Who guards the guardian? The issue of central bank governance.

Abstract

Good governance of central banks is important, as it helps with sound and well-informed decision making in monetary and financial policy. Good governance is a multifaceted concept, and two of its main components are independence and accountability, which are considered two sides of the same coin. While good governance has recently developed, discussions of its components have been present in the academic literature for decades. While the trend of exploring the independence and accountability of central banks first appeared in the 1990s, and then in the early 2000s with the global financial crisis, there is silence on current developments, especially the economic turmoil in current political affairs. Furthermore, the operational independence of the Bank of England has existed for almost 25 years and the parliament is examining its effectiveness. That calls even more attention with regard to the importance of examining the Bank’s governance structure. This dissertation aims to provide an overview of the governance framework of the Bank of England and assess its compliance with international standards, such as the International Monetary Fund’s Central Bank Transparency Code and the Basel Core Principles for Effective Banking Supervision. This dissertation uses doctrinal legal methods to assess and analyse the Bank of England’s independence and accountability, and their compliance with the principle of good governance. It will be contended the Bank of England primarily focuses on operational independence as a tool to achieve monetary policy and parliamentary accountability as a constraint of such powers to ensure its alignment with democratic legitimacy.