News This Issue:

• Football Frenzy
• Yellow Card For Duisenberg
• IMF Raps Central Banks'audits
• Trichet Back In Play
• Argentina - Time For A Substitution?
• Ready, Steady, Go
• Lars "The Hawk" Heikensten
• Slovenian Hopeful
• New Kazakh Deputy Chairman
• Reticent Yam

Football Frenzy
It can hardly have escaped anybody's notice that the world is under the spell of World Cup frenzy, and central banks are no exception. Even the Bank of Japan's governor, Masaru Hayami, seems to have been infected by this virus. He is generally typecast as a temperate fellow, but he succumbed to the popular fever when he curtailed a news conference to watch the Japan-Tunisia game. He selflessly reassured his audience, "I don't want you journalists to miss this important moment when the entire country is on the alert. I'll make sure my answers to your questions are brief so that you don't have to stay here longer than necessary."

As for the rest of the employees at the BOJ, they are fortunate enough to be able to watch the games outside working hours, as many of the games are being held in their country. Perhaps for that reason, the BOJ has organised nothing special, and I am assured it is "business as usual". However after work is done, everyone in the bank piles into the lounge in the hope of securing a decent view of the televisions there.

In Europe, central bankers are less fortunate as the games are shown at deeply unsocial hours. Some central banks like the ECB, the Bank of England and the Central Bank of Ireland have strategically positioned televisions around their buildings to allow employees to follow the games. In the BOE, there is a screen in the canteen which is turned on for all England and Ireland matches, and employees have arrived uncommonly early to watch matches. However the flexible working hours at the BOE meant it took the historic Argentina game that bought the whole of the country to a standstill comfortably in its stride, and lunch breaks of up to two hours are quite acceptable. One or two were gone a little longer though, I hear...

For Irish fans, the Central Bank of Ireland has also installed two large screens in its staff canteen and in true patriotic spirit has been good enough to provide free lunch to staff who watched the matches there. "The atmosphere is great," says one who was present. Apparently the shouting and cheering could be heard from the street outside and is thought to be the first time ever that such a clamour erupted from the central bank.

Yellow Card For Duisenberg
Wim Duisenberg risked having America turn its nose up at him when the furore over his wife Gretta's decision to decorate their home with a Palestinian flag reached breaking point. In what has now become a major public embarrassment for the ECB president, when the World Jewish Congress threatened to declare him persona non grata in the United States he was eventually prompted to override what he insists is all his wife's doing and took down the flag six weeks after it was put out.

Members of the local Jewish community have also been militating against Mrs Duisenberg, and the orthodox Federation of Jews in the Netherlands has taken court action against her on charges of anti-Semitism, although she vehemently denies she is anti-Semitic, saying she simply opposes the Israeli government. This has done little to pacify her neighbours who are also up in arms as their children and grandchildren live in Israel. Although Mr Duisenberg has denied any part in the flag flying his neighbours have scoffed at the notion that he is not involved: "come off it, it's his home."

Rather more disturbingly, Mrs Duisenberg has received what she has described as a "horrible, terrible death threat" and has been under 24-hour police protection. Despite this she has declared, "I will never change my feelings about the situation in the Middle East. It is important that I continue my endeavours in support of the Palestinian people. I am sorry I can say no more, but in view of the death threat the police have told me not to give any more interviews."

Mrs Duisenberg has gone off on holiday to the South of France, but the flag is reputed to be flying still, albeit in a different place. A local newspaper alleges that it had been passed on to another family who are flying it from their houseboat. Intriguingly, Dokkumer Vlaggencentrale, the Netherlands' biggest flag manufacturer, reports increased demand for Palestinian flags since Mrs Duisenberg's show of solidarity for their cause.

IMF Raps Central Banks'audits
Since its problems with the National Bank of Ukraine in 1998, the International Monetary Fund has been making an effort to keep tabs on where its loan dollars end up once disbursed to central banks. As part of this "safeguards assessment process" Fund staff have been checking how well central banks keep their books.

The Fund assessed 50 central banks. 67% were found to have "non-existent or deficient external audit". 41% were guilty of "no, or delayed, publication of financial statements". Alarmed, Fund staff visited a smaller number of central banks in person. This closer inspection revealed 88% using "inadequate accounting standards" and 88% having "deficient internal audit". It sounds bad, but what does it all mean? The report spells out instances of the following malpractices:

"Concurrence by auditors with dubious accounting practices by the central bank... Non-financial audits conducted by the Auditor General or equivalent (focus on operational issues such as cafeteria usage)... Delays of at least a year in publication of the full financial statements... Over reliance on Governor for decision-making and oversight of operational transactions... Absence of an audit committee or an equivalent oversight body... Quasi-fiscal activities expensed by the central bank, including construction costs for government buildings, purchase of computer system for government, purchase of vehicles for outside agencies, inappropriate payments to national sports champions."

