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Welcome to the Central Bank Insider Archives. We are pleased to be able to provide you with this intimate look at central banking events, policies, and staff. Commentary is updated as available (generally bi-weekly) and archived monthly. The source commentary "Newsmakers" is reprinted at USAGOLD with permission and by courtesy of Central Banking Publications Ltd.
17 February 2004
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A selection of news stories from CentralBankNet
http://www.centralbanknet.com/
By Benedict Mander
Central Banking Publications
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NEW GENERATION AT THE TOP
Findings in the new edition of Central Banking Publications' Central Bank Directory have shown that 2003 has been a year of much change at the top level of central banking. In the group of ten nations alone there have been five new governors: Jean-Claude Trichet at the European Central Bank, Toshihiko Fukui at the Bank of Japan, Mervyn King at the Bank of England, Christian Noyer at the Banque de France and Lars Heikensten at Sweden's Riksbank. This means just under 50% of G10 nations saw governor change in the last year.
There was a change of governor also in the two countries with the world's biggest populations. Zhou Xiaochuan took over as governor of the People's Bank of China and Dr Yaga Reddy as governor of the Reserve Bank of India.
Thirty-two new governors are listed in the 2004 Directory, meaning nearly 20% of all central banks saw change the top.
NEW YORK FED NAMES CHRISTINE CUMMING FIRST VP
The Federal Reserve Bank of New York named Christine Cumming, a 24 year veteran of the Bank, as its new first vice president on Monday (9 Feb). Timothy Geithner said that her fine judgement and intellectual contribution to the bank is impressive.
Ms. Cumming, 51, has served for the past four years as executive vice president and director of research, and as a member of the bank's management committee.
Ms. Cumming is the bank's ninth first vice president, following Jamie B. Stewart, Jr. who resigned on January 30. The first vice president is the second ranking officer in the bank, and serves as its chief operating officer, as well as an alternate voting member of the Federal Open Market Committee.
As director of research, Ms. Cumming was responsible for the Research and Market Analysis Group, which provides analysis relating to the bank's responsibilities for monetary policy, banking supervision, payments systems, and financial market issues. Ms. Cumming joined the bank in the International Research Department, and focused on international economics and capital markets while a research economist. Subsequently, she joined the Bank Supervision Group, where over time she was responsible for both bank examinations and policy analysis areas, with a special emphasis on risk management and capital markets issues. Ms. Cumming also was active in the work of the Basel Committee, including co-chairing its Risk Management Group from 1997 to 1999.
Ms. Cumming holds both a B.S. and a Ph.D. in Economics from the University of Minnesota. She is a resident of Brooklyn, New York.
ISSING - RULES ARE RULES
Otmar Issing, chief economist and executive board member at the ECB has said there is no need for the UK to join the euro area soon: "No problem at all would be caused for the euro or the ECB if some countries stay out for a long period". But he was adamant that the UK as well as Denmark and Sweden would have to observe two years in ERM II before adopting the euro, insisting that rules are rules and new members should adhere to the same regulations as existing members already have:
"It is right that all new members should have to follow the same rules as existing members have done."
The same goes for the stability and growth pact, which many people have consigned to history. Not at all. The rules of the stability and growth pact also must be observed in future. He was "very disappointed" that Germany should have been one of the countries flouting the rules; the bad example of this breaking of the rules for smaller countries set to join the EU in May was, he said, "not only unfair but unacceptable".
The comments were made in a wide-ranging interview published last week in the February 2004 issue of Central Banking.
ANOTHER ROW LOOMING ON ECB BOARD APPOINTMENTS?
A debate has started in Europe about who will eventually succeed Otmar Issing in the key role as head of research and economics at the ECB when his term expires in 2006. Might it be another German national? Of course, the last thing the ECB needs at this stage is a further dispute among the countries about senior appointments to the ECB - least of all if the battle lines are drawn up on nationalistic lines. But this does now seem possible.
The ECB needs to avoid another quarrel on the subject of the nationalities of executive board members. Its credibility has in the past been damaged by such disputes as they have repeatedly threatened to drag the institution into the political arena when it wanted to present itself as a smoothly running, independent, supranational institution.
