The mission of the Central Bank of Eswatini (the Bank) is to foster financial sector stability conducive to economic development in Eswatini. The principal objective of the Bank as stipulated in the Central Bank of Eswatini Order, 1974 is to supervise banks, credit institutions and other financial institutions to the end of promoting a sound financial structure. In accordance with the Constitution of the Kingdom of Eswatini Section 206 (2) (d) and (f), the Central Bank shall supervise the operations of financial institutions in the Kingdom and shall promote monetary stability and a sound and stable financial structure in Eswatini.
Monetary stability refers to a stable price level in the economy that does not change much over time. Financial stability is more difficult to define than price stability, which simply relates to among other indicators, a stable inflation environment and the internal and external value of the currency. The Central Bank of Eswatini defines financial stability as a “condition in which the financial system- comprising of financial intermediaries, markets and market infrastructures- is capable of withstanding internal and external shocks such that participants have confidence in the system.”
The global financial crisis has shifted many central banks’ objectives from only considering price stability but to also considering financial stability as an important objective in the primary functions.
Rationale for financial stability focus and domestic responsibilities
A stable financial system fosters a sustainable level economic growth through investment, employment and production in the economy. Financial stability is not a sufficient but a necessary precondition for sustainable economic growth. The mandate of The Central Bank of Eswatini includes particular responsibility for financial stability as the Bank is responsible:
- To formulate and implement sound monetary policy to achieve financial stability.
- To regulate and supervise the financial sector to the end of achieving a sound and efficient financial system.
- Assessing system-wide risks to financial stability Sharing risk assessment responsibilities with the Financial Services Regulatory Authority (FSRA)
- Developing macro-prudential instruments and policies
- Mitigate risks through developing and implementing discretionary policy actions
- Considering longer time horizons when resolving financial stability crises
Eswatini participates in the International Monetary Fund’s exercise in compiling financial soundness indicators.
Relevant website links to include under FSU page:
- Financial Stability Board (http://www.fsb.org)
- Bank for International Settlements (http://www.bis.org)