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Governing the Governors: A Clinical Study of Central Banks

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Author Info
Frisell, Lars () (Financial Stability Department, Central Bank of Sweden)
Roszbach, Kasper () (Research Department, Central Bank of Sweden)
spagnolo, giancarlo () (University of Rome)

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Abstract

We study the specific corporate governance problems of central banks in their complex role of inflation guardians, bankers’ banks, financial industry regulators/supervisors and, in some cases, competition authorities and deposit insurance agencies. We review the current institutional arrangements of a number of central banks, e.g. formal objectives, ownership, board and governor appointment rules, term limits and compensation, using both existing surveys and newly collected information. Research on central bank governance appears to have focused almost only on their monetary policy task. As shown by the sub-prime loan market turmoil, central banks play a crucial role in financial markets not only in setting monetary policy, but also in ensuring their stability. In this paper, we contrast the current governance practices at central banks with the structures suggested in the corporate governance literature. Our analysis highlights a number of specific issues that appear to have been unsatisfactorily addressed by existing research, such as the incentive structure for governors and board members, the balance between central banks’ multiple objectives and the need for term limits.

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Publisher Info
Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 221.

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Length: 52 pages
Date of creation: 01 Mar 2008
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Handle: RePEc:hhs:rbnkwp:0221

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Related research
Keywords: accountability; bank regulation; board structure; central banks; corporate governance; central bank independence; governor remuneration; term limits;

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Find related papers by JEL classification:
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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References listed on IDEAS
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marie-Thérèse Camilleri Gilson & Tonny Lybek & Kenneth Sullivan, 2007. "Audit Committees in Central Banks," IMF Working Papers 07/73, International Monetary Fund. [Downloadable!]
  2. Hasan , Iftekhar & Mester, Loretta, 2008. "Central bank institutional structure and effective central banking: cross-country empirical evidence," Research Discussion Papers 29/2008, Bank of Finland. [Downloadable!]
    Other versions:
  3. William B.P. Robson, 2009. "To the Next Level: From Gold Standard to Inflation Targets - to Price Stability?," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 285, March. [Downloadable!]
  4. Donato Masciandaro & María J. Nieto & Henriëtte Prast, 2007. "Financial governance of banking supervision," Banco de España Working Papers 0725, Banco de España. [Downloadable!]
  5. Clare Leaver, 2007. "Bureaucratic Minimal Squawk Behavior: Theory and Evidence from Regulatory Agencies," Economics Series Working Papers 344, University of Oxford, Department of Economics. [Downloadable!]
  6. Ulrich H. Klueh & Peter Stella, 2008. "Central Bank Financial Strength and Policy Performance: An Econometric Evaluation," IMF Working Papers 08/176, International Monetary Fund. [Downloadable!]
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