Dear Delegate,
 
Central Bank Corporate Governance: the Role of the Board

As central banks work to ensure that their governance structures are appropriate to the task of 21st-century policymaking, the important role played by the governing board (board of directors) has come under particular scrutiny. Operational independence, as well as the introduction of stringent new corporate governance standards for private-sector firms, has focused attention on how central banks and other public-sector institutions are governed. There are many other pressures, both domestic and external, to re-define the role of the board. What is clear is that the role of the board, and especially its non-executive directors, can be crucial factors in its overall performance and its standing in the national and international communities.

Properly structured and briefed, a governing board will provide valuable support to the governor or president, as well as discharging its responsibilities in determining the bank's strategies, oversight of risk management and the efficient use of resources. Indeed, although practice differs greatly from one country to another, these responsibilities may extend to every aspect of managing the central bank's affairs, including monetary policy procedures.

This new seminar from Central Banking Publications is designed to enable members of governing and supervisory boards, and especially non-executive directors, to perform their oversight role as effectively as possible. It is intended specifically for individuals who now sit on governing boards or who may be called upon to do so in future.

The benefits are clear. When central bank board members are fully equipped to support governors and presidents, and fully effective in their constructive scrutiny of management and strategy, the overall performance of the institution will be greatly enhanced.

Each day of the seminar examines a key theme:

Wednesday 14 June - Pressures for improved governance: The movement to central bank independence has inevitably brought with it a greater focus on accountability, a greater need to set clear business objectives and strategies, and increased demands for best practice in financial and risk management. At the same time, the IMF and other international watchdogs (including credit rating agencies) are paying ever-closer attention to good governance in central banks, especially in emerging markets and transitional economies. This introductory day explores these pressures.

Thursday 15 June - Core responsibilities and major areas of oversight - asking the right questions: While legal traditions differ, the core tasks of most governing and supervisory boards are to scrutinise organisational strategy, supervise the effective fulfilment of functions and ensure the efficient use of resources. To this end, boards must establish procedures for appointments and remuneration. They must monitor potential conflicts of interest, and understand and approve risk and financial management policies. Above all they must learn to ask the right questions of management. This second day explores each of these core responsibilities.

Friday 16 June An effective governing board in action: To promote practical skills, and implementable approaches, the course concludes with a series of interactive workshops which will encourage participants to work through various case studies that highlight real-world corporate governance issues and discuss alternative means of addressing them.

Throughout the course, participants will work together to examine the key elements and responsibilities of non-executive directors, consider how they may best perform their duties and scrutinise executive strategy and management.

While this course is primarily aimed at non-executive, or independent, board members, governors, deputy governors and other members of the executive will also benefit from attending by gaining new insights into how the functioning of their boards can be made as effective as possible.

All discussions are held in roundtable format to encourage participants to share with each other their experiences and debate issues at the forefront of their field. Each session of the seminar allows participants an opportunity to "benchmark" their work against best practice internationally.

Since 1999, over 1,000 senior central bankers and supervisors have attended roundtable seminars hosted by Central Banking Publications. I hope you will be able to join them.

I look forward to welcoming you to St George's House, Windsor Castle.

Yours sincerely,
William Clarke, PhD, CBE
Chairman, Central Banking Publications

Leading issues in central bank governance worldwide
Ian Plenderleith
Former Executive Director, Bank of England, and former Deputy Governor, South African Reserve Bank

Defining major areas of oversight and responsibilities of the board
Ian Plenderleith

This session aims to provide an overview of the work of a central bank from the viewpoint of the board. Clearly, an adequate understanding of the basic functioning of a modern central bank and the areas of risk exposure are essential, including legal risks and major areas where board approval of guidelines for management are needed. Boards also need to understand major inputs and outputs. The role of the governor and other members of the executive should be clear, as must monetary policy procedures. This session examines in more depth the appropriate role of the board in scrutinising the monetary policymaking process.

The central bank as a bank - understanding central bank risk and financial management
John Nugée
Director and Head of Official Institutions Group, State Street Global Advisors, former Head of Reserve Management, Bank of England

Modern central banks are primarily policymaking institutions. However, they remain banks, and remain exposed to many of the same balance sheet risks that banks face. For this reason, effective financial controls, and modern risk management techniques are crucial. Independent and non-executive board members must fully understand these risks and should endorse the central bank's approach to managing them. This session examines balance sheet risks and how the board should review the adequacy of risk management.

The central bank as a business - efficiency and performance measurement
Speaker to be confirmed 

Supervising the efficient use of resources is a core task for central bank boards. Granted a national monopoly, central banks must be able to show prudent stewardship of the resources entrusted to them. In the current environment of reduced central bank earnings, governments, parliaments, the media and the public are understandably keen to know that their central bank is operating efficiently. This session explores some of the ways in which central banks have tackled this issue, and examines how central banks can best communicate and disseminate information about their performance.

Internal controls and procedures - roles and responsibilities, key committees, board procedures
Mark Jewett
Corporate Secretary of the Bank of Canada

For central banks, as for all large and complex organisations, effective and appropriate governance procedures are an indispensable element of institutional efficiency and effectiveness. Unlike commercial sector organisations however, central banks lack a ready-made template for governance. This session examines how a leading central bank has structured itself, looking in particular at the role of an audit committee, the procedures for appointing external auditors and approving general accounting principles, the roles and remits of other key committee (including those responsible for remuneration of senior officials and succession planning) and the preparation and approval of the annual report.
 
Corporate governance for central banks - are private-sector structures translatable
Group discussion led by Iain Thomson

While commercial codes of corporate governance provide useful benchmarks, there is a debate about the extent to which central banks should follow these standards in full. Often, public policy concerns prompt carve outs from normal company law and practice. Few central banks, for instance, separate the roles of chairman and chief executive. To what extent are these derogations justified? This group discussion will invite participants to draw on their own experiences (both in their central bank and more widely) to investigate how central banks should approach this key issue.
 

Where the board should focus
Peter Nicholl
Former Member of the Governing Board (and former Governor), Central Bank of Bosnia and Herzegovina

What should boards focus on? Should they drive the strategy of the central bank, or follow a more hands-off scrutinising approach? Where should governing and supervisory boards direct their efforts to achieve maximum results? This session, drawing on the speaker's experience as deputy governor of the Reserve Bank of New Zealand, and governor of the Central Bank of Bosnia and Herzegovina, considers how different economic and political environments might shape the answer to this question.

Interactive workshop sessions: real-life governance case studies
Facilitated by Iain Thomson and Peter Nicholl

In order to focus the results of the discussions and deliberations of the week most of the final day's programme is devoted to a series of interactive workshop sessions which will be considered by working groups drawn from participants. The idea will be to examine how, as a board, they might approach real-life dilemmas which confront central bank boards, including ethical issues. Case studies will cover issues such as investigation the economic performance of an institution, assessing negative capital, managing succession issues and dealing with suspected fraud or impropriety.

Delegates will work through various case studies that highlight specific corporate governance issues and discuss alternative means of addressing them. Delegates will be encouraged to share particular concerns that they have encountered or expect to encounter in their day-to-day work.

Workshop and course round-up: implementing good central bank governance
Group discussion, and action plans led by Iain Thomson

This final discussion session provides the group with an opportunity to pull together key themes and issues from the week. Delegates will be asked to reflect again on their experiences and issues of particular interest to them in the light of the week's discussions. Each will be encouraged to formulate action points to take back to their home institutions.