| Abstract: |
Recent research on central bank governance has focused mainly on their
monetary policy task. As the sub-prime loan market turmoil reminded us -
central banks play a crucial role in financial markets not only in setting
monetary policy, but also in ensuring their soundness and stability. In this
paper we study the specific corporate governance structures of a number of
central banks in light of their complex role of inflation guardians, bankers’
banks, financial industry regulators/supervisors and, in some cases,
competition authorities and deposit insurance agencies. We review their
current institutional arrangements, e.g. formal objectives, ownership, board
and governor appointment rules, term limits and compensation, using both
existing surveys and newly collected information; and we contrast them with
the structures suggested in the corporate and public governance literatures,
where present. Our analysis highlights a striking variety in central bank
governance structures and a number of specific issues that appear
unsatisfactorily addressed by existing research, including the incentive
structure for governor and board members, the balance between central banks’
multiple objectives, and the need for term limits or post-employment
restrictions. |