• Trichet ratchets up the rhetoric
• Bernanke - the Fed's wave-maker
• Speech of 1975 evidence in BoE trial
• Summary of BCCI defence case
• Bank of England governors' sporting prowess
• Farewell to Saddam notes
• Dropped feud makes Medina favourite for governor
• Bank of Israel's Klein to petition on salaries
• Tunisian governor dismissed
• Former Bank Indonesia governor under investigation
• Zeti wins top honours as central banker
• Norges Bank executive director gets IMF move

TRICHET RATCHES UP THE RHETORIC

The steady appreciation of the euro and widening of the euro-dollar gap has been accompanied by a rising lack of appreciation at the ECB, where the president, Jean-Claude Trichet has been using increasingly strong rhetoric to voice his concern. For some time the mantra from the Eurotower has been that they want a "strong and stable" euro. Then we were told the emphasis was on "stable". Last week Trichet stepped up the volume a notch by denouncing excessive exchange rate volatility as "not welcome and not appropriate". However he obviously felt that the message was not getting through. "We are concerned. We are not indifferent", he said a few days later at a meeting of the G10. Trichet's comments were enough to send the euro into decline but it steadied before too long, leading strategists to speculate that verbal intervention can only have a short term effect. It seems, though, that the current situation suits George Bush rather well, decreasing the trade deficit as American exports (and the profits of exporters) rebound. So hopes that America will help are perhaps optimistic.

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BERNANKE - THE FED'S WAVE-MAKER

Ben Bernanke, having signed on as a governor only 17 months ago, never stops making waves at the Fed,. Even though he has tried to learn Fedspeak, to the alarm of some traditional central bankers he can communicate even in this strange lingo. His latest effort stole the show at the annual meeting of the American Economic Association in San Diego, despite the presence of luminaries like Alan Greenspan and Roger Ferguson in attendance. Preaching on transparency, a virtue only recently fashionable among central bankers (though to hear them speak you would think they have been practicing it for ages), Bernanke called for information to be made more symmetric - surely an unexceptionable aspiration. Clarity in communicating the purpose of policy and the rules and models used by central bankers was paramount. Bernanke supported the Fed's stance of maintaining interest rates despite the signs of recovery in the US economy. He claimed that while in normal circumstances raising rates would be the correct course of action, the US situation is presently 'unusual' since there are several factors at play that prevent pressure on prices to rise. He did not mention that there was a certain gentleman running to be President of the United States later this year who would not appreciate a big hike in rates and a recession just before November 2. Discretion is a central bankerly virtue that has not gone out of fashion.

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SPEECH OF 1975 EVIDENCE IN BoE TRIAL

A speech given in 1975 by the governor of the Bank of England at the time, Gordon Richardson has been used as evidence against the Bank in the ongoing trial over its handling of the Bank of Credit and Commerce International affair. The Bank claims its senior officials always believed the Luxembourg regulators were responsible for supervising BCCI SA, but Richardson told a different story to an international banking conference. Richardson agreed "that the supervisory authority in the country where a banking group's head office is located should assume primary responsibility (for supervising the group)". BCCI later collapsed owing more than £10 billion to depositors and creditors in one of the world's biggest banking frauds. The liquidator, Deloitte and Touche, claims that Bank officials knew that BCCI SA's operations were run from Leadenhall Street in the City of London, even though it was formally incorporated in Luxembourg and that they deliberately avoided their supervisory duties. It is suing the Bank for £850 million.

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SUMMARY OF BCCI DEFENCE CASE

As a service to our readers, newsmakers has attached a summary of the Bank of England's defence in the BCCI case. The Bank also said on the record "This is a cynical attempt to get round the Bank's statutory immunity by unjustly accusing 22 public servants of dishonesty."

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BANK OF ENGLAND GOVERNORS' SPORTING PROWESS

With that Eddie George dislocating his shoulder at the start of the month in a Tennessee Titans match against the Baltimore Ravens and the disgrace of Mervyn King after he insisted on the measuring of the oche of his dart in the world championships this month, it appears that our multi-talented former and present Bank of England governors have been in the news recently. American football? A surprising pursuit for a former bank governor to excel in. Darts championships? An interesting choice for someone helming the British economy in his spare time. But no, the world of central banking can breathe a sigh of relief. Mervyn King, number three darts seed and Eddie George, star of the football pitch share their names with governors of the old lady. Anyone sharing the name of the world tiddlywinks champion might want to think about sending in applications when King's tenure is done!

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FAREWELL TO SADDAM NOTES

Iraqi bank notes bearing the face of Saddam Hussein are now obsolete following the termination of the three-month period to exchange new bills for old ones. More than 10,000 tons of worthless notes are being destroyed according to a statement by the Central Bank of Iraq and the Coalition Provisional Authority. The new notes are illustrated with images of Iraq's scientific contributions, history and landscape and are printed in denominations of 50, 250, 1000, 5000, 10,000 and 25,000 dinars. The dollar is now worth between 1,200 and 1,300 dinars, substantially less than the 2000 dinars it was worth before the US-led invasion. There are about 4.5 trillion new Iraqi dinars ($3 billion) in circulation. Deputy governor of the Central Bank of Iraq, Ahmed Salman Jaburi claims that the new dinar is secure, unlike the easily forgeable Saddam dinar. The notes were printed by the British company De La Rue and the first shipment arrived in Baghdad on 17 September in 28 jet loads of 90 tons each.

