it's 3 if if if if it comes
to years after your competitors no one

will buy it when you work in a central
bank no one on the outside will ever know

when you're done or not so you can always
you can always write another memo or

you can always improve on your last
memo and that means that when you run

a central bank you have to create your own
sense of urgency because you are the only

institution in your in your country and
you have to keep pushing people so

that things haven't surely get done
while at the same time through and

through to your point getting
criticised is always there are so

you had to be careful because you
have to move the whole system.

But if you move too quickly and
then mistakes will be made and

everything you do will always be turned
against you by somebody else and

then you have to sort of.

Survive that part of the part of
the exercise and that creates a very very

special and Vironment in terms how
you actually go about doing doing

things both both really
terrific insights so

we've been talking a lot about the role
of central banks in financial inclusion

as there are lots of different
strategies that central banks can take

I wonder persevered briefly just
say how important is it that

central banks are involved in financial
inclusion as opposed to other actors and

then I want to stay explore a bit what
does it mean what kind of role do you want

the central bank to take on whether
that's direct provision or enabling As

you know to 2 kinds of strategies they
will start with covering this system.

I mean generally when it
comes to our legal framework.

Our responsibility is to work and

try to provide and a safe and
efficient payment system

I mean that's in a legal
sense very vaguely put so and

no one has really defined what it means so
essentially that has left it to

us within the central bank to
fill those words with content so

that you actually do something which
is not a legal obligation it's

a sort of in some sense directional and
here actually in

the digital inclusion matters because if
you don't have it then you have some kind

of a problem when you're fine ifas and
that's why if you want to run a safe and

efficient payment system you really want
would like to maximum financial inclusion

and then you sort of work on how to
get to that point but you can't force

banks to do this and that or you can't
force the general public to do this and

that but what you can do and what you do
what we do is to act as a catalyst and

here the distribution of notes and
coins is a good example because.

It costs money to handle money and

people tend to forget that and then
most people come to the federal bank and

said we would be incredibly happy if the
central bank is willing to subsidize this

whole thing because then the problem
kind of goes away but what that

an essentially means is that that means
less of a dividend to the government so

there is a cost to society as a whole
to run a highly inefficient system.

Now in order to run an operating more
efficient system then you need to get all

the interested parties in the same
room and that means that you have to

have people from the banks you have
consumers you have to have retailers you

have to have businesses and you have the
supervisor authorities in the same room so

that you get an agreement on what the map
and what the world actually looks like and

there you can sort of when this is popular
term nowadays you can sort of knowledge of

the interested parties into moving in
the direct in the in a proper kind of

direction and usually these these
individuals and these are organizations

have great difficulty is talking to
each other because essentially they're

struggling among themselves about trying
to push the cost to somebody else but

we can always get them
in the same group and

we can force them to sit there until there
is some kind of an agreement on how or

how this is this is managed and
that's quite that's quite helpful but

also struck me over the years is
that in many fields where we really

don't have a formal responsibility at
all in the eyes of the general public

they think that we have something to do
with the particular money matter because

my name is on the notes and then they say
someone has got to be responsible for

this and that means that in a very kind of
subtle soft way responsibilities go beyond

what we actually are required
to do it's interesting to

me that this is a very common way I think
that many central bankers describe how

they engage in decision making and
in standard setting and rule making as.

A kind of exercise of soft power and so
I'm wondering and then and then I'll

switch to govern during the but I wonder
if you could just say a little bit about.

When you see that that use of
soft power is appropriate verses

you know saying this is the rules for
payment or for go away or

we're providing the payment infrastructure
this is how it's going to work go away.

Once in awhile you get to a point
where nothing happens and

then you say Ok this is the way it's going
to be and if you want to do the clearing

with the Central Bank these
are the conditions so that's one that's

one issue but the other issue and
here the response is a good thing.

We have never had supervision supervision
has always been handled in a separatist

already but we've been around for hundreds
of years and when things really really go

wrong supervision does not
matter then because people

know that supervisors don't have any
money on the monies in the central bank

and that's well understood
in the banking community so

being a private sector banker you
don't put yourself in a position

where you know that if things go
wrong you have to come and ask for

money at the Central Bank not having
delivered on certain things in the past

because then you know for sure that the
central bank has the upper hand because

at that moment the central bank decides
whether you'll be around the next day or.

