Securing Financial Independence in the Legal Basis of a Central Bank
15 Pages Posted: 28 May 2008
Date Written: October 1, 2005
Abstract
Together with institutional, functional and organizational independence, financial independence constitutes one of the cornerstones of central bank independence, the economic ratio of which has been demonstrated extensively in the literature. In broad terms financial independence may be defined as referring to the legal and practical arrangements identifying the finances of a central bank and the extent to which the bank is subject to outside influence in this regard. In the (legal) debate on central bank accountability, arguably arrangements relating to central bank finances have sometimes been treated in a rather step motherly fashion. Yet, with the wider debate on good governance structures having reached central banking, more attention is paid to such detailed arrangements. This contribution focuses on and aims at providing an overview on the impact on central bank independence of the legal arrangements relating to several aspects of central bank finances. While government access to central bank money undoubtedly has an impact on the financial position of the central bank, this contribution focuses on those elements, which are arguably more directly linked to the financial position of a central bank, including capitalization and recapitalization, the determination of the central bank budget and the arrangements on profit and loss distribution. In legal studies these arrangements have certainly received less attention. To this end a critical assessment of the role which the legal basis of a central bank plays in enhancing or undermining the financial position of a central bank vis-a-vis government and, thereafter. In this context, legal arrangements which do not only support the financial independence of a central bank but also enhance its accountability are observed. Where appropriate, references are included to legal arrangements in existing central bank systems so to provide for negative and positive examples.
Keywords: central bank, central bank independence, accountability, central bank accountability, finances, capital, central bank finances, central bank capital, central bank legal basis
JEL Classification: A10, E50, E60, K10, K20, L50, N10, N20
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Regulatory and Supervisory Independence and Financial Stability
By Marc Quintyn and Michael Taylor
-
Revisiting the Rationale for a Single National Financial Services Regulator
-
Integrated Financial Supervision: Lessons from Northern European Experience
By Michael Taylor and Alex Fleming
-
A Cross-Country Analysis of the Bank Supervisory Framework and Bank Performance
By James R. Barth, Daniel E. Nolle, ...
-
The Changing Borders of Banking: Trends and Implications
By Claudio E. V. Borio and Renato Filosa
-
Issues in the Unification of Financial Sector Supervision
By Richard Abrams and Michael Taylor
-
Issues in the Unification of Financial Sector Supervision
By Richard Abrams and Michael Taylor
-
Crisis Prevention and Crisis Management The Role of Regulatory Governance
By Udaibir Das and Marc Quintyn
-
An International Comparison and Assessment of the Structure of Bank Supervision
By James R. Barth, Luis G. Dopico, ...
-
The Accountability of Financial Sector Supervisors Principles and Practice
By Marc Quintyn, Eva H.g. Hüpkes, ...