Reputation Lasts Longer Than Life: How can Central Banks Quantify their Reputational Risk?

Abstract

It takes multiple decades of commitment and credibility to create repute but only a few seconds to tarnish it, as the instances of misinformation, disinformation and malinformation galore. In light of this, Central banks, as delicate and sensitive public institutions, are significantly vulnerable to such reputation risk due to their mandate for policy decisions and implementation. Thus, this study aims to formulate a barometer that quantifies the reputation score of central banks. The Central Bank Reputation (CBR) score is derived based on the respondents’ responses to a questionnaire that includes twelve attributes and twenty-eight indicators, which is administered among the eight set of audiences. The reputation score ranges from −100 to +100, that indicates the reputation of the Central Bank at a point of time. The deviation in reputation score between two points of time thus measures the reputational risk. However, the study suggests applying other qualitative analysis tools in complement with this quantitative barometer, to come up with the robust assessment.

Assessing the evolution of banking reputation literature: a bibliometric analysis

“…The efficacy of these policies significantly hinges on the public's trust in the system and the effectiveness of communication by Central Banks. In instances where the public perceives their central bank as lacking credibility, the anticipated positive impact of policy measures on the economy may not be realized (Kafle, 2023). Moreover, since the onset of the global financial crisis, central banks have significantly broadened their involvement in financial markets, acquiring substantial asset volumes as a component of expansive monetary policy approaches.…”

Swiss National Bank: Is the Recent Loss a Threat to Monetary Policy? A Research Note1

“…See also a recently published paper byKafle (2023) on how to quantify reputational risks for central banks.…”