The immediate issue is to find a replacement for Spain's Eugenio Domingo Solans, another of the six members of the European Central Bank (ECB) executive board, whose term of office ends on June 1. Belgium and Ireland have both already presented candidates to succeed him - the much respected former academic Peter Praet from Belgium and Michael Tutty, former career civil servant and vice president of the European Investment Bank. Belgium and Portugal are two countries that have not yet had one of their nationals on the ECB Board (the others being Ireland and Luxembourg); Belgium has already been rebuffed when it put forward Paul de Grauwe as a candidate for the board last year. But if Spain also proposes and this is accepted, this could set a precedent for a German to replace Issing. The fact that the other big vacancy coming up before that is for the Italian, Tomasso Padoa-Schioppa (whose term expires in 2005) adds to the room for power-play by finance ministers, who will make the final recommendation to heads of state.
It is another test for the ECB, and inevitably the big countries have the clout to get their way if they so wish. The key is how Germany, France and Italy vote. Actually, it would probably make sense for either Germany or Italy to have a national at the top table. Otherwise, all the other slots (other than the president Trichet) could after 2006 be held by nationals from the so-called second tier countries.
This is clearly the view in Berlin. A senior German government official said that the make-up of the ECB's six-member executive should reflect the eurozone's largest economies.
"It makes sense that a healthy majority of eurozone gross domestic product is represented in the European Central Bank's executive board and it is against this background that personnel decisions should be taken," the official, who declined to be identified, told Reuters.
CHAOS AS COINS CONSUMED BY CHILDREN
The State Bank of Vietnam's recent issue of three new coins turned to disaster when children started eating them after mistaking them for sweets. Since three coins were made available in mid-December after a two-decade absence, doctors have treated at least 17 children for swallowing them. Six children aged between two and 10 were treated in the central province of Quang Nam over the recent Lunar New Year holidays after swallowing coins.
The new coins were intended to promote the use of vending machines and other conveniences in Vietnam but have proved to be a headache for the central bank. But the launch of the country's new money has faced other glitches. Polymer-based, counterfeit proof banknotes that were also introduced last month were hit by rumours that the bills would be withdrawn because they had no year of issue printed on them.
Jewellery shops have complained that their counting machines couldn't read the new notes.
This all resulted in the central bank issuing a stern warning in defence of its much maligned new notes. "Any individual who refuses to circulate the bank notes issued by the State Bank of Vietnam will be named as a lawbreaker and will face tough punishments," deputy governor Nguyen Thi Kim Phung said last month.
SEE THE FUTURE ECB HEAD OFFICE
Forget to enter your designs for the new European Central Bank (ECB) premises competition? Sadly it is too late now, but from 21 February for three weeks there will be the opportunity to see the work of the eighty architects selected to draw up designs for the new building in the first phase of the competition, of which twelve were selected to go through to the second round.
From these twelve, a jury has selected three winners. First prize was awarded to Coop Himmelb(l)au of Vienna. Second place went to ASP Schweger Assoziierte of Berlin and joint third to 54f Architekten of Darmstadt (Germany) and T.R.Hamzah & Yeang of Selangor (Malaysia). In the revision phase that follows the Governing Council of the ECB will invite one or more of the prizewinners to review their design proposals and the final design will then be decided on by the ECB and the City of Frankfurt.
The new premises will be built on the site of the Grossmarkthalle (wholesale market), an area of 120,000m on the river in the eastern part of Franfurt-am-Main.
Entry is free so start booking
your tickets to for a glance at what the ECB could look like!
There are guided tours on Saturday and Sunday.
visit below for all the details:
http://www.ecb.int/premises/pr/exhibitionflyer.pdf
MACFARLANE'S AMEX BILL GOES PUBLIC
Australia's newspapers went into overdrive this week after one was able to obtain RBA governor Ian Macfarlane's American Express statements under a "Freedom of Information request". The bank was forced to defend Macfarlane's $249,000 credit card bill, which is funded by the Aussie tax payer.
The Amex bills were obtained by Australia's Daily Telegraph which reported that, shock, horror, "Macfarlane spends on travel and hotels, sometimes taking wife Barbara with him". But the Reserve Bank of Australia said 90 per cent of the expenses were for travel to official events and others were for corporate entertainment.
"He has to do these trips because he's the governor of the Reserve Bank of Australia," a bank spokesman said. "There are no personal items. It's a massive misrepresentation of the truth which is entirely that these are all official expenses."
The statements didn't reveal anything particularly exciting in Macfarlane's spending, with unspecified "books and stationery", "sporting goods", and visits to plush restaurants the highlights. Some items on the statements were deleted by the Reserve Bank, the report said, citing "unreasonable disclosure" of Mr Macfarlane's personal affairs.
IMF BACKS UP FAZIO'S CLAIM
When Antonio Fazio, Governor of the Banca D'Italia, claimed in his testimony to parliament over the role of the bank in the Parmalat affair, that an IMF report had commended the supervisory role of the bank, general suspicion was raised when Tom Dawson, the Fund's chief communications officer, could not immediately recall such a report.
