Good morning everyone, I would like to welcome you all to the Central Bank today.Welcome in particular to Robert Troy TD, Minister of State, as well as Brian McHugh, Chair of the Competition and Consumer Protection Commission (CCPC), and Liam Sloyan the Financial Services and Pensions Ombudsman (FSPO).We are also joined by stakeholders from across the financial system who, over the last three years, have supported and informed the development of the revised Consumer Protection Code which we are publishing today. Thank you all for coming and thank you for your commitment to dialogue and engagement to inform the new Code. You have made an important contribution to the new Code.Before turning to the Code itself, let me say a few words about consumer protection more generally and our approach here in the Central Bank of Ireland.Our mission is to serve the public interest by maintaining monetary and financial stability while ensuring that the financial system operates in the best interests of consumers and the wider economy.  We are guided by the objective set out in our founding legislation which stated that the Central Bank’s “constant and predominant aim shall be the welfare of the people as a whole”.  Everything that we do is aimed at serving the public interest and protecting consumers of financial services, whether it is through the consumer protection code, the mortgage measures, our monetary policy actions, our oversight of the payments system, or our supervision of individual firms. Over the last decade, we have, along with the CCPC and FSPO in particular, played a significant role in strengthening the consumer protection framework in Ireland, to ensure that the system and protections are in line with global standards.  I was pleased with the endorsement we received from the OECD just before Christmas.  But while this strengthening of the framework has improved supports and outcomes for consumers, we also recognise the importance of ensuring that the framework – like all frameworks – continues to adapt and evolve so that it remains fit for purpose and future-ready.   The challenges and risks facing us are clear. The global economy is fragmenting and countries across the globe are undergoing significant economic transitions – in demography, in technology, in climate – while also experiencing a period of unprecedented innovation.  The ways in which we as consumers buy, use and engage with financial services are changing significantly.  These changes reflect new preferences, provide new opportunities and meet different needs on the part of individuals, households and businesses.  But they also create new challenges and new risks in the financial sector that we supervise and for the consumers we protect. In the face of this changing ecosystem, we need to adapt, evolve and transform.  In fact all of us – firms, regulators, advocates, media – need to work together to secure customers’ interests as they seek to navigate their financial affairs and to plan for their financial futures.As set out in our Strategy, the Central Bank recognises that we must keep up with the changing world if we are to continue to deliver on our mandate.  As both a regulator and supervisor we are working to ensure that our frameworks are ready to respond to the changes that people are experiencing in their daily lives, and that we are connected to – and understand – the needs of the individuals, households and businesses that make up the real economy which ultimately supports the welfare of the people as a whole.  For us it means being focused on innovation, building our data capability, modernising our regulations, evolving to adopt new mandates and transforming our supervisory framework. Our new supervisory approach came into effect in January this year. It remains outcomes-focused and risk-based, building on our existing principles and practices.  The changes enable a more integrated approach to the different aspects of our mandate but remain focused on achieving four safeguarding outcomes: the protection of consumer and investor interests, the integrity of the financial system, the safety and soundness of firms, and the stability of the financial system.  Importantly, our new approach places consumer protection at the heart of day-to-day supervision. It positions us better as an organisation to meet our objectives to ensure consumers of financial services are protected in a changing financial landscape. Consumer Protection Code Let me turn to the revised Consumer Protection Code itself.  It is built on the strong foundations of its predecessor which is the cornerstone of our – and the wider national – consumer protection framework for financial services. Throughout the course of the morning, you will hear further detail on the measures and protections that the updated Code will introduce. And you will also be able to read about them in the suite of materials that we are publishing today. At its core, financial regulation is about supporting positive outcomes, protecting consumers and investors, and, ultimately, contributing to the economic well-being of the community as a whole. In reviewing the Code we have focused on modernising the regulatory framework to reflect the provision of financial services in a digital world. Consumers will benefit from a package of protections that better reflect how they are accessing financial services in the modern world.  Regulated firms will benefit from an integrated regulatory format, and a clearer articulation of their Code obligations, complementing the work they are already doing.One of our key objectives in revising the Code has been to put customers at the heart of the culture, strategy and business models of financial services firms. This is addressed through a new Securing Customers’ Interests Standard, supported by detailed guidance which describes what firms need to consider, the actions they need to take, and the mind-set they should have towards their customers.  