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The
Belt Tightens In Hong Kong
If you thought the public sector always pays badly,
then think again. Well, think, at least, that there
are considerable attractions to working in the public
sector in Hong Kong. Joseph Yam, who heads the Hong
Kong Monetary Authority, is reputedly the world's best
paid central banker. In 2000, he earned something in
the region of HK$9-9.5m (US$1.15-1.22m). Poor Mr Greenspan
on the other side of the Pacific was fobbed off with
US$133,600 (HK$1.04m) in 1997 (compared to Yam's HK$7.5m
at the time).
Iniquitous,
some may scoff. None louder than the Hong Kong Monetary
Authority itself - indeed it was no other than Mr Yam
himself who nobly requested that his salary become a
touch more palatable to the public in the face of Hong
Kong's highest unemployment levels in decades. Yam deserves
respect for volunteering last October to have his pay
whittled down by 10%, a gesture that was only made public
recently. He can be proud to be the first civil servant
in Hong Kong to have his pay cut, even while the pay
of some others is actually rising.
But the governor
is not the only one in the authority to feel the belt
tightening. The entire 600-strong staff of the authority
will have 40% of their bonuses spirited away, as well
as a pay freeze this year. On top of this, there will
be a 5% reduction in staff levels and a 5% reduction
in the administrative budget. This should cut the authority's
overall budget by 5%. This also means that Yam may forgo
a full 15% of his previous pay, taking it to below HK$8m
- although I should probably point out that this is
a speculative figure.
[ASIDE -
Perhaps Estonia isn't such a bad place to be a central
banker either: readers may be interested to hear that
the president of the Estonian central bank, Vahur Kraft,
got a walloping 874,186 kroons (€56,000) in 2001, about
half of which makes up his regular salary, the rest
being extras and bonuses for the bank's good performance.
Kraft's monthly salary was 40,530 kroons, nearly ten
times the average monthly salary in Estonia.]
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...And
In Japan
Central bankers will also be watching with interest
movements in pay levels in the Bank of Japan. It plans
to cut retirement allowances for all its directors.
Here the bank is complying with a recent government
decision to cut public sector executive pay. Masaru
Hayami, the bank's governor, saw his retirement allowance
sag from 51.08m yen ($0.39m) to 36.12m yen ($0.27m).
Allowances for the deputy governor will fall to 28.56m
yen ($0.22m) from 40.39m yen ($0.31m). Monthly pay for
the bank's directors will also be hit, dropping by 110,000
yen ($831) to 1.28m yen ($9,673) for executive directors.
Also, the
bank's policy board has been shaken up as two lifelong
businessmen have now been appointed. The terms of Toshio
Miki and Nobuyuki Nakahara expired at the end of March,
and although there has been some deliberation in appointing
their replacements, Toshikatsu Fukuma, who advises the
trading house Mitsui & Co., and Hidehiko Haru, vice
president of Tokyo Electric Power Co., have now been
confirmed as new members of the decision-making board.
They have both been working at their respective companies
for the last 40 years.
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April
1 In Canada
There has been a hullabaloo in Canada over rumours -
started on April Fool's Day - that the finance minister,
Paul Martin, had decided to pack it all in and withdraw
to a life of rustic simplicity. Pierre Bourque's website
for political gossip featured a deadpan story about
Martin's longstanding desire to retreat to his farm
to pursue a "burgeoning" interest in breeding "prize
Charolais cattle and handsome Fawn Runner ducks which
he plans to show this fall at the Brome Lake and Havelock
fairs".
The article
said: "The Bank of Canada is said to be ready to intervene
with the Canadian dollar to stabilise it on world markets
if necessary." Needless to say, the Bank of Canada only
found out about the hoax when the story made headlines
the next day. I have been assured that there was no
intervention by the bank on the financial markets and
no truth to the fact that the bank was standing by to
intervene. But currency traders were brilliantly fooled
as they unblinkingly began to sell, having failed to
spot the gag, let alone the date, causing the Canadian
dollar to fall to its lowest level in a month, although
it recovered as soon as dealers realised that they had
been caught with their pants down. http://www.bourque.org/notes.html
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A
Successor For Noyer ?