Since then Mr Dawson has been
happy to report that he has located the quote in a draft prepared
last November entitled "Detailed Assessment of Compliance
with the Basel Core Principles for Effective Banking Supervision
for Italy". The document was, he said, in the process of
being finalised. Visit below for a link to the IMF website where
Dawson's comments are published:
http://www.imf.org/external/np/tr/2004/tr040212.htm
FORMER BANK OF CANADA GOVERNOR DIES AGED 83
Gerald Bouey, former governor of the Bank of Canada from 1973 to 1987, died on 6 February in Ottawa at the age of 83. David Dodge, current central bank governor said "I and many Canadians will remember Gerry as a consummate governor, a man of enormous intellect and integrity, who worked tirelessly to ensure the bank achieved the highest standards of public policy."
Bouey, a career central banker, is remembered for raising interest rates to record levels (21% at one point) in an effort to eliminate the inflationary expectations rife among businessmen and consumers. Though unpopular at the time, Buoey's achievements in an exceptionally troubled period have since been lauded.
GERASHCHENKO'S APPEAL FAILS
Russia's Supreme Court rejected an appeal from former central bank chairman Viktor Gerashchenko on Friday 6 February over refusal by the Central Electoral Commission (CEC) to register him a candidate in the upcoming presidential election.
Gerashchenko was refused registration
by the CEC on 22 January by a majority vote, on the ground that
he was nominated not by the whole Rodina bloc, but by one of its
parties, namely the Party of Russian Regions.
Claiming the move was illegal, Gerashchenko cited legislation
stating that the parties who won the Duma election have the right
to nominate their candidates to the post of Russian president
without collecting the necessary two million support signatures.
EGGSCHANGE RATE POLICY?
Managing reserves may be considered a fairly serious task for a serious institution, but it seems the Old Lady is showing her fun-loving grandma side in the latest line up of its museum events. Not only will a costumed Kenneth Grahame, secretary of the bank form 1898 to 1908, be reading extracts from his famous book "The Wind in the Willows", the Easter bunny himself will be distributing eggs in a "chocolate eggstravaganza". A bounty of fauna seems to be the theme from the very place where characters Ratty, Mole and Toad of Toad Hall could have been inspired!
SWEDEN'S CENTRAL BANK GETS A CHIEF PRESS OFFICER
The Sveriges Riksbank has appointed a former journalist for a new job at the world's oldest central bank. Jörgen Eklund will become the chief press officer as the Bank's external communications "have increased in scope" the Riksbank said.
At a meeting the Executive Board of the Riksbank appointed Jörgen Eklund chief press officer. This is a new post and entails an extension of the Communications Department's press service. The reason for the new post is that the Riksbank's external communications have increased in scope.
Mr Eklund has worked as advisor to the governors of the Riksbank since 2000. Prior to that, he worked as a journalist at Finanstidningen newspaper and on the Ekot radio programme. Mr Eklund will take up his new post on 1 April 2004. The press service will then consist of a chief press officer and a press officer.
SPECULATION ON BARKER'S REPLACEMENT AT BOE
Kate Barker's term on the Bank of England's Monetary Policy Committee is due to end in May. While she could be reappointed, a few names have been aired as potential successors.
The FT named John Muellbauer of Nuffield College Oxford, a specialist in housing economics as a potential replacement for Barker, given the importance of the housing market. But David Miles, a former City economist and now an academic, who is reviewing the mortgage market for the Treasury, also has strong backing they say. Geoffrey Dicks of Royal Bank of Scotland is a favourite for others. While the bank economist with probably the highest reputation in the Treasury is David Walton of Goldman Sachs, some reports said.
Gavyn Davies, who recently resigned as chairman of the BBC following publication of the Hutton Report, is also tipped by the FT saying he is not only experienced at the highest levels of government and the financial markets, but also admired by Gordon Brown.
It seems Britain has not run out of suitably qualified candidates for its monetary policy committee just yet.
2 February 2004
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By Benedict Mander
Central Banking Publications
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NORGES BANK IN GOLD SALE
Norges Bank has sold 16 tonnes of gold bars in January and is planning to sell the remainder of the Central Bank's holdings of gold bars at a later time.
Excluded from the sale are seven gold bars that have been used for exhibition purposes and a large number of gold coins that were transported to England when Norway was attacked in 1940. Norges Bank and the University of Oslo are discussing whether the gold coins can be put on public exhibition.
