There will be a new governing system at the island’s premier financial institution, the Central Bank of Barbados.
In what he described as “important legislation”, Minister in the Ministry of Finance Ryan Straughn told the House of Assembly on Tuesday that the Central Bank was critical to a number of key Government reforms going forward.
“The Central Bank, as the lead regulator in the banking sector, has to transform itself in order to ensure that we can adequately provide for a number of critical reforms that we believe will lead to the unlocking of economic growth in this economy,” he said.
Some of the major changes in the legislation relate to the tenure of the Governor, which is now six years; the firing process of the Governor; and amendments to the board of directors.
“You will note in the Bill that the tenure for the Central Bank Governor is proposed to be six years and we have done that deliberately. At the end of the six years the Governor is eligible for reappointment. We have also changed the tenure with respect to directors,” Straughn said.
“We will have some transitionary provisions with respect to being able to ensure that at any given time, there is always continuity with the board of directors of the Central Bank of Barbados.”
The Minister stated that unlike in the past, where the Minister of Finance could fire the Governor of the Central Bank, there is now an added provision that if the Finance Minister wants to relieve the Governor of his duties, the recommendation must be supported by the Head of State.
Straughn said this particular amendment was a “fundamental improvement” of the Bill, adding that the removal of a Governor is “a significant marker mover” which should not be done willy-nilly.
“We have introduced the concept of a double veto where, in the event in the future that a situation may arise where a Governor may have to be relieved of his responsibility, that the Minister of Finance makes a recommendation to the Head of State with respect to being able to do so. That provision now is in place to create a little more protection for the Governor of the Central Bank and that from the Minister of Finance.
“It is important for the public to appreciate that by giving more independence in situations where absolutely incompetence arose, we still wanted to make sure that the process can be followed in a much more accountable way,” he said.
As it relates to the board, Straughn said those changes were intended to strengthen its power “and to give operational autonomy maintaining accountability”.
“We have a slightly different structure where there will be staggering of appointment of directors, so that every year a director will be appointed for a term – whether one or two years – as opposed to having all of them appointed at the same time,” he said.
The economist pointed out that usually when governments change, the directors of boards of institutions would put their instruments at the disposal of the Minister.
“When we came into office in 2018, we didn’t dismiss the entire board of directors across the state-owned enterprises. Instead, we deliberately kept persons appointed to the previous boards to ensure the incoming board of directors would have somebody with some institutional knowledge in order to facilitate better decision-making.
“We thought that was important because if government is to work properly, then you need a measure of continuity, especially in the context of the Central Bank, because the process of replacement of directors has to be carefully managed,” the Christ Church East Central MP said.
Straughn explained that there was a time when the Governor would give trustworthy advice to the public and the public would adhere to that advice.
“We have to ensure that there is trust, that there is credibility… and with respect to the Central Bank, credibility is the most important element. In economic terms, it speaks to the level of investment that one can expect externally,” he said.
The Minister said the new Central Bank Bill would assist in restoring the public’s trust and confidence in the institution. (IMC)