It looks as though the successor of the ECB's vice president,
Christian Noyer, may soon be decided - at last. Central
bankers and finance ministers are due to meet in Oviedo
from April 12-14, and, fingers crossed, a successor
will be announced. The president of the ECB, Wim Duisenberg,
said in a recent press conference, "I expect a proposal
maybe in Oviedo or shortly thereafter." Spanish economy
minister Rodrigo Rato took a similar line: "I think
that next week in Oviedo there will be a (common) position
from economy ministers to propose a candidate to European
governments for the substitution of Mr. Noyer." About
time too, as Noyer's term on the ECB board expires at
the end of May. The contest remains between Greek central
bank governor Lucas Papademos and Belgian economics
professor Paul de Grauwe.
But the ECB
has been less than decisive about its plans for the
successors to other outgoing members. Duisenberg brashly
told reporters that the question of his successor and
that of his fellow board member Sirkka Hamalainen was
"not yet on the order of the day". As it is not a burning
priority, he said that he expected that it might be
dealt with "in the first half of next year".
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Investing
In Equities
In the same press conference, Duisenberg was questioned
about what he thought of the idea of the Bundesbank using
some of the money from the sale of its gold stock to buy
equities. He replied that for many central banks, buying
equities is "not unusual". We at Central Banking Publications
were intrigued by this, and apart from a few notable exceptions
- such as the incident when the Banca d'Italia got its
fingers burned after the Long Term Capital Management
fiasco - a straw poll between us yielded pitifully few
other examples. Can any Newsmakers subscribers think of
other examples? Please
let us know! |
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Former
Argentine Governors Accused
The trend towards accusing former central bankers of
mismanagement or worse and hauling them before the courts
continues. Last week former presidents of the central
bank of Argentina, Roque Fernandez (1991-1996) and Pedro
Pou (1996-2001), were both indicted for actions they
took while in office. The allegations centre on policies
during the collapse and liquidation of Banco Feigin
in 1995, when Fernandez was president and Pou was vice
president.
The charges
claim that, while Banco Feigin was barred from engaging
in transactions, the central bank allowed it to use
$37m to pay off loans with Banco Nacion. The judge in
the case ordered assets of Fernandez and Pou, worth
76m pesos and 72m pesos respectively, to be frozen.
If found guilty, the former governors face up to three
years in suspended jail terms.
Fortunately
these accusations show no sign of cramping the style
of the present governor, Mario Blejer. In a recent interview,
he was modest about his achievements at the central
bank so far, saying that his greatest accomplishment
since taking control in January was merely that "we've
survived"! He added: "These last weeks have been very
difficult." Indeed, his chief concern is "to keep the
situation under control." When asked if he and his staff
were up to the job of managing a floating currency regime
- basically launching a new currency from scratch -
he said, "Yes, the people here are very qualified. But
we're operating in a very complicated new arena…[and]
under a lot of pressure."
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Nourbakhsh
Faces Down The Mullahs
Mohsen Nourbakhsh, the governor of the central bank
of Iran, is also in trouble. The country's judiciary
has announced its intention to pursue his case, under
charges of corruption. But he is not the only Iranian
magnate whose probity is under question - the oil minister
and other senior politicians are also to be tried. This
represents part of Ayatollah Ali Khamenei's campaign
against corruption, although it goes against the wishes
of Iran's less zealous president, Mohammad Khatami,
who tried to block the trials last November, on the
grounds that they were politically motivated.
It is reported
that Nourbakhsh's alleged misdemeanours involve gifts
of gold coins from the bank, as well as being implicated
in corruption among former officials of state banks
who have already gone on trial. Nourbakhsh already betrayed
signs of being out of favour with some of the mullahs
earlier this month when he was ejected from the powerful
Expediency Council.
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Volcker
To The Rescue
Andersen has accepted Former Fed chairman Paul Volcker's
plans to make radical reforms to the firm, perhaps the
only way to save it. Volcker believes the firm can only
recover its reputation and commercial viability by ditching
its consultancy operations and concentrating on audit
services. He also wants to expand the board to seven
people which would have full control of the US practice
with sweeping powers to make senior management changes.
