The process which a central bank or monetary authority follows to persuade banks and other financial institutions under its supervision of complying with its general monetary and financial policies and directives. For example, some central banks use moral suasion to restrain or expand credit or money supply. Commercial banks are required, implicitly by moral suasion, to cooperate with the central bank either in the best interest of the whole banking sector or out of fear of administrative or legislative sanctions. Moral suasion is generally classified as formal or informal. As a monetary tool, formal moral suasion involves explicit commitments to refrain from activities seen as at odds with the central bank’s policies and objectives. Informal moral suasion is carried though communications and interactions between the central bank and financial institutions (whether locally incorporated, offshore, or branches of foreign entities), during which the central bank explains and reiterates its policy objectives on various matters, and expects such institutions to heed its general guidelines.

Moral suasion is informally known as jawboning.