New act will ensure more checks, balances
PARISTA YUTHAMANOP
Tarisa: The King's remarks lifted morale |
The Bank of Thailand (BoT) will increase its political independence and accountability to the public in its conduct of monetary policy, central bank governor Tarisa Watanagase said yesterday. She said the new Bank of Thailand Act would improve checks and balances for the bank's operations, as an outsider would now act as the bank's chairman.
The law also calls for the appointment of more outsiders as directors than bank executives on the board, as well as requiring the central bank to share responsibility with the government in setting monetary policy targets.
Mrs Tarisa said remarks by His Majesty the King on Tuesday highlighting the importance of maintaining monetary stability had given a morale boost to central bank officials. She brushed off concerns about whether the bank's monetary policy operations had come under political pressure.
Finance Ministry officials have criticised the bank's move to raise interest rates to clamp down on inflation, as they have argued that rate hikes will only slow economic growth and increase costs for businesses and consumers.
But the central bank, which raised interest rates last month for the first time in more than a year, argues that curbing inflation and stabilising prices are critical for sustainable growth.
Another bone of contention has been the government's appointments to the new central bank board. Some observers have questioned the qualifications and suitability of members of the selection committee responsible for screening candidates.
The new board is directly responsible for appointing new committees responsible for overseeing monetary policy, the supervision of financial institutions and the country's payments system.
Pasuk Phongpaichit, an economics lecturer at Chulalongkorn University, said the public should have a greater voice in appointments to key agencies such as the BoT and the Securities and Exchange Commission.
Speaking at a seminar on central bank independence, she said the appointment of selection committees with close ties to the government raised questions about the future independence of the country's financial and economic regulators.
The fact that the Stock Exchange of Thailand also had the same set of people on its board contradicted principles of good governance, Mrs Pasuk said.
On July 29, the cabinet approved the appointment of Pornchai Nuchsuwan, former director of the Budget Bureau, as chairman of the central bank. Mr Pornchai was nominated by a selection committee that included Nibhat Bhukkanasut, a former Finance Ministry technocrat once accused of corruption.
Mrs Pasuk said the BoT Act should be amended to clarify the necessary qualifications of BoT directors. The law now prohibits people who have conflicts of interest or are in political positions from being elected to the board.
She said the public should be given better access to the selection process of financial regulators, and added that both the central bank and the SEC must also improve the transparency of their operations.
Ammar Siamwalla, an honorary economist for the Thailand Development Research Institute, said the government should set a framework that allows it and the central bank to share responsibility in setting monetary policy targets.
But he stressed the importance of independence for the central bank.
''The central bank needs to be independent. But we also need to make clear its targets and the central bank's accountability,' he said.
Mr Ammar, a former member of the National Legislative Assembly, said the new BoT Act was aimed at enhancing the independence of the bank while increasing the authority of its board to act as a checks and balances mechanism.
The new act gives the central bank governor a five-year term, and says governors may only be dismissed for gross negligence or incompetence. Previously, the governor could be dismissed at the discretion of the finance minister.
The law also reduces the power of the governor in monetary policy operations as the role of various committees has increased.
Mr Ammar said he also questioned whether the new directors recently appointed by the government could undermine the central bank's independence.
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