But the plan
hinges on the US government dropping its obstruction
of justice charge against the firm, which some say is
unlikely. Andersen is nonetheless moving to sell or
spin off much of its existing US practice.
One Andersen
spokesman has said, "We are confident that we can move
ahead and build the audit firm of the future under the
leadership of Mr Volcker." Another has commented, "We
intend to be around for a long time as a newer and better
audit firm under the leadership of Paul Volcker."
Also, now
that Andersen's CEO Joe Berardino has left the company,
there is a vacuum at the top, and somebody has to fill
it… People have been wondering whether Volcker might
fit the bill, although Berardino has said that the new
leader may come from inside the company.
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O'connell
Soldiers On
The former governor of the Central Bank of Ireland, Maurice
O'Connell, only weeks after leaving the bank, has no intention
of allowing himself to slide into the sybaritic lifestyle
that must tempt so many retired central bank governors.
His appointment by the minister for arts to chair a high-level
group on the future of public sector broadcasting - no
sinecure, certainly - is a kind relief from gardening.
Doubtless the qualities of thick-skinned media veteran
that any central bank governor must develop will have
commended him for the job. The many interviews he has
conducted over the years and the unrelenting media coverage
that has shadowed him during his governorship - particularly
in his last two years when television stations from all
over the world were interested in his views on the 'Celtic
Tiger' and the introduction of the euro - makes him well
placed to take on such a role. |
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Bank
Of England Mpc Reshuffle
The Bank of England's monetary policy committee has landed
a fresh catch now that Ian Plenderleith has announced
his retirement from the bank, to coincide with the end
of his term in May. He turns 60 next year. Paul Tucker
is to fill his boots, currently the bank's deputy director
for financial stability. A sprightly 44 years old, Tucker
first joined the bank when he was half that age, although
since then he has done time at the former Barings Brothers
as well as advising the Hong Kong government on reform
of the securities markets. The future of David Clementi
and Sushil Wadhwani, who both also sit on the MPC, is
presently uncertain, as they too are approaching the end
of their terms this summer. |
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Continued
Turbulence In Indonesia
There is continued turbulence in Bank Indonesia. This
time it is over parliament's delay in confirming two
new central bank deputies after the governor Sjahril
Sabirin nominated candidates - Aslim Tajuddin and Hartadi
A. Sarwono - to replace Achjar Iljas whose term ends
on May 17. Bunbunan Hutapea's term also ends then but
Sabirin hopes he will be reappointed.
Sabirin's
proposals must be approved by parliament, but since
it is now in recess it is unlikely that it will pay
further attention until the next session starting May
10. The bank's spokesman was unable to tell me what
would happen then, since the amendment of Bank Indonesia
Act is not yet ready and there is a plan to reduce the
number of deputies to three (currently eight), despite
the bank's best efforts to convince parliament that
the optimal number of deputies should be five.
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Now
Anyone Can Manage Monetary Policy...
The Reserve Bank of New Zealand is doing its bit for transparency.
You can now download from its website a monetary policy
computer simulation game in which you are given a chance
to find out for yourself just how bafflingly complex or
unnervingly simple - whichever way you want to look at
it - managing monetary policy really can be. The player's
task is to keep inflation stable by controlling interest
rates in a virtual economy with a few graphs and a smiley
or scowling face (depending on how you're doing) to guide
you along your way. http://www.rbnz.govt.nz/education/0116902.html |
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Badge
Of Honour
Unfortunately, central bankers cannot always balance sensible
policies with popularity. Masaru Hayami, the governor
of the Bank of Japan, is all too aware of this, and was
accused by one politician last year of being "lower than
a monkey" while another one said he was "the worst Bank
of Japan governor in history". But Hayami is impervious
to criticism; in fact, Hayami believes so passionately
in the rightness of his stand that he seems to revel in
it. Earlier this year he said in an interview: "Even if
I am hit with stones, I think of it as receiving a badge
of honour." |
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