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DROPPED FEUD MAKES MEDINA FAVOURITE FOR GOVERNOR

Victor Medina, CEO of the United Mizrahi Bank, is a step closer to becoming central bank governor of the Bank of Israel in January 2005 after the Prime Minister, Ariel Sharon, dropped his objections. Sharon's previous opposition to Medina stemmed from a long-standing dispute, but his support for his previous adversary is now said to be greater than for any other candidate. Sharon and finance minister Benjamin Netnayahu will submit a candidate together under an agreement on the formulation for the current government. As Netanyahu also backs Medina and it appears David Klein, the current governor will not be offered a second term, it looks like Medina could be on the way up.

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BANK OF ISRAEL'S KLEIN TO PETITION ON SALARIES

Governor David Klein has announced that he intends to petition the High Court against a decision to intervene in salary terms and other benefits awarded to employees of the Bank of Israel. Klein's reaction came after Finance Ministry wages chief, Yuval Rachlevsky, recently asked the attorney general to intervene in bringing about a change in the central bank's salary terms. As part of the legal struggle, Rachlevsky intends to turn to a criminal statute which places criminal liability on general managers or department heads when an anomaly is discovered in the budget or in benefits awarded to employees.

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TUNISIAN GOVERNOR DISMISSED

Mohamed Daouas, governor of the Central Bank of Tunisia was dismissed on Wednesday, an official news agency has reported. The agency states that Daouas was "called to other functions". The news follows the leak of a list allegedly containing the names of Tunisia's 127 most indebted businessmen some months ago. Taoufik Baccar, outgoing finance minister, has stepped in as governor.

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FORMER BANK INDONESIA GOVERNOR UNDER INVESTIGATION

Former governor of the Bank Indonesia, Syahril Sabirin, has been named as a suspect in a fund misuse case worth 20.9 rupiah (2.47 billion dollars). An investigation has been triggered by findings of the Supreme Audit Board (BPK) last August showing that the central bank and the Indonesian Bank Restructuring Agency (IBRA) had misused part of the 53.78 trillion rupiah in government funds. The funds had been placed in a central bank account to aid struggling banks after the Asian financial crisis of 1997-1998. This is not the first time the Indonesian authorities have attempted to put Sabirin behind bars. In 2000 he was declared a suspect in a corruption case involving the disbursement of IBRA funds to Bank Bali. In 2002 he was sentenced to three years in prison by the Central Jakarta District Court but five months later was acquitted of all charges by the Jakarta High Court.

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ZETI WINS TOP HONOURS AS CENTRAL BANKER

Bank Negara Malaysia governor Tan Sri Zeti Akhtar Aziz is The Banker's choice as the central bank governor for 2004. The magazine, which is published by the Financial Times, said that Zeti's continued pioneering work to build the Islamic finance industry and establish Malaysia at the forefront "shines out". "No less important, she showed a deft hand in guiding the Malaysian economy onto a path of solid growth," the magazine said, adding that as a result of her efforts, Malaysia leads Bahrain and the United Arab Emirates as the centre for Islamic finance. The magazine quoted Zeti as saying: "For Islamic banking and finance to be sustainable, compliance with syariah principles alone is not sufficient. Over the long run, customers and businesses demand quality in the products and services that Islamic finance offers. "This is the challenge for Islamic banking and finance: to be able to provide a comprehensive range of Islamic financial products and services that are not only innovative and competitive but syariah-compliant."

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NORGES BANK EXECUTIVE DIRECTOR GETS IMF MOVE

Norges Bank Executive Director Jon Solheim is to take office as executive director for the Nordic-Baltic countries at the IMF in Washington. He will work at the Fund's Washington DC headquarters for a two-year term beginning in January 2004, Norges Bank announced. Executive directors are members of the Executive Board, which is responsible for conducting the day-to-day business of the IMF. Solheim will represent Denmark, Finland, Iceland, Norway, Sweden, Estonia, Latvia and Lithuania. These countries are jointly represented by one member of the Board. The position is held by each of the Nordic countries in turn and it is now Norway's turn to take office. An economics graduate from the University of Oslo, Solheim joined the staff of Norges Bank in 1970. He worked at the European department of the IMF from 1972 to 1975 and as chief economist at the Central Bank of Gambia in 1977-78. In 1984-86, he held the position of managing director at the Association of Norwegian Finance Houses and from 1991 to 1993 was alternate executive director for the Nordic-Baltic countries in the IMF. Solheim has held positions at executive level at Norges Bank for many years, most recently as executive director of Norges Bank Financial Stability. He has also taken part in a number of international and national committees dealing with economic, monetary and foreign exchange issues and has carried out short-term assignments in Jamaica, Zambia and Namibia.

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