On the plus side the report reveals much positive effort going to fix all this. Nevertheless Newsmakers awaits the next central banker's speech on the importance of good corporate governance with measured scepticism. ["Safeguards Assessments - Review of Experience and Next Steps": http://www.imf.org/External/NP/tre/safegrds/2002/review.pdf]

Trichet Back In Play
Jean Claude Trichet will not have been the only person in France to wipe the sweat off his brow when he heard that he was off the hook over the Credit Lyonnais affair. This was an acutely embarrassing incident for France, sullying the good name of its most able central banker, and had potentially grave repercussions: Trichet may have been debarred from succeeding Wim Duisenberg at the ECB, which it is widely anticipated he will do.

Trichet was put under investigation two years ago for his hand in the collapse of Credit Lyonnais as he was at the treasury and responsible for overseeing the bank at the time. Ever since, this has been lurking uncomfortably in the wings just waiting to step out and down Trichet, and what's more, deprive the country of its prime candidate for taking on Europe's top job in monetary policy. But happily, state prosecutor Jean-Pierre Dintilhac decided that Trichet's hands were clean, and announced that the charges should be waived. His decision still needs rubber-stamping by a magistrate, but this is expected to be a mere formality.

Argentina - Time For A Substitution?
Neither the Argentine nor the international press has tired of predicting central bank president Mario Blejer's "imminent" resignation. Perhaps in a bid to give them something to chew over, a central bank spokeswoman admitted that he is considering resigning, with the caveat that this would not be before he had designed a new monetary programme, implemented a plan to convert deposits into bonds and helped obtain a loan from the International Monetary Fund. He won't be leaving for a while then?

The spokeswoman did make it clear that Blejer had not presented his resignation or set a fixed date to resign. Blejer himself has been quoted as saying, "I agreed to stay and help in the negotiations [with the IMF] and prepare a new monetary programme. If I cannot reach the conclusion that the monetary programme can be sustainable and lead to some degree of stability then I won't stay." Defending his performance at the central bank, Blejer said in exasperation, "Look, we have had a run on deposits going on for 14 months. It's very difficult to conduct monetary policy when people don't have any confidence in either the banks or the peso."

Such an outburst might have lent credence to local Radio Mitre's dubious allegation that Blejer would leave his post on June 30, citing unidentified government officials, if it were not for the central bank's clarification. Others say Blejer told President Eduardo Duhalde two weeks ago he wanted to resign. According to one government official, Blejer and Duhalde "have a very good relationship, but (Blejer) advised that we should start thinking of a replacement." It is rumoured that Blejer pines to return to Washington D.C., where his wife lives.

Meanwhile, former finance minister and darling of the financial markets, Domingo Cavallo, has been released from confinement at the military base outside Buenos Aires, where he spent 65 days, with no charges levelled against him, but still dare not walk the streets of Buenos Aires.

Ready , Steady, Go
There is stiff competition to take the place of the outgoing distinguished deputy governor of the Reserve Bank of India, Yaga Reddy. Two senior bureaucrats are jockeying to control this key post that involves responsibility for monetary policy and internal debt management. V. Govindrajan, secretary at the Department of Company Affairs, and Adarsh Kishore, additional secretary at the Ministry of Finance, are in the running to replace Reddy.

Now that he is 61, Reddy will leave the bank on August 1 to become India's executive director at the International Monetary Fund, where he will remain for the next three years. He has been deputy governor at the RBI since 1996, where he has overseen monetary policy, economic analysis and policy, and external investments among other portfolios. Of the four governors at the RBI (one governor and three deputies), one must be a career civil servant, another a commercial banker, and a third a central banker. Reddy was the career bureaucrat, hence the need for bureaucrats to replace him.

Reticent Yam
Joseph Yam, the governor of the Hong Kong Monetary Authority, when introducing Stanley Fischer, formerly of the IMF, asked what happens to central bankers when they are no longer central bankers? Is there life after central banking? He admitted that it was a subject of "intense personal interest". The recent resignation of Don Brash at the Reserve Bank of New Zealand left Yam with the "doubtful distinction" of being the longest-serving central bank chief in the region, as he has been governor since 1993. He did stress, however, that he had no intention of following in Brash's footsteps: politics is not his thing.

Yam seemed oddly reluctant to discuss Fischer's new job, although he felt comfortable enough saying that he had become vice-chairman of one of the world's largest banking and finance groups. Then the reasons for his reticence became clear: the HKMA just so happens to be a tenant in the building of the same name. He confessed, "To avoid giving the impression that the HKMA is a subsidiary of that bank, we have always tried to pretend that the building is called something else, by refraining from mentioning the name on our stationery, or to deliverymen or taxi-drivers, or to anyone else." The institution in question is Citigroup, a band that likes to give the impression it owns the world.