The law of central banking

This chapter examines briefly selected aspects of the legal framework that governs Central Banks in the context of modern financial markets and contemporary challenges. A basic premise of this contribution is that the law plays a fundamental role in the status, functions and objectives of Central Banks. The chapter commences by examining the narrow model or mode of Central Banking that developed in the early 1990s. It then looks at the broadening of the mandate and the role of Central Banks as ‘crisis managers’ following the global financial crisis, the COVID pandemic and the present times where an array of other objectives, from climate change to sustainability in general (social and governance in addition to environmental) co-exist - at times in tension - with the primary mandate of keeping inflation under control. The chapter takes into account the overarching theme of the book (convergence/divergence in financial regulation) by highlighting differences in approaches towards the widening of the mandate and the impact on independence and accountability measures. The chapter also explores succinctly some issues concerning the digitalization of money (in particular the advent of Central Bank Digital Currencies, CBDCs) and how traditional legal categories, such as legal tender, are adapting to the digital space. Money (including digital money) is a public good and this justifies the public ordering of the monetary and payment system via supervision and regulation.