So that's also kind of an element
of this so you you want to have

a you want to carry out a decent
conversation in peace time

but also make sure that people do
understand that when things go wrong

things will change it's great Kevin and
in the.

The subject matter of financial inclusion
is very interesting if you started

by saying but
different in different countries for

example I think to be in Sweden you
would not really talk about financial

inclusion because 1st where
everybody's financial grew it.

In different degrees but when you
come to countries like in Africa for

example in Kenya this is a really
a serious public policy because

it's a market access it's
a question of market access and

market accessibility and different
markets for that matter in general

is actually very very important because
it helps the poor in terms of accessing

the market they can sell they are able or
even exist there where but financial

market is very very important because it
allows them to save and perhaps invest and

even in right asset base so
they can escape the cycles of poverty

the whole issue is how do you do that by
the time I entered the central bank there

was the idea was that oh we can introduce
micro finance so that micro finance can

establish branches closer to
the population but I think for almost.

6 years the micro finance bill but

the parliament again has not
approved even the grade range so

the I think what I did was know the
guidelines were not yet prepared I think I

could realise that there was
a friend working with the un d.p.

in Geria and they had developed a draft
of guidance I borrowed that and

we changed but even when we did that most
of the banks that started at this micro

finance had only given up and they came
back so the whole issue is that you have

to start all over again of course we
started community based micro finance

national id micro finance withdrawal
threshold of capital or capital

question but this did not do the trick
because everybody was waiting for so many.

So then that is why I'm saying
then you have to trade different

angles and different.

Today see.

Instruments that can help and
that's why when I come to when I come to

agents of banking for example or
even M.P.'s of on financial services

they became the quickest instruments to
achieve that today when you go to Kenya

there are more micro finance that than
there was 10 years 20 years ago but

it is because they are now moving in tied
in with what micro finance is doing most

of them my agents of banks at the same
time so but what was the best a control

constraint Why was financial inclusion not
working because banks never realized that

they didn't have the technology or they
did not invest in the technology of trying

to manage micro accounts micro accounts
means people withdrawing comes and

they have to open bank accounts that
growing come is sometimes it's all

sometimes the C.-Leg rain terms of growth
so such screening and an account in

the bank was very expensive so and then
from then on if you get a technology that

can manage micro microcosms then you
can see what actually happened and

that's why in my talk today when I talked
about back to a savings account for

me it was really an eye opener for
the banks and that's why or

of a sudden we found that we moved
from about 4300000 accounts to about

28000000 accounts and mobile phone
McCown's are even more much haven't that

I've seen that it has the same way in
Tanzania as what the same way in Rwanda so

the whole issue of access digital
markets is very very important but

financial markets are very very
critical so looking for investment and

even instruments to do that becomes.

We've had a lot of discussion
about digital cash and

I want to return to that topic now.

I think it might make sense
starting with with covering this to

talk a little bit about the role
of private money in public money

what is digital cash has to play
a role in that should we have

is there an advantage from
a financial inclusion standpoint of

central banks offering digital currency
is that fundamentally different or

fundamentally the same from offering an
account directly at financial institution

how is that different from holding a bank
account I mean I think there's a lot of

maybe confusion in the market
about what these different

these different kinds of approaches
might mean and there's a lot of.

What I'll describe is Frost's
about bitcoin in the possibility

of nonfiction digital currency
being important in this space so

I wonder if you just reflect on the
appropriate role and way of thinking about

digital cash in relation to public and
private money creation.

Of hard to come I don't know I
don't have a perfect answer to

disagree if there's an issue which has
been with us for hundreds of years so

in that sense there is nothing
new under the new under the sun.

But let me start way way way way
back in my youth to to Sion has

provided money in one form or
the other for 350 years.

Now then if physical and
cash goes away then that of course

raises the issue should you just let it
happen and say oh we didn't keep track of

this thing it just sort of happened and
now we only have private money or

should should you carefully
considered which way to go and

that's essentially what we are we are
doing now today this is considered to be

something entirely new but
I read a paper the other day where.

The after had looked into what central
banks have done in the past and

the conclusion was that it's only roughly
over the past 70 years or so it has been

impossible for the general public to hold
the departed with some central banks so

in that sense this is not not a new not a
new issue ultimately it's going to require

some kind of a value judgment but we do
know if history gives us any guidance and

take this country as one example
you had a period with private

bank money only and
that was not successful.