We want to see a maturing of firms’ understanding and engagement with their consumer protection obligations where they take ownership for meeting these obligations, deliver positive outcomes and are proactive in addressing any issues that arise.Another important aspect of our review has been on protecting consumers in vulnerable circumstances, as they are more likely to suffer detriment or harm.  The new Code sets out an updated definition of vulnerability along with enhanced requirements which reflect an improved understanding of its dynamic nature, recognising that people can move in and out of circumstances that make them vulnerable.  We want firms need to understand the broad nature of vulnerability, and ensure that their culture, policies and processes take account of the needs of consumers in vulnerable circumstances. The revised Consumer Protection Code comes into effect 12 months from today.  We will continue to engage with industry and consumer representatives in relation to its implementation over the next year.  We want to see the new Code contributing to building trust in the financial system and for consumers to have the confidence that it will work to deliver positive outcomes for them.In my view implementing the revised Code successfully will be more likely if it is seen as a collective effort on the part of all participants in the financial system:firms must continue to put the customer at the heart of their culture, strategy, business model and decision-making.  Customer interests should not be the afterthought to finalising a strategy. Consideration of the impacts on customers and customer outcomes needs to be a key aspect of the strategy development and decision-making process itself;consumer representative organisations play an important role in supporting and advising consumers in their interactions with financial services and I’m sure they will continue to do this as we work through implementation of the revised Code;media organisations of course play an important role in informing all the participants in the system;agencies such as the CCPC, FSPO and others will continue to play their important roles as key players in the national consumer protection framework; andthe Central Bank we will remain focused on ensuring that the financial system operates in the best interests of consumers and the wider economy, as well as playing our part in communicating with consumers to raise their awareness of the revised Code. Adopting a whole-of-system approach will support effective implementation of the revised Code and ensure the protection of consumer and investor interests in their interactions with a rapidly-changing financial system.Thank you once again for joining us today. 

Good morning everyone, I would like to welcome you all to the Central Bank today.Welcome in particular to Robert Troy TD, Minister of State, as well as Brian McHugh, Chair of the Competition and Consumer Protection Commission (CCPC), and Liam Sloyan the Financial Services and Pensions Ombudsman (FSPO).We are also joined by stakeholders from across the financial system who, over the last three years, have supported and informed the development of the revised Consumer Protection Code which we are publishing today. Thank you all for coming and thank you for your commitment to dialogue and engagement to inform the new Code. You have made an important contribution to the new Code.Before turning to the Code itself, let me say a few words about consumer protection more generally and our approach here in the Central Bank of Ireland.Our mission is to serve the public interest by maintaining monetary and financial stability while ensuring that the financial system operates in the best interests of consumers and the wider economy.  We are guided by the objective set out in our founding legislation which stated that the Central Bank’s “constant and predominant aim shall be the welfare of the people as a whole”.  Everything that we do is aimed at serving the public interest and protecting consumers of financial services, whether it is through the consumer protection code, the mortgage measures, our monetary policy actions, our oversight of the payments system, or our supervision of individual firms. Over the last decade, we have, along with the CCPC and FSPO in particular, played a significant role in strengthening the consumer protection framework in Ireland, to ensure that the system and protections are in line with global standards.  I was pleased with the endorsement we received from the OECD just before Christmas.  But while this strengthening of the framework has improved supports and outcomes for consumers, we also recognise the importance of ensuring that the framework – like all frameworks – continues to adapt and evolve so that it remains fit for purpose and future-ready.   The challenges and risks facing us are clear. The global economy is fragmenting and countries across the globe are undergoing significant economic transitions – in demography, in technology, in climate – while also experiencing a period of unprecedented innovation.  The ways in which we as consumers buy, use and engage with financial services are changing significantly.  These changes reflect new preferences, provide new opportunities and meet different needs on the part of individuals, households and businesses.  But they also create new challenges and new risks in the financial sector that we supervise and for the consumers we protect. In the face of this changing ecosystem, we need to adapt, evolve and transform.  