Preface of "Issues in the Governance of Central Banks"

This report presents issues that arise when decisions need to be made on the governance of central banks. It draws on a large body of information on the design and operation of central banks that the BIS has brought together since it initiated work on central bank governance in the mid-1990s. Preparation of the report required resolving several issues. One issue is that central banks differ significantly – in the scope and nature of their functions, in their history and in the political and economic conditions in which they operate. What is suitable for one country will not be for another. Hence, setting down a single set of "best practices" is not feasible. The report therefore eschews such an endeavour and instead seeks to present information that will help decision-makers set up governance arrangements that are most suitable for their circumstances. A range of governance practices is presented – including some less commonly used – but presentation does not imply endorsement.

A second issue is the evolving nature of central banking. The role of central banks has changed significantly since the first one (the forerunner of today’s Sveriges Riksbank) was established in 1668. Changes have often taken place in response to severe crises or persistent policy problems. For example the need to deal with chronic inflation in the 1970s and 1980s prompted the identification of price stability as a formal central bank objective and led to a significant reworking of governance arrangements. The global financial crisis that is now unfolding could well have equally important implications for central banks, particularly with respect to their role in fostering financial stability. These issues are discussed in the report, but it is far too early to know how central banking will change as a result of the current crisis. What is clear is that as the broad environment for central banking changes, the role and governance of central banks will continue to evolve.

A third issue concerns the appropriate amount of detail to include. Central banks are complex institutions. Providing a full complement of information relevant for all the operations of central banks would risk burying the essential features in a mound of detail. Accordingly, the report is selective, covering eight strategic topics sequentially and in depth in Chapters 2 to 9. To further ease access, the report begins with a layering of overview material: the first layer is a "road map" of topics to guide readers to the chapters that may be of greatest interest to them; the next is a set of "highlights" – a brief summary of the report’s main themes. Thereafter, Chapter 1 offers an overview of the most important elements of central bank governance covered in the rest of the report. Even more detailed information on governance matters is available to central banks in the extensive database that underlies this report.

Much of the information has been provided by the 47 central banks and monetary authorities that belong to the Central Bank Governance Network, which, together with the Central Bank Governance Group, forms the Central Bank Governance Forum. Over the past decade, members of the Network have participated in several surveys on governance and other organisational matters. Through a new survey conducted specifically for this report (BIS (2008b)), Network members graciously provided updates of essential data.