What Is a Moral Suasion?
Moral persuasion refers to the use of the central bank's special position in the financial system to advise commercial banks or other financial institutions, affecting the amount of loans and investment direction, in order to achieve the purpose of controlling credit.
Moral persuasion
Right!
- Chinese name
- Moral persuasion
- Prerequisites
- Central bank has high prestige and status
- Function
- Quality and quantity
- Advantages
- Advice from financial institutions
- Purpose
- To achieve the purpose of controlling credit
- Moral persuasion refers to the use of the central bank's special position in the financial system to advise commercial banks or other financial institutions, affecting the amount of loans and investment direction, in order to achieve the purpose of controlling credit.
- Moral persuasion refers to the use of the central bank's special position in the financial system to advise commercial banks or other financial institutions, affecting the amount of loans and investment direction, in order to achieve the purpose of controlling credit.
- The role of moral persuasion is to:
- 1. Reduce the unpleasant psychological response brought by the adoption of mandatory credit control, which will help the central bank and commercial banks and various financial institutions maintain long-term close cooperative relations.
- 2. Because the interests of the central bank are consistent with the long-term interests of financial institutions, in some cases, the method of moral persuasion is effective.
- 3. Moral persuasion works both qualitatively and quantitatively.
- As a tool of monetary policy, moral persuasion must meet three conditions:
- 1. The central bank has high prestige and status.
- 2. The central bank has sufficient legal powers and means to control credit.
- 3. The country has a high moral standard and a spirit of discipline and law compliance.