Spring
2007 Training Course/Seminar Series
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Central Bank Governance: the Role
of the Board
4-day intensive residential programme, 1-5 April
2007
Venue: Cumberland Lodge, The Great Park, Windsor
Course Chairman: Peter Nicholl, Former Governor and Member of the Board,
Central Bank of Bosnia & Herzegovina
Series Adviser: Charles Goodhart, CBE
Details of how to register
are here
Dear
Delegate,
CENTRAL BANK GOVERNANCE: THE ROLE OF THE BOARD
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.
The tasks performed by the board, and especially its non-executive directors,
are crucial to a central bank’s overall performance and its standing
at home as well as in the international community.
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. But faced
with the increasingly technical and specialised institutions that central
banks have become, to be effective boards must ask the right questions.
This new seminar from Central Banking Publications is designed to equip
members of governing and supervisory boards, and especially non-executive
directors, to perform their oversight role as effectively as possible.
It is intended specifically to be useful 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
is greatly enhanced.
Each day of the seminar examines a key theme:
Day 1: pressures for better governance
The movement to central bank independence has inevitab ly 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 governance in central banks. This introductory day explores these pressures.
Day 2: the central bank as a business
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. This second day looks at the range of board responsibilities,
and how it can provide effective oversight.
Day 3: supervision and developing financial infrastructure
As the hub of a nation’s financial system, a central bank can be
called on to play a variety of supervisory roles as well as further or
spur development of financial markets infrastructure. This third day explores
the challenges and potential conflicts in managing these roles.
Day 4: asking the right questions
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 1,200 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 Windsor.
Yours sincerely,
William Clarke, PhD, CBE
Chairman, Central Banking Publications
Chairman: Peter Nicholl, Former Governor, Central Bank of Bosnia & Herzegovina
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.
Leading issues in central bank governance
worldwide
Peter
Nicholl
Former Governor, Central bank of Bosnia and Herzegovina
Greater central bank independence
has inevitably brought with it a sharper focus on accountability, and
underlined the need for clear business objectives and strategies, for
modern financial and risk management techniques and for the efficient
use of resources. In response, a number of central banks and governments
are reviewing central bank governance structures. Others are planning,
or have recently passed, legislation to amend the central bank statute.
While paying due attention to the differing traditions and legal frameworks
in different jurisdictions, there are certain common trends. This session
explores in particular how management’s accountability to the
central bank board can help to protect central bank independence. Differing
perspectives on the role of the governing board (board of directors)
in relation to monetary policy will also be discussed.
Key challenges for governing boards
Workshop led
by Peter
Nicholl
This workshop builds on the experiences
of participants in their home institutions. Delegates will talk briefly
about the key issues that present them with challenges at their central
bank in their work. Delegates will be asked to give a brief account
of their central bank’s approach to corporate governance, and
identify the external stakeholders that influence strategy. Discussion
will also address the representation of stakeholders’ views in
central bank fora and codes of conduct for executives and non-executives.
The rising bar: how developments in
private sector governance affect central banks
Jeremy
Foster
Partner, PricewaterhouseCoopers
Together, the Sarbanes-Oxley Act,
International Financial Reporting Standards, the European Union’s
new single capital market legislation, and a host of related national
initiatives have radically altered the rules governing private-sector
companies. Increasingly, supervised banks, external auditors and independent
board members expect to see these new standards reflected in central
banks’ own procedures. What are the key lessons for central banks
to draw? Where are these new standards most (and least) appropriate?
This session led by a speaker with a wealth of experience in working
with central banks explores how central banks should respond to these
challenges.
Chairman: Peter Nicholl
Ian Plenderleith
Former Deputy Governor, South African Reserve Bank
This session provides 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 the appropriate role of the board in scrutinising the business lines of the central bank.
The central bank as a bank – understanding financial risk and capital
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 are thus 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. Discussions will also focus on the question of a central bank’s need for capital and what constitutes an adequate amount.
Overseeing efficiency and performance measurement
Iain Thomson
Managing Director, Squared Circle Consulting Ltd
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.
A targeted approach: how the board adds value
Workshop led by Peter Nicholl
Building on the themes raised throughout the day, this session looks at where governing and supervisory boards should direct their efforts to achieve maximum results. Should they drive the strategy of the central bank, or follow a more hands-off scrutinising approach? 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.
Chairman: Peter Nicholl
The
central bank as supervisor
Peter
Nicholl
Developing domestic financial markets and infrastructure
Professor Avinash Persaud
Chairman, Intelligence Capital
As key players in domestic markets, central banks are ideally placed to lead reforms in financial markets. Yet consultation, design and implementation involve considerable technical and managerial challenges. Increasingly central banks are playing catalytic roles to sure up the financial infrastructure that underpins their domestic markets through project-management, as well as regulation and oversight. What roles can central banks can play in this area? What does this demand of central bank leaders? What potential conflicts of interest can arise? In this session, the speaker will focus on the practical implications of central banks' work to develop financial markets, and where the limits of intervention should lie.
Financial market oversight – a roundtable discussion
In this session, participants will consider the major topics and issues raised in the day’s discussion of developing and supervising financial markets, and examine how to formulate approaches to challenges faced in these areas.
RIGHT QUESTIONS
Chairman: Peter Nicholl
Interactive
workshop sessions: real-life governance case studies and ethical issues
Facilitated by 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. Through
considering responses to a variety of scenarios, the session will 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 investigating the economic performance of an institution,
assessing negative capital, managing succession issues and dealing with
suspected fraud or impropriety. Delegates will be encouraged to share
particular concerns that they have encountered or expect to encounter
in their day-to-day work.
Implementing good central bank governance
Workshop and course round-up
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.
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