In fact all of us – firms, regulators, advocates, media – need to work together to secure customers’ interests as they seek to navigate their financial affairs and to plan for their financial futures.As set out in our Strategy, the Central Bank recognises that we must keep up with the changing world if we are to continue to deliver on our mandate.  As both a regulator and supervisor we are working to ensure that our frameworks are ready to respond to the changes that people are experiencing in their daily lives, and that we are connected to – and understand – the needs of the individuals, households and businesses that make up the real economy which ultimately supports the welfare of the people as a whole.  For us it means being focused on innovation, building our data capability, modernising our regulations, evolving to adopt new mandates and transforming our supervisory framework. Our new supervisory approach came into effect in January this year. It remains outcomes-focused and risk-based, building on our existing principles and practices.  The changes enable a more integrated approach to the different aspects of our mandate but remain focused on achieving four safeguarding outcomes: the protection of consumer and investor interests, the integrity of the financial system, the safety and soundness of firms, and the stability of the financial system.  Importantly, our new approach places consumer protection at the heart of day-to-day supervision. It positions us better as an organisation to meet our objectives to ensure consumers of financial services are protected in a changing financial landscape. Consumer Protection Code Let me turn to the revised Consumer Protection Code itself.  It is built on the strong foundations of its predecessor which is the cornerstone of our – and the wider national – consumer protection framework for financial services. Throughout the course of the morning, you will hear further detail on the measures and protections that the updated Code will introduce. And you will also be able to read about them in the suite of materials that we are publishing today. At its core, financial regulation is about supporting positive outcomes, protecting consumers and investors, and, ultimately, contributing to the economic well-being of the community as a whole. In reviewing the Code we have focused on modernising the regulatory framework to reflect the provision of financial services in a digital world. Consumers will benefit from a package of protections that better reflect how they are accessing financial services in the modern world.  Regulated firms will benefit from an integrated regulatory format, and a clearer articulation of their Code obligations, complementing the work they are already doing.One of our key objectives in revising the Code has been to put customers at the heart of the culture, strategy and business models of financial services firms. This is addressed through a new Securing Customers’ Interests Standard, supported by detailed guidance which describes what firms need to consider, the actions they need to take, and the mind-set they should have towards their customers.  We want to see a maturing of firms’ understanding and engagement with their consumer protection obligations where they take ownership for meeting these obligations, deliver positive outcomes and are proactive in addressing any issues that arise.Another important aspect of our review has been on protecting consumers in vulnerable circumstances, as they are more likely to suffer detriment or harm.  The new Code sets out an updated definition of vulnerability along with enhanced requirements which reflect an improved understanding of its dynamic nature, recognising that people can move in and out of circumstances that make them vulnerable.  We want firms need to understand the broad nature of vulnerability, and ensure that their culture, policies and processes take account of the needs of consumers in vulnerable circumstances. The revised Consumer Protection Code comes into effect 12 months from today.  We will continue to engage with industry and consumer representatives in relation to its implementation over the next year.  We want to see the new Code contributing to building trust in the financial system and for consumers to have the confidence that it will work to deliver positive outcomes for them.In my view implementing the revised Code successfully will be more likely if it is seen as a collective effort on the part of all participants in the financial system:firms must continue to put the customer at the heart of their culture, strategy, business model and decision-making.  Customer interests should not be the afterthought to finalising a strategy. Consideration of the impacts on customers and customer outcomes needs to be a key aspect of the strategy development and decision-making process itself;consumer representative organisations play an important role in supporting and advising consumers in their interactions with financial services and I’m sure they will continue to do this as we work through implementation of the revised Code;media organisations of course play an important role in informing all the participants in the system;agencies such as the CCPC, FSPO and others will continue to play their important roles as key players in the national consumer protection framework; andthe Central Bank we will remain focused on ensuring that the financial system operates in the best interests of consumers and the wider economy, as well as playing our part in communicating with consumers to raise their awareness of the revised Code. Adopting a whole-of-system approach will support effective implementation of the revised Code and ensure the protection of consumer and investor interests in their interactions with a rapidly-changing financial system.Thank you once again for joining us today. 

