Lenihan to alter bank bill after criticism from ECB
New legislation 'could restrict role of the governor'
FINANCE Minister Brian Lenihan is to make amendments to the new Central Bank legislation after sweeping criticism of the draft bill from the European Central Bank.
In an "opinion" on the Central Bank Reform Bill 2010, the ECB even queries whether the Central Bank can be held liable for the pensions of staff transferred to the new National Consumer Agency being set up under the legislation.
Its main concern is that the legislation as drafted may restrict the independence of the bank and its governor in exercising the policies assigned to the ECB system, especially on the preservation of price stability.
The legislation would establish a Central Bank Commission and the ECB clearly worries that this may reduce the role of the governor in areas that come under the ECB's remit.
"As regards European System of Central Banks-related (ESCB) tasks, and their performance, the governor, the bank, the commission and its individual members must all be independent and must not seek or take instructions from the Government as far as those tasks are concerned," it says.
The ECB also queries the provision which would allow the Central Bank governor to engage in paid activities outside the bank.
"As a matter of principle, membership of a decision-making body involved in the performance of related tasks is incompatible with the exercise of other functions that might create a conflict of interest," it says.
"In particular, members of such decision-making bodies may not hold an office or have an interest that may influence their activities, whether through office in the executive or legislative branches of the state or in regional or local administrations, or through involvement in a business organisation."
In a statement welcoming the opinion last night, Mr Lenihan said that, while it will not be possible to conclude all aspects of his examination of the ECB opinion in time for next week's Report Stage of the Bill, he will be bringing forward two amendments to take on board some of the main independence-related issues raised.
"One of these is intended specifically to reinforce the governor's sole responsibility for the performance of the bank's objectives regarding ESCB-related tasks. I will consider any further legislative changes that might be appropriate and how they might be implemented in the context of the second Central Bank Reform Bill in the autumn," he said.
The ECB also says the Central Bank must have considerable independence over how much profit it pays to the exchequer, and when.
"Profits may be distributed to the state budget only after any accumulated losses from previous years have been covered and financial provisions deemed necessary to safeguard the real value of the NCB's capital and assets have been created," the opinion says.