So ultimately at the end
of the day one way or

the other governments need to be involved
in this because they tend to back up

the financial system in one in one form or
the other being it everything physical or

everything digital and
that's why why this this matters and

then we have and I think this is where
we will end up in many countries for

it made me over time we have sort of
hybrids when it comes to this because.

You can you can create a central bank
digital currency which is sort of token

based you can create something which is
very similar to fission physical cash but

it's the 2 or you can create
something which is a cult based or

you can create sort of a and hybrid
ultimately it's going to take some kind

of a value judgment to do it to do
that too early to tell which way

this is going to end up over time but
having said that and

others refer to to what is happening
in China today and you have these new

tech companies but they have just recently
been required to haul to back up their

deposits with a 100 percent reserve
requirement Well that's essentially

turning their private money into central
bank money that's that's what came

out of it despite the fact that the whole
thing sort of started as a completely

private sector undertaking so here I guess
that different countries will end up with.

Different solutions but ultimately it's
really a political issue in the sense that

money your own currency is
part of the nation state and

there's no way around that I mean we used
to have all the kings in some countries

presidents and all sorts of stuff and
people that people recognize on

the on the notes because part of
a nation is the money that you have

created in that nation it's only if
you have been completely unsuccessful.

In doing so that you end up with
changing to somebody else's currency but

then we talk about miserable cases like
when it's minds about Zimbabwe and and

those those issues so.

My conclusion so far and
my apologies for talking it so

long about this is that
ultimately at the end of the day.

It's the political economy of this that
will decide which way you will go so

this will never be decided
by economists only

because it's such a sensitive sensitive
issue which way you would prefer to know.

Governor new do you want to add to
that in economic maybe follow up with

some like a question
asking the cream of for

why now the cream of our digital
currency and maybe could tie up with

the previous previous session they talked
about America and money around during And

obviously when it is digital
currency does it make it easier for

monetary and maybe we maybe there's
a question we can follow up.

When I join the Central Bank One of
the things was about Montreux policy and

then 25 percent of the currency in
circulation is outside the banking system

then the question was how how would
you call that Mt reports when

such a large amount of current sales in
the banking system and so the whole thing

is criminal in for digital currency is
it going to be easier in terms of m.l.c.

have to Jim I know I went to
join Central Bank been unlucky

because I joined the central bank when
Kenya was in the dark Greece in the fact

of classification and I had to try and
reverse that because essentially we

were getting into serious serious issues
with even with correspondents banking and

one of the things they argued strongly was
that it is the informality of markets and

informal the movement to move away from
informality of money then we can actually

even monitor the currency in
circulation in a better way and the.

Financial inclusion was
one of those stories so

essentially I don't know whether
the claim of 44444 digital

currency right now is to make sure
that we have better control or is it.

Trying to ask myself but
I do I do think that the maker

of things specially if it's going
to aid in terms of a transaction.

Payment System that for
me would make a lot of difference and

also if it's going to
support Finnish inclusion but

not digital currency the way it is being
seen to have crypto currency trying to

trade goes giving an example of a bit
coin I think the 1st time we went for

a conference talking about
a tronic money in there would be

the Terra course toward us with
the governor bent on the roof turns and

in that we are going to affect many
surprises before you know you know months

months upright process before you know
it and we ask them how because but

to 7 save the detainees are asking for
100 percent backing.

Tronic money in Kenya that is then place a
type of a transactions 100 percent but so

there was no way to tell us who would even
inference money because they were actually

doing shopkeepers kind of function you
jade cash into a chronic units of cash and

that's all and it's but
100 percent is not a deposit so.

Those are the there Moyses but I think
the more we try to understand where we're

going and where we're coming from maybe
the better because then digital currency

will be addressed today in a better way
is not changing the way we actually know

about money if we change that then
obviously we go into a known types of but

I think 7 say it is and

it is not a known it's such that it
always known is only that we go sort of

the current times we forget what has
happened in the last 70 or so years.

I like when I when I'm teaching
my financial regulation class.

We're doing with this I'd like to show
pictures of you know bank notes and

as people are misstatements if
they have an idea what this is.

An interesting thought experiment.

Let's let's talk a little bit about.

The ways in which central banks might
need to adapt their own cultures and

human resources and approaches.

As there are more and more non-bank
actors operating in the system so.

Maybe we'll start with the Kenyan case and

with the rise of pace and
the need to negotiate with the telcos and

talk or regulators how did the culture
of the central bank of Kenya change.

That but
that's that's quite interesting because.

