Political economy of Central bank appointments: A case from Riksbank (Sweden)…

The constitution of Central Banks never ceases to amaze me. It is really interesting how these central banks are organised and governed. And as expected, this is the least studied aspect of central banking which is as important (if not more important) as monetary policy. One is seeing how politicians and political economy factors  are shaping central bank appointments, firings and so on across the world. Needless to say these appointments and pressure around them is behind most monetary policy decisions as well.

For instance, one just read about the reappointment of Stefan Ingves as chief of the central bank, He has already served two 6 year terms (12 years in total) and has got another 5 year term. As per law, the term should be for 6 years and the lawmakers should have given him one. But given he is in his mid 60s they gave him just a 4 year term.

However, what was more interesting was the candidates in fray. There was Karolina Ekholm who earlier served as Deputy Governor from 2009-14 and then left midway to join as Secretary of the political party: Social Democrats. In 2104 elections, The Social Democrats formed an alliance to form the government.

Now Riskbank has this Board which is called General Council and it is appointed by the government after every elections. Most of them are politicians:

The General Council appoints the members of the Executive Board and decides on their salaries and other terms of employment. It also adopts the Riksbank’s Rules of Procedure and decides on the design of banknotes and coins.  The General Council is appointed by the Riksdag after each general election, for a period of four years.
The General Council may present opinions within its field of competence on issues officially referred to the Riksbank for consideration. In consultation with the Executive Board, the General Council may present proposals to the Riksdag (Parliament) and the Government regarding statutory amendments or other measures in its sphere of responsibility.
The General Council presents proposals to the Riksdag and the Swedish National Audit Office regarding the allocation of the Riksbank’s profits.

The General Council of the Riksbank has its own audit unit which examines how the Executive Board members discharge their duties.

What is also interesting is that General Council webpage mentions the political affiliations of all the Board members:

The General Council consists of eleven members and as many deputies. Its members are appointed by Parliament (the Riksdag) and have a term of office corresponding to the general election period. The General Council selects from among its number a Chairperson and a Vice Chairperson.

Regular members

1 Susanne Eberstein, Chairperson (S)

2 Michael Lundholm, Vice Chairperson (M)

3 Hans Hoff (S)

4 Peter Egardt (M)

5 Caroline Helmersson Olsson (S)

6 Olle Felten (SD)

7 Hans Birger Ekström (M)

8 Anders Karlsson (S)

9 Roger Tiefensee (C)

10 Agneta Börjesson (MP)

11 Chris Heister (M)


1 Catharina Bråkenhielm (S)

2 Elisabeth Björnsdotter Rahm (M)

3 Tommy Waidelich (S)

4 Oskar Öholm (M)

5 Anne-Kristine Johansson (S)

6 Mikael Eskilandersson (SD)

7 Carl B Hamilton (L)

8 ClasGöran Carlsson (S)

9 Karin Nilsson (C)

10 Esabelle Dingizian (MP)

11 Stefan Attefall (KD

Political affiliation:

C: Centre Party
L: Liberal Party

KD: Christian Democrats
M: Moderate Party
MP: Green Party

S: Social Democratic Party
SD: Sweden Democrats

Amazing to see how political interests are balanced in the central bank Council.

All this background takes us back to Ekholm case. As there are 4 members from Social Democrats on the Council and it is also the leading party, there was political interest to appoint Ekholm as the head but she was blocked:

 Karolina Ekholm, the front-runner and a Social Democrat top pick to take over as Swedish central bank chief, has been rejected by the opposition, raising the prospect of Stefan Ingves’s mandate as Riksbank governor being extended, sources told Reuters.

The central bank has come in for widespread criticism in recent years, first for raising interest rates too fast after the financial crisis and more recently for keeping negative rates and an ultra-expansionary policy despite a surging economy and the threat of a housing bubble.

 Ingves’ second term as governor expires at the end of the year. The appointment of a new governor has been seen by many as an opportunity for rate-setters to reassess a policy that is closely associated with him.

But while the Social Democrats on the Riksbank General Council have pushed to install Ekholm, currently state secretary to Finance Minister Magdalena Andersson and a long-time favorite for the post, the opposition has flatly refused to accept her nomination.

“That is totally out of the question. We can’t have an active Social Democratic politician as Riksbank governor,” a source with knowledge of the matter said.

A second source with knowledge of the discussions confirmed that a majority of the General Council would not back Ekholm as Riksbank governor. The Council is made up politicians and reflects the parties’ seats in parliament.

Politics around appointments of central banks are quite a story…

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