Vladimír Tomšík, CNB Board Member
Prague Castle
Prague, 29th June 2010
Dear Mr President,
Dear incoming Governor,
Ladies and Gentlemen,
It is a great honour for me to be able to speak to you on the occasion of the appointment of a Vice-Governor and a Bank Board member of the Czech National Bank. Let me thank you not only on my own behalf, but also on behalf of my new colleague for your confidence in appointing us to the management of the Czech National Bank.
The Czech National Bank affects the daily lives of all citizens of the Czech Republic. It is successfully fulfilling its primary objective as defined in the Constitution of the Czech Republic, namely to maintain price stability. And that is no mean feat. Achieving price stability and exchange rate stability (or a modestly appreciating exchange rate in the long term) while simultaneously providing for equilibrium economic growth – which, by the way, has long exceeded growth in the euro area – is by no means a given in a small open economy.
Over the last two years we have witnessed considerable turbulence in financial markets. This turbulence is placing increased demands on economic policy actors. On the one hand, the crisis has highlighted previously latent problems, which have to be dealt with. On the other hand, however, it has produced many hasty and fundamentally erroneous proposals, which responsible policy-makers conversely have to face. In any case, it is more apparent than ever before just how important it is to have responsible economic policy in which an independent currency plays a central role.
In addition to its core, macroeconomic function, the Czech National Bank performs two other very important roles which I would like to mention today and which are closely related to that core function.
The first role is to ensure the stability of the financial system as a whole. The people of the Czech Republic are well aware of what instability of financial institutions means and how important a role confidence in these institutions plays. The Czech National Bank is proud to say that the financial sector is sound and has withstood the crisis, and that people’s savings were and are safe. Czech public finances did not have to invest a single koruna in the banking sector during the crisis. Looking at the multi-billion bail-out operations in numerous other countries it is evident that this again should not be taken as a given.
Second, I would like to mention how important a role the Czech National Bank is playing in shaping the new international rules for the financial sector. The idea that greater regulation can prevent business cycles and crises is incompatible with any economic theory or financial practice. The Czech National Bank will always promote common sense and the principle of free trade in order to prevent regulation mania from causing more harm than good to the financial sector.
Thank you, Mr President.