I always say that every charity has
its own solution once you think so.

I mean when once you're focused
in terms of a solution and

one of the things about the way
the pirate was conducted in Kenya for

before the impasse I was loaned is
actually one of them is one of the teams

trying to make sure that this cannot walk
it's a pyramid scheme on the other side on

the other side the other teams just saying
actually we can find solutions we have

a lead of the day just like Stefan say
that depends on who is the team leader and

the team leader wants solutions and

doesn't want solutions to block
the innovation we want solutions to make

sure that even if it does what doesn't
want what does not work today there is

a problem is that it can work because
sometimes some of the innovations I had.

And.

And that is one aspect of the.

The 1st thing is that we didn't we
did not have a national payments

department in the central bank because
even though it was a money it was

we didn't have even experts in that so
the whole process is a if

this is the way we are going to walk
then we have to push very hard to get x.

But in that area in the national
payments who can actually

help in trying to understand the market
it is going to be very difficult for

a regulator to sit back and maybe
the private sector telling you exactly

what is happening out there you
are supposed to be the regulator

know that the traditional way
is that you are regulated so

essentially you have to have the knowledge
to match what the market is telling and

those are the should I say they
need to months of actual up for

speed in trying to to try to understand
what the market is proposing and

trying to understand how then can you and
you actually.

Push this forward what I did was
always to use the their way out of.

Their variable network and one of the ones
that I used in Kenya was the f.s.b.

evident will have done a great job
in Africa today because they provide

various knowledge base studies and

even data to trends than what is happening
so what we did was to invite Evans d.

so that we can use their network even grow
body to actually come up with some draft

ratios to understand what is happening.

I call them draft regulations because
unless the parliament also passes them you

cannot use them but what as soon as as
long as they are draft regulations you

use them because you can use them to issue
guidance and that is the starting point

even the institutional capacity of the
central bank was helped by the draft guy

drains in the end they became the guy
agrees but the 1st thing is to do that So

essentially if you're confronted by a new
idea the most important thing is that

you're to see how you can instead of
setting the market the way you try to

encourage the market move on where we are
studying the situation then that is what

helped the central bank institution and so
many other issues that we can I can give

examples that is that the direction that
I took to make sure that these dishes

not left behind even if it doesn't work
been noted is that the central bank walks

with a well in terms of institutional
building and even capacity building and.

I wonder if you could talk about
cultural change that might be needed at

the Basel Committee on banking
supervision and at the B.A.'s and

the other standard setting bodies
as the world evolves to include

many more non-bank players potentially
very large social media platforms the big

tech companies what needs to
change the standards anybody's to.

You know figure out what the right
set of new approaches for that world

might look like or do you just need to
accept that the world is changing and

that you can't turn back time.

And a major issue in the future will
be when somebody will have to decide.

If it walks like a bank and
it quacks like quacks like a bank and

it swims like a bank then it
probably is a bank and that's and

that's an issue that one would is going to
have to deal with one way or the other and

it's definitional and then of course
some some of these new providers of

services will have to accept that because
you can have been referring to their

panel before us you can have players
where let's say I am male rules don't

apply just because they call themselves
a tech company I mean that's not really

really acceptable but that also means that
we probably will have to accept different

types of banks in the future and that some
of them will be more kind of narrow banks

maybe some of them are more kind
of payment services providers

and and some of them do everything
the way some many banks have done for

a long long time in the in the past but

it just can't you just have to live with
them with that and on the regulatory

side decide where to draw the lines
in that now you have come so

close to dealing with financial services
in such a way that you are actually a bank

and part of it is going to be
dealing with the risk aspect of this

because banks have to have capital
because they blow up once in a while and

causes huge problem and
a huge cost to society as a whole and

there is an enormous negative externality
coming out of a banking crisis.

And if you get new players into the system
that run the risk of creating similar

types of s n l it is for society as
a whole then you actually have to say Ok.

Not be on this this is what
you have to comply with but

that of course will be difficult for the
battle committee and other committees to

deal with over time because when the world
is changing you just have to you just

have to change because at the same and
at the same time it doesn't make sense to

regulate certain entities where the whole
business move to other entities so

it's a tricky it's a tricky one
since try yeah patience Yes Let

me ask one final question of both of
you and then I'm going to open it up.

To we've been struggling a lot over
the last couple days in the project is

over the last year I
think you know quite a.

