This year’s transparency champion: Ireland

Central Bank of Ireland

Central Bank of Ireland

The Central Bank of Ireland has won Central Banking’s Transparency Award for taking a “proactive approach to openness” and progressively revealing more of its inner workings to rebuild its credibility in the wake of the global financial crisis.

Central Banking staff on selecting the Central Bank of Ireland (CBI):

The CBI has had to work hard in winning back the public’s trust. It might have tried doing so by keeping as much hidden as possible, by increasing its opacity. Instead, it has opted for a diametrically opposed strategy: to embark on a process of educating the Irish public about complicated financial matters, and to open up more and more of its own workings, in an effort to win public support.

The CBI may come to stand as an example to its peers of how to deal with a loss of public support after a crisis. Its transparency initiatives have been a model of a central bank winning back respect by speaking clearly and honestly to the people it serves.

In my view, the Irish central bank clearly stands out from the field for publishing lots of detail about internal proceedings, travel expenses, salary scales and contracts, and also for its outreach activities to financially educate the public and explain what it is doing and how in a simple and illustrative way.

As Central Banking put it, “the 'explainers' of various financial topics published on its website are some of the clearest and most comprehensive efforts produced by any official body.”

Philip R. Lane, Governor of the Central Bank of Ireland, speaking on the announcement of the award:

“Accountability and transparency are a key part of our strategy to safeguard stability and protect consumers. The award recognises our high standards of governance, risk management, transparency and accountability, and reflects our vision of being trusted by the public and respected by our peers.”

A hike in inflation targets seen as a cure for stubbornly low inflation

A group of economists, including former Central Bank of Ireland chief Patrick Honohan, has spoken in favor of raising central banks' inflation targets to meet their price stability mandates and boost their economies.

The latest Geneva Report on the World Economy:

Although policymakers have tools for stimulus at the lower bound, these may not always be enough. We therefore also consider adjusting policy frameworks to reduce the risk that nominal rates hit zero. Of the many proposals out there, the most obvious and simplest of such adjustments would be a modest increase in central banks’ inflation targets.

Perhaps the most common reason that policymakers have resisted raising the inflation target is the concern that credibility will suffer. We believe this concern is unwarranted and misplaced. Central banks should seek credibility for their commitment to meet their ultimate goals – full employment and price stability – not for their commitment to a particular number for the inflation target. A greater risk to central bank credibility may be the protracted inability to meet their mandates at the current low targets, due to the lower bound constraint.

The paper joins a raft of academic publications offering suggestions on how to prevent central banks from becoming increasingly impotent to deliver on their promise to engineer 2 percent inflation when interest rates have reached the zero lower bound.

True that the inability of central banks, in many developed countries around the world, to meet their declared 2 percent objectives poses a clear credibility threat.

Former Ireland's governor joins Peterson Institute

Patrick Honohan, governor of the Central Bank of Ireland during 2009–15, has joined the Peterson Institute for International Economics as a nonresident senior fellow.

"Patrick's combination of distinguished research on financial development and his genuine leadership in resolving the Irish and European financial crises as a member of the ECB's governing council is second to none," says Adam Posen, president of the Institute and a former central banker himself.

"Patrick will be the latest addition to what has become now perhaps the best team on monetary and financial policy anywhere, and we are proud to have him on board at the Peterson Institute."

Indeed, Posen seems to have turned the Peterson Institute into a leading central banking think tank.

More central banks pick top leaders via open tenders

The Bank of Canada has announced the appointment of a new Deputy Governor following an open search process involving an outside headhunter.

When launching the search, the Bank said:

The Board of Directors has formed a selection committee to conduct the search and selection process, with the assistance of global executive recruiting firm Boyden. Public advertisements for the Deputy Governor position have been published on the Bank's web site, as well as in The Globe & Mail and La Presse newspapers, and the on-line edition of The Economist.

The practice of employing outside consultants or running an open, public tender to hire top central bankers has recently spread in English-speaking countries.

An executive search firm was contracted last year to pick a new Governor of the Central Bank of Ireland.

U.K. Chancellor of the Exchequer George Osborne earlier in February also advertised for the position of Deputy Governor of the Bank of England to replace outgoing Andrew Bailey.

Quite different practice from what I witness in a number of countries that are frequently visit, where central bankers seem to secure their jobs thanks to their political connections or affiliations, rather than on merit.

I dare to say the candidates selected via an open search will enjoy greater reputation, be more independent-minded and stronger to handle the pressures of their positions than central bankers who owe their jobs to deals made behind closed doors.

Headhunters looking for central bank governor

An executive search firm was contracted to pick a new Governor of the Central Bank of Ireland. The move follows a decision by current governor Patrick Honohan to step down later this year — more than a year before he was due to retire.

Given this office holder position is of unique importance to the Irish financial system and the Irish economy, the Minister has decided to undertake a comprehensive search process to fill the position. To ensure as broad a search as possible, the Minister has issued a call for expressions of interest, which will be accompanied by an extensive national and international executive search process to identify suitably qualified candidates in Ireland and abroad.

It is a departure from established practice to select a top central banker via an open, public tender. In Ireland, as in most countries, these jobs usually go to current or former government officials or academics based on deals made behind closed doors.

Governor of the Central Bank of Ireland, importantly, has a say in shaping monetary policy for the entire eurozone as a member of the Governing Council of the European Central Bank.