 Modified Domestic Demand has had a modest downward revision. It is forecast to grow by 2.7 per cent in 2025 and 2.4 per cent on average in 2026 and 2027Headline inflation is projected to rise to 2.2 per cent in 2025 before declining to 2.1 in 2026, and further easing to 1.4 in 2027 Whilst the outlook is challenged by global events, the domestic economy has for the most part continued to perform well.The Central Bank has today (19 March 2025) published its first Quarterly Bulletin of 2025. On the launch of the Quarterly Bulletin, Robert Kelly, Director of Economics and Statistics said: “A significant rise in policy uncertainty in recent months is the most prominent feature of the current economic outlook.  That rise in uncertainty, is proportionately large in comparison to the available data, it centres on the shift in geoeconomic relationships brought on by the signalled policy stances of the new US Administration, and the prospective responses from other major economies.  Widespread announcements and implementation of tariffs and non-tariff barriers, and the need for Europe to evolve geopolitical priorities, present a very different landscape for the Irish economy than we have had in recent years. While our current central forecast for the domestic economy continues to point to a steady pace of growth out to 2027, the shift in policy uncertainty weighs on the outlook for consumption, investment and exports, and leads to the slower growth now expected in comparison to our last outlook issued in December.”“While the outlook is challenged by global events, the domestic economy has for the most part continued to perform well. This is most evident in the labour market, with the unemployment rate remaining at historical lows over the longest period of time since data are available.  It is expected that steady employment growth will continue alongside growth in wages consistent with productivity developments and contained profit margins.  These combine to underpin our central expectation that domestic inflationary pressures will remain in check over the forecast horizon, despite some near term elevation in energy prices which contribute to a higher forecast for HICP inflation in 2025.“More elevated economic uncertainty in recent months has prompted a modest downward revision to the outlook. MDD is forecast to grow by 2.7 per cent for the full year in 2025 and by 2.4 per cent per annum on average in 2026 and 2027.  Resilient household consumption is forecast to be the main driver of MDD growth. Continued strength in the labour market is projected to support robust income growth, although its positive effect on consumption will be tempered somewhat by a gradually rising savings rate.  Modified investment, while still contributing significantly to MDD growth over the horizon, is revised down in light of greater global economic policy uncertainty and lower projections for housing completions.  Export growth is also revised down moderately relative to the previous Bulletin based on heightened uncertainty over global trading conditions. Overall export growth of around 5 per cent per year is projected over the forecast horizon. This growth is expected to be supported by a continued expansion in pharmaceutical and ICT services exports but this forecast is sensitive to any further deterioration in global trade including from potential new tariffs.Households’ real incomes are forecast to continue to rise, supported by further growth in employment and with inflation expected to remain below 2 per cent on average over the forecast horizon. Following exceptional gains since 2022, the pace of employment growth has moderated recently and there is evidence of an increase in measures of available labour supply in some sectors. Despite this closer alignment of labour demand and labour supply, overall conditions remain tight and the unemployment rate is projected to stay close to its current low levels – consistent with an economy near full employment. With inflation forecast to stay below 2 per cent, the favourable labour market conditions are projected to underpin further gains in real incomes. Services are expected to be main driver of inflation over the forecast horizon, though the contribution of energy has been revised upwards on the basis of updated global commodity price assumptions. Continued high levels of net inward migration and increases in labour force participation are forecast to boost labour supply in the coming years.The central forecast is for a further easing of Headline inflation despite a small upward revision to 2.2 per cent for 2025.  Headline inflation is projected to rise to 2.2 per cent in 2025 before declining to 2.1 in 2026, and further easing to 1.4 in 2027. These projections contain a small upward revision in 2025 followed by downward revisions further in the forecast horizon relative to the previous Bulletin.  The 2025 upward revision is primarily driven by higher energy prices and more persistent than expected services inflation, largely reflecting recent realised data which surprised to the upside and, in the case of the energy price outlook, higher global commodity price assumptions. Risks to the growth outlook remain firmly to the downside as the risk of more pronounced global trade tensions has risen. As a small open economy with extensive trade and Foreign Direct Investment (FDI) linkages with the US, the Irish economy, public finances and labour market are highly exposed to changes in US economic policy and any broader deterioration in the global trading environment. In the near term and in the absence of any major negative external shock, there is a risk of higher and more persistent inflation unless infrastructure constraints are adequately addressed in a timely manner. This risk would be aggravated if an overly expansionary fiscal stance emerged which created excess demand in the economy. Such an outcome would result in a deterioration in Ireland’s relative international competitiveness. Given the outlook and risks, public policy needs a clear orientation to build long-term resilience in the economy and the public finances.  In particular, priority should be given to committing to an effective anchor to guide fiscal policy, within the context of that anchor to widen the tax base and prioritise capital expenditure, and to engage in meaningful structural reform to facilitate greater private sector investment.  Taken together these actions would create the necessary fiscal and economic space to sustainably deliver the higher levels of housing and infrastructure investment that are needed to alleviate capacity constraints, boost competitiveness and improve overall living standards.Previous Quarterly Bulletins are available to view on the Central Bank’s website. 