The background to the sale is that gold only accounted for just over one per cent of the Bank's international reserves, and thus contributed little towards diversifying the risk associated with the reserves. The bank said that return on gold had historically been low. At end-2003, Norges Bank's gold reserves consisted of about 37 tonnes of gold, made up of 3 tonnes of coins and 33 tonnes of gold bars.
BANK OF ISRAEL RANKS NO.1 IN PAY INCREASES
For the fourth year in a row the Bank of Israel topped a list of government bodies with overpaid employees, according to the Finance Ministry's Wage Report for 2002.
Thirty-four of the bank's 800 staff received raises of 7.5 percent or more in 2002, earning the Bank the distinction of violating the civil service codes, which state that government employees may not get raises exceeding 5 percent in any year.
In 2001, "only" 27 central bank employees received excessive salaries.
The treasury and the Bank of Israel currently are embroiled in a highly publicized battle over wages. The treasury's wage director, Yuval Rachlevsky, has demanded that the central bank cut salaries, and has also instructed bank management to cancel certain traditional bonuses and increments.
According to the wage report, 115 of the central bank's 800 employees average NIS 41,300 a month, which costs the taxpayer an average of NIS 54,900 per month, or NIS 659,000 a year. The average monthly wage at the Bank in 2002 was NIS 21,100, 1.9 percent higher than the previous year despite the recession.
FRASER FROWNS
Bernie Fraser, the former governor of the Reserve Bank of Australia, has taken a swipe at executive pay levels.
Mr Fraser, who headed the RBA between 1989 and 1996, is chairman of superannuation funds bank Members Equity (ME). He said chief executives were being paid "scandalous" salaries while customer service was being downgraded.
He said there was a belief that banks cannot be customer orientated while at the same time remaining profitable.
"This is the sort of one dimensional way of thinking quite prevalent in the market place and a justification for a lot of excesses in the market - the scandalous, in my view, high remuneration packages and the downgrading of customer service," Mr Fraser said.
BANKING REFORM IN CHINA - A NEW OFFENSIVE
Governor of the People's Bank of China, Zhou Xiaochuan will be attending a meeting that will take place next in Beijing next month, bringing together top finance officials from around China to discuss ways of keeping up the pace of banking reform.
The government recently injected $86 billion in cash and stock to bailout two of its state lenders, the Bank of China and the China Construction Bank. This has been toted just the start of an aggressive reform of the banking sector. Amongst changes are reforms in the state banks, instilling a better awareness of credit risk, inviting foreign investment to take stakes in state banks and propping up the ailing stock market.
TRICHET NOSE HIS SKIING
Attending a summit in London last week ECB boss Jean-Claude Trichet stood out from the crowd with what was described as a large plaster on his nose.
The group included Gordon Brown, UK chancellor, the Spanish Economy Minister Rodrigo Rato, Germany's Hans Eichel, Ireland's Charlie McCreevy and the Netherlands' Gerrit Zalm.
Trichet apparently attributed the large plaster across the bridge of his nose to a Davos-related skiing sunburn injury.
FAZIO DENIES RESPONSABILITY
The governor of the Bank of Italy on Tuesday 27 January tackled his critics who say he failed to protect investors from the Parmalat scandal, claiming that banks had shown a "serious error of judgement" in their dealings with the food company.
Antonio Fazio told a parliamentary hearing on Parmalat's multi-billion-euro accounting scandal that it had been impossible to follow all of the group's activities given its extensive dealings with foreign banks.
The governor has faced the stiffest criticism of his decade-long term from supporters of Economy Minister Giulio Tremonti, who say the central bank failed in its duty to oversee the sale of corporate bonds ahead of Parmalat's slide into insolvency.
Fazio told the hearing that Parmalat's near-collapse was the result of criminal activity within the dairy company.
The way the banks advised families on their investments "probably required a higher degree of professionalism."
"On more than one occasion I asked the banks to offer products with easy-to-understand characteristics," he said.
The content of the report -- even the report itself -- appears to be beyond the ken of the encyclopaedic Tom Dawson, the Funds's chief communications officer, "I would have to--I was not aware of that report. I think I would have to check to see what document was referred to," he said when asked about this at a pres conference.
FAZIO COULD FACE JOB LOSS IN SHAKE-UP
The Italian Government is apparently seeking to vary the appointment terms of the Governor of the Bank of Italy, currently Antonio Fazio, in a move that would force him to step down.
Giulio Tremonti, the Italian Economy Minister, one of the ministers keenest to force through the change, was reported as wanting to block the unlimited tenure awarded to the Governor and replace it with a fixed-term contract.