Big picture about what a central bank of
the future might look like should look

like in a way that promotes financial
inclusion let me give you each a couple of

minutes to say what you think should be

key elements of such a central bank and
again if you were

able to live in the world we live in
that is you live in a real world but but

you have the ability to project
forward in ways that free you from

the the current institutional constraints
that we're all facing maybe I'll.

Start with the governor and then go and
ask you to to sketch that out for us.

Thank you thank you very much I think.

I started by saying that
the central banks and

the way I look at it when they joined
the central bank was that actually it's

an agent of market development even
though it's a regulator because

the moment you start with especially
in the markets where we belong.

You are likely to find that
you'll be keeping the market.

And if you if you're lucky to survive
because again this is politics

is more broader then you do not.

Find yourself talking you find yourself
that you are alone in that process and

encouraging the market becomes very
very important because once the market

has already fallen for example and
we give you make the payment system or

of a sudden there was
no payment system and

Pacer wants to come into the market you
come up with an admissions we even.

Even the ecosystem was actually
approved finally we even created

a space where you can even have
standalone killers claimants kiosk but

they have never managed to stand our own
Actually they're still in the bank so

they still except a few Forex bureaus
that have tried to do that because

we had the component of foreign
exchange really mittens is to try and

form arise and
move our from the underground and

it has worked well that in that way but
they did they are not standard on because

they still believe that you can have the
transactions platforms today in a bank and

operate that you can still be in can
operate but the moment the market

you're not in the market towards
the development that you'd like and

then you can once the market is upright
and moving on then the central bank limply

taints its core function and that is what
I believe the future central bank should

be is that you do not run away
from not helping the market or

even helping the markets to intervening
creating appropriate interventions

in the market to that you move in
that direction and then the market in

2 to 2 to privately so on and we give
2 examples the 1st one was that how

do you create credit reference bureaus in
economies like ours to share information.

I started by telling protections that
we're going to share negative information

so that we actually can push the market
to the next level we want Sierra b.s.

that can create your credit scores and
obviously in the wrong run want to cheat

the Cratloe technology that was in use but
if you go into in a very.

Focused when say that you want in both
that even positive information you're not

going you can not get much new not
manage to get the parliamentarians So

the 1st thing is that they accept it
after some years then we went back and

I told the finance committee of Parliament
that we know we want objectivity here so

we need to bring positive and negative
information and excepted so we created

a project and then Sierra bis where they
were being supervised by the central bank

then that project moved and
became now like like a like a concert and

a unit that would help Sierra bees work
through but then is it 5 years ago

they started No 6 years ago is that using
that when the government and the president

appoints you as an ambassador the 1st
thing is to bring your Sierra b.

certificate in of course ours are but

it is going out of the central one
always is Julian and he actually made

it made in 0 pushed us to this idea so
you can see that we have managed to

create an institution that is working but
it is a process of nudging market that.

There are several examples
that we can give but

one of the things they can now is that
there is no longer in the controversy

about any 10 of course in terms of
managing payments it is no confusion

in a more because they knew exactly
what what is the dividing line because

everybody gets their cause that there
was participating in the management but

the moment you can read that market the
central bank is never involved in a more

in terms of negotiations between
commercial banks and terror of course in

terms of the product or of central bank
just looks at the products insist that.

This is a problem so my idea of the future
of the central bank is to make sure that

and especially in developing markets
that you help the market understand

where it's going to try to navigate and
intervene where there would be 6 and

try to straighten up the market for than
once there upright and then moving and

they're developing the market in their
own market segment then you move

the central bank should move on and
to it's all on comedy but

we live in the world where
the segmented markets and

theories frighten those segments of
the market segmentation who creates around

the edges in terms of today structural
change even economic transformation but

I know where central banks
in Africa have moved in and

frightened those segments of
the market it has worked well

that's the way I would look at it I would
say that it is developmental in nature but

they are image you cannot always carry
the market with you you didn't need

to remain in the segment of the market
where you use your speciality and most of

the capacity of the central bank is well
going is going to be a combination effect.

Monetary policy policy is not going to
disappear it will stay because somebody

has got to be there to produce
a reasonably stable price level

whether we call it inflation targeting or
something else doesn't really matter but

the key issue has stayed the same for
hundreds of years.

Somebody has to to make sure that
you don't end up with too much or

too much inflation or
deflation for that matter for

national stability is definitely not going
to go away I mean that that will be.