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness

Good morning everyone. It’s a pleasure to be in Zagreb.[1]  It is my first visit to a city that my family has connections to: my parents lived here and in fact my father died here back in 1992.  I have never had the opportunity to visit and am pleased to be here with you.Before I begin today’s lecture, I would like to thank the Croatian National Bank (HNB) for organising this special event in honour of the late Dr Ante Čičin-Šain. This is the first lecture since 2018 due to a Covid-enforced hiatus, and as you all know, these lectures provide a focus for discussion and contact between Ireland and Croatia on matters of economic interest, as well as marking Dr Čičin-Šain’s unique contribution to fostering trust and furthering relations between the two countries.It’s an honour to be here today to rekindle our special relationship and to deliver this lecture. Although Ante Čičin-Šain needs no introduction here at the Croatian National Bank, I would like to pay tribute to his career and role he played in developing deep relations between Ireland and Croatia. As Croatia’s first Ambassador to Ireland, he was highly committed to developing Irish-Croatian relations and the two countries have enjoyed a very successful relationship since he took up his role. Prior to becoming Ambassador, Dr Čičin-Šain was of course the first Governor of the independent Croatian National Bank, during a particularly testing time for his country.  He brought about monetary independence for Croatia, and successfully introduced a new currency while Governor in the early 1990s.In his role as Ambassador, he forged relationships and built trust between our two countries and further developed the path for Croatia which ultimately led to the country’s accession to the EU in 2013. Indeed the unique part he played in promoting Croatian-Irish relations was recognised by the Irish Government when, after he had retired as Ambassador, he was appointed Ireland’s first Honorary Consul in Zagreb.The Central Bank of Ireland and the Croatian National Bank have developed a successful relationship together over the past few decades. One significant milestone in our relationship that stands out was the coin that we issued jointly in 2007, commemorating Ivan Meštrovic.  He was one of five artists who, in 1927 and at the request of Irish poet and Nobel Prize winner William Butler Yeats, drew up the propositions for the design of the first coins of the Irish Free State. Unfortunately, Meštrovic received the request too late but, as Yeats recorded, “Meštrovic made one magnificent design and, on discovering that the date had passed, gave it to the Irish Free State with great generosity”.  Meštrovic's design (‘Girl with a Harp’) is now used by us at the Central Bank of Ireland as our official seal.[2]Institutions and social capitalFrom coins and seals to institutions.  Some of you here today may have been in attendance in Dublin in 2006 when Dr Čičin-Šain delivered the first of these lectures.  He spoke about the importance of building relationships between Croatia and the European Union and the role that Ireland played in the development of the Croatian economy  He also spoke about the establishment of Croatian institutions, and in particular the HNB following a particularly turbulent period for your country.   In my remarks today I will focus on institutions.  Although my starting point is the broad definition of institutions as the frameworks that societies have designed to structure political, economic, and social interactions, I will concentrate on the institution that I lead.  I will discuss the important role that trust and credibility play to ensure that an independent central bank delivers its objectives.  And I will also discuss the importance of communicating effectively to maintain and improve trust. Finally, I want to address the challenge of sustaining trust in a world of alternative truths and disinformation bubbles.Let me start by making some general remarks about the role of social capital in growing the economic capital that ultimately underpins a society’s prosperity.  As I have argued before, the combination of financial and physical capital, natural capital, human capital and social capital represent the economic capital that supports and enhances a society’s wellbeing.[3]  Social capital, in particular, is essential to the success of institutions such as independent central banks whose core functions take place in the public realm.I think of social capital as “the social connections, attitudes and norms that contribute to societal wellbeing by promoting coordination and collaboration between people and groups in society.” [4] Ultimately, social capital is how people connect with one another. I do not intend to delve deep into the definitional and measurement issues around social capital (that’s something for the future).  But social capital is essential to what we – central banks – do every day, and why we do it.  