Proposed governance changes at Portugal central bank

In most countries, governments are undermining central bank autonomy. In some like Portugal. the government has proposed changes in the governance structure of the central bank.

ECB was asked to review the proposed changes and ECB released its response on the website:

The two main purposes of the draft law are to reform the institutional governance of the BdP and the institutional framework for the Portuguese financial supervisory system.

There are several proposed changes. Some of them are:

Under the draft law, the BdP’s Management Board is slightly reduced in size, comprising the BdP Governor, one or two Vice-Governors  and three or four, instead of the current three to five, other board members. Currently the Governor is appointed by the Ministerial Council on a proposal from the Minister for Finance, after consulting the competent commission of the Parliament, while the other members of the BdP’s Management Board are appointed by the Ministerial Council on a proposal from the Governor, after consulting the competent commission of the Parliament. Under the draft law, the Governor is no longer to have a role in the appointment procedure for the other members of the BdP’s Management Board, who, along with the Governor, are henceforth to be appointed by the Ministerial Council on a proposal from the Minister for Finance, after consulting the competent commission of the Parliament. The draft law also precludes the appointment or proposed appointment of members of the Management Board during the six months prior to the end of the current legislature, or between the call for elections for the Assembly of the Republic or the dissolution of the Government and the parliamentary investiture of the newly appointed Government, except if the positions in question are vacant and there is urgency in proceeding with the appointment, in which case the appointment or proposed appointment still depends on confirmation from the newly appointed Government. In addition, according to the draft law, the members of the Management Board of the BdP must be appointed from among persons of recognised good moral standing, aptitude, sense of public interest, professional experience, management ability, knowledge and relevant and appropriate technical competence for the exercise of their respective functions.

Currently the mandate of the members of the Management Board is five years, which may be renewed once, by the Ministerial Council, for a further five-year period. Under the draft law, the duration of the mandate is increased from five to seven years, but without being renewable.

ECB is happy with most of the changes barring a few. This is welcome as most changes suggest strengthening the governance of the central bank (though should read more carefully)..

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