If a new law is passed to this effect, Antonio Fazio, the present Governor, could be asked to make way for a new Governor under the new rules.
Currently Italy is the only EU country in which the head of the central bank serves for an indefinite period.
Signor Tremonti's move was viewed by many as an attempt to force Signor Fazio to resign as a scapegoat over the lack of financial controls which led to the collapse of Parmalat.
SPAIN HAS 'VERY GOOD' CANDIDATES TO REPLACE SOLANS
Spain can offer "very good candidates" to replace European Central Bank executive board member Eugenio Domingo Solans when his mandate ends on May 31, said Economy Minister Rodrigo Rato last week.
Rato spoke after a meeting with ECB president Jean-Claude Trichet at which future executive board changes were discussed.
"We spoke about changes on the ECB's executive board which will take place in the next few years, but no particular people were discussed," Rato told reporters later.
Spain has "very good candidates, with wide experience and are well enough known for this post", he said.
German daily Boersen-Zeitung reported that Belgian National Bank board member Peter Praet could be named as Solans' replacement and the Irish parliament discussed putting forward a candidate last week with a Minister saying the idea was "under consideration".
GERASHCHENKO HOPES DASHED
Viktor Gerashchenko, former governor of the Russian central bank, has failed to get permission to run for president in the forthcoming elections by the Central Electoral Commission (CEC). Candidates not endorsed by parties with over 5% of the seats in the state duma are required to collect two million signatures to support their candidacy. Gerashchenko believed that as he was nominated as the official candidate of the Rodina, or Motherland Bloc, he would not need to compile the signatures. However, Gerashchenko was formally nominated as a candidate by the Party of the Russian Regions, a collective member of the Motherland bloc but not the Motherland bloc itself. As a result he is not officially nominated by a party with over 5% in the state duma and neither does he have two million signatures to support him. Consequently he has been denied registration.
It has since been announced that the Russian Supreme Council will examine a complaint from Gerashchenko, who has challenged the actions of the CEC.
KAZAKHSTAN APPOINTS NEW CENTRAL BANK CHIEF
Kazakhstan's parliament on Monday 26 January approved Anvar Saidenov, 43, as the new head of the former Soviet Republic's central bank.
Saidenov, a British-trained economist, had been nominated to the post by President Nursultan Nazarbayev, the parliament's press service said. He had been deputy head of the bank since 2002.
Previously, Saidenov headed a state investment agency and he also held the post of deputy finance minister from 1999 to 2000.
Saidenov replaces Grigorii Marchenko, who earlier this month was named first deputy prime minister.
Kazakhstan has one of the fastest growing economies in the former Soviet Union, and attracts the largest share of foreign investment -- mostly in the energy sector for projects on its Caspian Sea shore.
HONOUR FOR MACFARLANE
Ian Macfarlane, governor of the Reserve Bank of Australia has been awarded Australia's highest honour in a list published each year on Australia Day. Macfarlane, 57, was given the Companion in the General Division of the Order of Australia (AC). He was honoured "for service to the stabilisation of the Australian financial system, to central banking, and to the operation of monetary and economic policy in both domestic and international spheres." He has been chief of Australia's central bank since September, 1996 and was re-appointed to serve another three-year term in July.
WIM FINED
Wim Duisenberg, former president of the ECB, had been fined EUR300 for drink driving after being breathalysed before Christmas. Duisenberg, 68, who retired as president last November to make way for Jean-Claude Trichet of France, was found to be over the legal alcohol limit after taking a random test on 18 December in Amsterdam. A prosecution spokesman said "He paid the fine and that brings an end to this case."
MUSICAL ARGENTINA
The central bank of Argentina has introduced a novel feature by offering people the chance to listen to music while browsing its revamped website.
Designers of the central bank's new homepage are trying to lure people by offering them the chance to listen to one of 10 tunes on a virtual jukebox. This month's selection includes Argentine rock, jazz and, of course, a little tango.
To listen to the music visit the link below and then click the green button on the top right, next to '"Enjoy our music while you visit the site".
Central Bank of Argentina's website:
http://www.bcra.gov.ar/ingles/i_hm000000.asp
© Copyright 2002 Central Banking Publications. All rights reserved. Reprinted at USAGOLD by permission.
Benedict
Mander
Email: bmander@centralbanking.co.uk
Central Banking Publications Ltd
6 Langley Street, London WC2H 9JA, UK
Tel: +44 (0)20 7836 3625
Fax: +44 (0)20 7836 3608
http://www.centralbanking.co.uk
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