And, perhaps not surprisingly for a central banker, trust and credibility are the aspects of social capital that I will focus on today. There is a mutually reinforcing connection between trust and credibility, and a central bank’s goals. If a central bank is credible, and households, firms and the financial sector have high levels of trust in its ability to deliver on its mandate, then arguably it will be easier for it to succeed.  Trust is a broader concept, one which captures the public’s belief in the goodwill or integrity of a central bank.  The public’s trust in an institution is linked to whether that institution is delivering public value, via the interconnected stewardship of the authorising environment.[5] In broad terms, that environment consists of the institutions, structures, process and activities that transform the interests and views of individuals citizens into a ‘collective public’ that can articulate what is worth taxing, what is worth regulating and what is worth investing in or spending on. In that environment, leaders and staff at those institutions work to build the legitimacy, credibility and support required to sustain a public enterprise over time.Trust is fragile and relies on “informal norms and social capital”.[6]  It is not a matter of blind faith.  It is earned through transparency, accountability and a demonstrated credible commitment to act in, and serve, the best interests of society. Here, in Croatia, the creation of the HNB as a strong and independent central bank and regulator was an important step for a young, independent country in the early 1990s. The HNB became a trusted institution through maintaining financial stability and implementing an independent monetary regime, which enabled stabilisation in a country that had previously been through a long period of economic instability, high inflation and frequent devaluations. Through its macroprudential measures, it protected the economy from the extremes of the global financial crisis and it successfully managed the move to the currency union in 2023. On the other hand, if a central bank fails to deliver on its mandate, it can affect how credible and trustworthy it is perceived to be. In Ireland, we saw this during the financial crisis, when the lack of a sufficiently robust regulatory environment was identified as a key failure contributing to the collapse of the banking sector.[7] It has been a long road back to rebuild trust for the Central Bank of Ireland.  There have been significant changes to the powers, structures and mind-sets within our organisation, along with a new macroprudential policy regime, reforms to our regulatory and supervisory approach, and a consumer protection framework that is responsive to emerging risks.  Institutional independence matters Whether old or new, institutions matter. Economists from Adam Smith, to Ronald Coase, Mancur Olsen and, more recently, Daron Acemoglu and James Robinson, have explained how institutions are critical for the rule of law, property and civil rights, economic development, economic stability, and solving information and co-ordination problems across communities and societies.[8]   As Andy Haldane put it, the “secret [of institutions] lies in solving societal problems of knowledge, co-ordination and incentives.  Institutional memory can help lengthen and strengthen otherwise short and subjective minds.”  Today we find ourselves in a period of geopolitical uncertainty, with the economic landscape facing significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.   Although there continues to be global trend towards enhancing central bank independence – signalling a broad recognition of the importance of independent monetary policy in maintaining economic stability – it is also true to say that established institutions, and their independence and effectiveness, are being challenged.[9]  As ECB President Christine Lagarde said earlier this year, “although de jure central bank independence has never been more prevalent than it is today, there is no doubt that de facto independence is being called into question in several parts of the world”.[10]Ultimately, if we view social capital as a means for how we connect with each other, then it is clear that institutions matter for building social capital. This connection and the role institutions play in social capital is arguably more critical than ever, in a time when the changes brought on by social media have given birth to a period of social disconnection.  In particular, algorithms have driven the greater atomisation of society.  And they have also enabled the growth of self-reinforcing extremes where established institutional frameworks are being undermined.  Central banks, as important institutions of the State, play a critical role. In my view, and notwithstanding the de facto challenges I just mentioned, I believe that there is a general acceptance of the important role that central bank independence plays in helping to keep inflation in check. It is an enabler of society’s expectation that authorities will act in a predictable manner in pursuing their objectives and that they will be successful in their mandate. [11]  But to continue to have the authorising environment within which to operate independently, we need to continue to have the trust of the public we serve.  