Vol. 548 No. 5
44 Mr. J. Mitchell asked the Minister for Finance if, before appointing a new Governor of the Central Bank, he considered a possible nominee from outside the Department of Finance; his views on whether the habit of transferring senior Department of Finance personnel to the governorship of the Central Bank blurs the lines of independence and demarcation between the two; and if he will make a statement on the matter. [5755/02]
Under the terms of the Central Bank Act, 1942, the Governor of the Central Bank is appointed by the President on the advice of the Government for a term of seven years. The current Governor, Mr. Maurice O'Connell, informed me of his intention to retire with effect from 10 March 2002. Following this, on 30 January the Government considered a range of possible candidates to succeed Mr. O'Connell and, in the event, decided to request the President to appoint Mr. John Hurley, current Secretary General of the Department of Finance, as Governor of the Central Bank with effect from 11 March 2002.
The Government's deliberations in this matter are confidential and I do not propose to say which other candidates, apart from Mr. Hurley, were considered for appointment. It is true that the post of Governor has traditionally been held by former officials of the Department of Finance. It will be agreed that the country has been well served by these individuals who, in their terms as Governor, have contributed to the high reputation the Central Bank enjoys at home and abroad, especially as a regulatory authority in the financial services area.
It is essential that the post is held by a person of integrity with a proven track record of good management and interpersonal skills, familiarity with the area and with the intellectual capacity to serve, ex officio, as a member of the governing council of the European Central Bank. Viewed in this context, it can be readily appreciated that the post of Secretary General of the Department of Finance is an excellent and appropriate background for a Governor to possess.
As regards the question of independence, the governorship of the Central Bank is protected at a number of different levels by a legal framework that ensures independence. This independence is traditionally jealously guarded by Governors and protected by the Maastricht Treaty. The Government must also, in appointing a governor, take full account of the potential appointees and their personal ability to assert that independence. Clearly, the Government is happy with its decision in the current case. Future cases are a matter for future Governments.
The question does not impugn the proposed appointee, the Secretary General of the Department of Finance, who is an eminent public servant. The issue is the principle involved. The Committee of Public Accounts, in its DIRT inquiry, found the Central Bank severely wanting. It found that there was no independent thinking in the Central Bank or in the Revenue Commissioners as distinct from the Department of Finance. It found that there was a cosy relationship which led all people to think the same and to come to the wrong conclusions together.
Does the Minister, therefore, agree that it would be much better in order to encourage independence of thinking to provide for critical analysis of the Department of Finance's policy by having a Governor of the Central Bank who is not only independent in name, but independent in thought? Somewhere other than the Department of Finance should be sought as a source for Governors of the Central Bank.
It is a slur on the current Governor and on previous Governors of the Central Bank to impugn that they do not have independence of thought. That is what the Deputy said and it casts a slur on the current Governor and past Governors, something the Deputy said he would not do. Over the past four and a half years – I would say I speak for my predecessors as well – we often hoped that the Central Bank annual review or quarterly review would happily coincide with the views of the Minister and the Department of Finance, but, in my time and in previous times, I have not yet seen a comment by a Governor of the Central Bank or one in the report of the Central Bank that was not critical in large or small measure of what the Minister for Finance and the Government of the day was doing. In all those reports, the Central Bank exercised its independence.
The Government and the Department of Finance in particular are responsible for setting out the regulatory and legislative framework within which the Central Bank operates. However, governors of central banks here and abroad have acted independently of the Irish Department of Finance and Departments of Finance in other countries. From my experience in Europe, the Central Bank operates much more independently than most other central banks in Europe which operate independently. It is wrong to think that the Central Bank of Ireland does not operate independently of the Department of Finance or anybody else. Its independence is jealously guarded. The Governor is appointed for a seven year term and only in very unusual circumstances can a Governor of the Central Bank be removed. It has never occurred here and it ensures the independence of the Governor.
It is a matter for future Governments to decide who they wish to make Governors of the Central Bank, but, as far as I am concerned, the people who have served as Governors of the Central Bank, having served in the Department of Finance, have done an excellent job. If the Deputy does not believe me, he should consult former Ministers for Finance in his party.
It is not surprising that former Ministers for Finance would say that having appointed previous Governors. There is an incestuous relationship between three major financial organs of this State – the Central Bank, the Revenue Commissioners and the Department of Finance – or that certainly was the case until the DIRT inquiry. A specific point made by the DIRT inquiry is being ignored. The old pals act where the Secretary General or a very senior assistant Secretary General of the Department of Finance is promoted to the Central Bank is not good enough. Deficiencies in the Central Bank over the past number of years have been shown to exist and I am very disappointed and surprised that the Minister seems happy with the whole show.
If the Deputy was of that view a year ago, he should have ensured, through his eminent chairmanship of the Committee of Public Accounts, that the committee made that recommendation. The committee of which he was Chairman did not make any recommendation in that regard. Although the Deputy feels strongly about it now, he was in a position then to make a strong recommendation but he did not do so.
If the Minister reads the full text of our report, he will realise that we did.
There is absolutely no recommendation on that from the Committee of Public Accounts.
