Outgoing Finance Minister Eelco Heinen (VVD) sticks to his intention to shorten the appointment period of a DNB president. He said that on Monday after the Council of Ministers in the Catshuis. In an interview with NRC Had divorcing president of De Nederlandsche Bank Klaas Knot criticized that intention. Knot called Heinen’s plan bad for the creditworthiness of the Netherlands.
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A maximum of fourteen years (twice seven) still applies to the appointment period. Heinen seized the change of the guard at DNB to start the debate on the duration of session. He found too long for fourteen years. As the most important reason, he called the risk of “compelling”. His proposal is therefore to shorten the period to five years, with one extension option. This way DNB can keep up with the times, Heinen argues.
Knot was “not cheering” in the perspective that the appointment periods would be shortened, he told NRC. “The independence of the central bank is an important factor that belongs to a stable institutional climate and high creditworthiness. Long appointment periods contribute to that independence. And we therefore see that countries with high creditworthiness often have long appointment periods.”
Heinen emphasizes that he is not looking for political influence.
Credit rating agencies such as S&P, Moody’s and Fitch consider the independence of central banks as crucial for the creditworthiness of a country. With shorter installments, independence has less difficult, and that can have consequences for creditworthiness. Heinen does not deny that possibility, but says that credit rating agencies will be much heavier if a country is conducting a prudent budget policy.
The minister assured that it was not about Knot, who will leave at the Central Bank this Monday. On Tuesday, the current DNB director Monetaire Affairs Olaf Sleijpen will be presenting as president. His first term lasts seven years, because adjusting the duration of session requires a change in the law.
Independence
Experts are also critical of shortening. They then see a higher risk of political pressure. For example, that a central bank president makes a decision that politicians would like to see as soon as the end of an appointment period is in sight. Heinen, however, remains that he finds fourteen years too long and emphasizes that he is not looking for political influence. “Independence is beyond doubt. It must be guaranteed.”
Heinen also says “from the sector” that it wants a supervisor who goes along with time. He does not want to specify which sector that is. Knot does not recognize the risk of ‘compelling’, he said. Heinen assumes that for notification. “A butcher cannot of course not inspect his own meat.”
Heinen says that he has discussed his plan to shorten the duration of session with the DNB supervisory board. The chairman of the Supervisory Board Martin van Rijn confirms this by telephone. Van Rijn says that he only told Heinen that the commissioners await the substantive proposal. “We have not given any weighting.”
Heinen has announced an independent committee that will find out what is desirable and possible. Van Rijn wants to wait for that committee before he gives an opinion.