And we cannot take that trust for granted.TrustTrust for a central bank is at the core of enabling effective delivery of its mandate. In today’s complex and fast-changing world, the independence of a central bank does not mean it acts in isolation. It engages with individuals, businesses, the political system, the financial system and many other stakeholders on a daily basis.  And, to be clear, it is trust and not popularity that central banks should strive for. Being a trusted, independent central bank contributes to the anchoring of inflation expectations and to reduced uncertainty about future inflation.  It helps contain short-term incentives and pressure on the central bank and facilitates the achievement of its goals.[12]Numerous central banks’ mission statements, or their codes of conduct, often emphasise the importance of being a trusted central bank.  In fact both the Central bank of Ireland and the HNB, as members of the Eurosystem, share a mission statement that attaches “utmost importance to credibility, trust, transparency and accountability.” Trust is important for many dimensions of central banking, and is core to what we do. Financial stability relies on trusting that the financial system is stable and well-regulated. Trust underpins the very notion of money, and thereby the modern system of money itself. In effect, trust builds resilience in the financial system. And during a financial crisis, a central bank that has widespread public trust as a competent, is likely to find that its actions and communications are viewed as credible and reassuring, increasing their effectiveness.Needless to say, trust also affects public and financial markets’ inflation expectations, an important anchor and determinant of price stability.  Monetary policy requires trust – along various dimensions – to keep inflation expectations anchored. In brief, a central bank that is trusted as having high integrity and whose policies are supported by the public is likely to be less prone to the influence of short-term electoral horizons.[13]  Building and maintaining trust helps to build social capital and helps us to grow our economic capital.How we can continue to build trust to improve public value?But building and maintaining trust has become more challenging.  I mentioned de jure and de facto central bank independence earlier.  In fact surveys have shown that trust in public institutions has, in general, been on a downward trend.[14] Some of this is a result of the social disconnection I also mentioned earlier, and some of it comes from the ongoing damage of the Global Financial Crisis. There are no doubt other reasons, but I will only mention one of them.The world of alternative truths and of disinformation bubbles has certainly had a corrosive effect on social capital.  In his recent book, Nicholas Carr warns of the dangers of “our frenzied, farcical, information-saturated time”.[15]  Algorithms can act as a poisonous accelerant towards a ‘post-truth’ society.  It is a particular challenge for institutions such as central banks that rely on facts, and who sometimes must explain to the public inconvenient truths or the rationale for increasing interest rates, such as to deliver on their objectives. I don’t have a solution to this challenge but I do think we need to address it proactively and not be passive in the face of its growing impact.I suggest central banks need to do a few things:First and foremost and self-evidently, we need to do our job well.  Nothing can earn trust better than delivering on your mandate to maintain price and financial stability, protect consumers and ensure the financial system works for the real economy; We need to be transparent and accountable.  And also humble.  We need to tell people what we’re trying to do and why we’re trying to do it.  And if we make mistakes, we should own them, fix them and learn from them; We should be open to diverse views and be prepared to change our view.  Your view may have been right, but when the facts change, you need to recalibrate. Change can strengthen institutions.  Or, to put it another way, if you only try to preserve an institution, you may in fact be weakening it; We need to be connected to the community as a whole, not least to the households and businesses that live in the real economy and are the ultimate owners of the ‘authorising environment’.  We should make efforts to understand which, in my view, will also help us to be understood; and, perhaps, most of all,We should place our communication into a coherent narrative that helps understanding.  Narratives matter.  As Robert Schiller has pointed out, “the spread and dynamics of popular narrative, particularly those of human interest and emotion and how these change over time” have an impact on the economy.[16]  And as I’ve said before, there’s always a narrative and vacuums are always filled, not necessarily by facts that are accurate or benign.[17]What’s critical to being trusted is of course the need to demonstrate trustworthiness. It is not simply a matter of asking the public to trust you. Trust is valuable when placed in trusted and credible institutions, but can be damaging or costly when (mis)placed in untrustworthy agents and activities.