With us forever I think because
financial instability creates so

much economic destruction in economy so
you just don't want to go there and then

in addition to that given that central
banks actually have a balance sheet so

everything you do when you run a central
bank passes to the balance sheet of

the central bank in one form or word or
the other just that's just the way us and

having a balance it means that you're
related to the financial sector in one

form or the other because you do things
together with the various participants

in the financial sector via your
financial your balance sheet and

that creates an environment presently
where you need to provide their.

Efficient efficient central bank clearing
in clearing 247 in central bank money

and then based on that do allow
the financial sector to of all in such

a way that the general push perception
among the general public is that.

These things are managed and handled and
produced in the private sector in and

in an efficient way and
the central bank should not.

Block their pollution of that.

Efficiency in addition to that and
I should mention that mentioned earlier

what comes and
comes now when burned not so

not really any more focusing on
the distribution of notes and corns.

More and more effort needs to go into
dealing with the consequences of

everything being digital and that's having
the capacity to deal with the cyber risk.

In different different shapes and
forms and that of course takes us

into a completely new world and
completely new environment in terms of

the competencies that you actually
need to understand these things and

that's because when people think about
the Central Bank they think about volts.

And they think about physical money or
I get constant emails about people

complaining to me saying why
is it that our goal is located

in London in the New York and
not at home and things like that because

that's the way it used to be in the old
days you know all of this will be replaced

truly understanding in the digital world
what happens and sure that it is safe.

Thank you Chris Clarke Gates Foundation So
this is been a wonderful opportunity to

look into the lives of 2 central bankers
from 2 different markets but seeing how

similar actually the challenges have
been how lonely the job sometimes is but

how much support you get from each other
and from other central bankers around

the world so this is truly
an inspiring message to do here and

I really appreciate that you took the time
to share that with us I do want to ask

a question that's central to this
conference and that is we've talked about

inclusion in the role of central banks
maybe in promoting inclusion we know that

not often the banks have a mandate
here and so on but I want to broaden

the challenge a little bit earlier this
morning we asked inclusion to what end and

one reason might be to prevent and
help people get out of extreme

poverty especially to central banks
have an interest in alleviating poverty

you can have stable prices you can have
a well functioning payment systems you can

have safe and sound banks and still
have lots of people living in poverty so

what is the interest of
central bank in a subject it's

hard I mean it's hard to deal with it
because it's not within your mandate.

And that of course raises the perennial
issue of how to deal with these types of

issues because given that people do
understand that you can you produce money

in the central bank then from time to
time others want to use your money for

all sorts of purposes that they feel are
sort of good for society as a whole but

still you need to find some way or some
way of drawing the line because if you

get involved in everything and
then eventually you don't know what you're

doing anymore and there are so
many nice things that you could can do but

you need to stay within your within
your mandate but what you can do is.

Talk to others about what you as
a central banker think is good for

society as a whole despite not
being part of your mandate.

You know Chris one of the things about
Central Bank moderate and mudded and

the weight is written in the Constitution
is that there shall be a central for

example in Kenya we will devise
a constitution I think 2 bills and

then there shall be a central bank
which formulates mentor of course but

if you're going to and then the rest
of it is be with you go to the Act This

is there will be all those functions and
that very end of it is that he has

to support government development
agenda which is so broad.

But any cause to question about I
believe that financial inclusion or so

what is sustainable but
you see the way you push that to that and

where you have sustainable poverty
reduction is actually assuming that

our other institutions will be a pretty
apart and that's one aspect and

I think from recent studies
including even what I think.

Was presented is that about women in
banking because I personally have seen

that women can actually even save and
invest in production that cannot be

encroached but that that's one of the one
side of the story and we cannot actually

have this attribution to the central bank
but you know that it is started and.

Ignited the process and
I Stephens can take all.

But there one when you come to
the general aspect of mantra policy and

especially in countries where we come from
ourselves mantra put is actual can affect

relative price movements and obviously
it's going to be very critical in terms of

public policy public policy being
duction poverty reduction and

the other function in developing countries
that we worry about inevitable to what is

in the in the news in the newspapers
every morning is the currency movement

which actually related to your
foreign exchange management and

the movement the currency is moving and

I gave an example today that if your
currency moves by 10 percent when I could

get a commission of a commission of
inquiry in the parliament I have had so

many myself you know because essentially
you need to explain to us why the currency

moved by 10 percent what is happening
here why is a currency more important

from the politician is national pride
that your currency is strong but

we always tell them that is bad but you
do not get it through them you can try.