[18] The public’s view of a credible public institution is formed, in part, through the competent delivery of its mandate by the institution and its employees.  Doing our job well is fundamental to trust: it is what the public sees and feels. Communicating effectively to improve trustThe importance of both understanding, and being understood, is a critical element of how an institution can strengthen its trust with the public. At the Central Bank of Ireland, we have placed significant importance on the value of engaging and listening to our various stakeholders, as well as how we are communicating the delivery of our mandate. How we engage with our communities and our commitment to being open and engaged, focused on transparency, and building genuine connections with the public we serve, matters to us. It allows us to foster a wider understanding of our mandate and role, it enhances the effectiveness of our policy-making and it contributes to maintaining trust and confidence in the financial system.The changing dynamics of the world in which we inhabit, not least how information is accessed and shared, means that institutions need to evolve if we are going to inform and if we want to be understood.  We have to meet the public – in fact all our stakeholders – where they are, rather than hope that they will come back to the old ways of receiving and accessing information.  I guess that most of us in this room can remember those old days when we received almost all of our information through broadcast and newspapers. Those days are gone.Today, the proliferation of multiple platforms in the social media age has led to multiple ways of being informed – whether accurately or not – and this presents a challenge to us all. And the onus is on us to meet the challenge.  We need to meet people where they are, be it online, through different forms of media, or in person. We have to engage and communicate in ways that are accessible and understandable.ConclusionLet me conclude.We have entered a more uncertain geoeconomic and political environment where social capital will need to be nurtured carefully if it is to make its important contribution to growing our economic capital and enhancing the prosperity of our communities. The integrity and independence of trusted institutions matters more than ever.  Trust is needed for institutions to succeed, and central banks are no different. We need to consider carefully how we can build credibility and trust and sustain it in a world of alternative truths. It’s a challenge that I am confident we can meet by doing our job well, by being transparent, humble and accountable, by being connected and open to different views, and by communicating clearly.  Perhaps, most of all, we can build and sustain social capital by seeking to understand so that we can also be understood.[1] Thank you to Vasileios Madouros, Conor O’Shea, Cian O’Laoide and Steven Cull for their help in preparing these remarks.[2] 75 Years of Change: The Story of the Central Bank of Ireland[3] Makhlouf, Gabriel. Growing our economic capital: investing in sustainable improvement in our wellbeing. Speech at Victoria University Wellington (3 November 2016)[4] Makhlouf, Gabriel. “Social Capital and the Living Standards Framework”. Address to University of Auckland (27 March 2018)[5] Understanding Public Value; https://www.dpmc.govt.nz/sites/default/files/2022-12/understanding-public-value-mark-moore.pdf[6] Discussion Paper Series: https://cepr.org/system/files/publication-files/DP19811.pdf[7] Resolving Ireland’s Banking Crisis by  Patrick Honohan [8] Haldane, Andrew; Address to the Centre for Research on Socio-Cultural Change (CRESC) Annual Conference, School of Oriental and Africa Studies, September 2003  (PDF 243.94KB)Why institutions matter (more than ever) (PDF 243.94KB)[9] Trust in Central Bank Independence, David Romelli[10] Lagarde, Christine. Central bank independence in an era of volatility. Speech at the Lamfalussy Lectures Conference (27 January 2025). [11] Carstens, Augustín. Origins and foundations of central bank independence. Speech at the Bank of Madrid (17 January 2025). [12] https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp3006~502710f3fa.en.pdf - ECB working paper[13] https://cepr.org/system/files/publication-files/DP19811.pdf - Aikman, Monti and Zhang[14] OECD Survey on Drivers of Trust in Public found that across the 30 countries, the share of people with low or no trust in the national government (44%) outweighs the share of those with high or moderately high trust (39%).  https://www.oecd.org/en/publications/oecd-survey-on-drivers-of-trust-in-public-institutions-2024-results_9a20554b-en/full-report.html[15] Carr, Nicholas.  Superbloom: How Technologies of Connection Tear Us Apart. (W.W.Norton & Co, 2025)[16] Schiller, Robert.  Narrative Economics (Cowles Foundation, Yale University 2017)[17] Makhlouf, Gabriel.  Chances, choices and challenges: New Zealand's response to globalisation. Lecture at the University of Canterbury (17 August 2017)[18] https://www.tandfonline.com/doi/full/10.1080/09672559.2018.1454637?scroll=top&needAccess=true Linking Trust to Trustworthiness