But there are aspects of it is that the
general case is that it actually leads to

relative price changes which is massive
it can they are they will be ruthless and

again so in a sense is a whole debate
of what is development here and what

is the attribution to the Central Bank but
they are direct they are direct functions

of the central but they also are in
direct that we can in principle some way.

This.

Sort of.

If you lose price stability
the poor will lose the most because

they are the last ones to understand what
is going on there have nowhere to run.

All the wealthy people and the well
educated people they know exactly what to

do and where to go and depending on in
what part of the world you happen to be

located some of them go to Miami
others go to other places but

the poor have no choice they will lose
everything particularly if you end up with

hyperinflation and that's why it's so
when credibly important to try as best as

you can stick to monitor stability because
that is definitely a good thing for

the poor Thank you Michel you know
that our time to us but thank you and

Adrian on your team for an amazing
conference just building on something and

I'm trying to wrap my head around so
both of you governors talked about

how lonely the job is all about every
thing that you do in terms of coronation.

There's a lot of myopia out there
like you yourselves talked about

some of your brightest economists and
everyone and

you see it in all kinds of sectors do we
really have the ability to chew gum and

walk at the same time so for example every
time there's a global financial crisis so

many people are thrown back into poverty
so many people we're trying to help middle

class is the poor and obviously financial
inclusion something we absolutely have

to go forward on and I central
bankers are becoming more involved and

more politicians want to have their hands
in the cookie jar What is the risk for

central bankers to be able to balance
those 2 in the critical times.

If you're a central banker or a bank
supervisors to put your job this is a no

and that's hard to do always.

I think and.

I personally my experience is that
we develop on a very tight rope

here we talked about mantra policy but
when it comes to that woman to proceed in

example some economists where I've
come from the Horn of Africa.

Which is ravaged by.

Weather weather with a sigh course most
of the information will be surprised.

It's a surprise id issue but you don't
have instruments for months reported for

the surprises and the the worst bit
of it is that when I talk about

Horn of Africa I'm talking about
drought and I just prices and

sometimes there is always a coincidence
that also energy prices globally are also

changing you can see that
the impact is massive What what

is you have to repress nights because you
don't have the price I'd instruments to

deal with a price I'd information so you
have to use the demand side instruments so

it means that in the short term if you're
lucky you have to plug the economy into

a temporary recession until the crisis
is over because you only want to prevent

prices the shock in prices from becoming
apparent to so that is there from becoming

permanent to become a producer that after
the crisis the price can come back and

that is a very very tight issue and
we have gone through those I cause

actually you have you always to
watch we used to watch the month

of January February and much because
that's where if there will be a.

Crisis heating food prices you know you
have to start looking at it from there

and what what is happening here and
there of the day you have different

regulators who should have different
buffer us so that we create economically

Syrians here Central Bank an ornery
Keep have one basket as foreign exchange

reserves just in case you want to support
the market in times of crisis but

when there is a drought that's the time
you realize that there are no food.

Surprising.

Where you anticipated and even for
reserves going on erast you 21 days and

all that our lot and all that fiscal
surprise is a dream that we haven't even

had in you know own country so you can
see what keeps it's at the end of the day

who is left hanging on very precarious
position is always this and

so essentially you know that creates that
only ness in that position because you're

watching in your chin information that are
coming from the Bureau of Statistics and

you're asking us what is it happening
you're watching every day what is

happening to our prices and
you're also watching in our own region.

The Chris it is actually very much hydro
and so when there's that crowd who sees

this so those are the issues that come
up among other many other institution.

So I think we've covered a lot of ground
in the last day and a half and even in

this last hour or panel it's been a really
rich an interesting conversation and

I really appreciate not only our
panelists for our concluding keynote

conversation but all of our panelists and
all of our participants in this conference

I've learned a lot I think it can really
help us push the conversation forward.

Help in partnership with the Gates
Foundation I really think about the future

of central banking and its role in
financial inclusion which I think

all of us having spent the last day and
have here think is pretty pretty critical

we look forward to continuing the
conversation with you after this day so

I hope you don't mind that we're going to
repay your kindness in participating today

by reaching out to you over the coming
months to continue that conversation and

continue to push forward with greater.

Details and
with hopefully a developing vision for how

we can push the field forward so please
join me in thanking our panelists and

thank yourselves as well thank you.