Past Event

Unelected Power: the quest for legitimacy in central banking and the regulatory state

We are pleased to host the presentation of Paul Tucker's latest book.

Date: May 31, 2018, 12:30 pm Topic: European Macroeconomics & Governance

audio & video recordings

presentation

Presentation by Paul Tucker

summary

Central bankers have emerged from the financial crisis as the third great pillar of unelected power alongside the judiciary and the military. They pull the regulatory and financial levers of our economic well-being, yet unlike democratically elected leaders, their power does not come directly from the people.

In this event, we hosted Paul Tucker who presented his latest book about unelected power and how it lays out the principles needed to ensure that central bankers, technocrats, regulators, and other agents of the administrative state remain stewards of the common good and do not become overmighty citizens.

During the Great Financial Crisis, the accumulation of powers within the Central Banks was reflected in the blurring of lines between fiscal and monetary policies and in the enhanced supervisory and regulatory powers. Prudential supervision, where accountability via oversight is impossible until failure, is an example of this “black box”.

How should we delegate power to independent agencies which are insulated from the daily politics of elected government? It was proposed that decisions should have a clear objective guided by public debate and that can be monitored and should be taken by one person one voter after deliberation to disperse power and to reveal disagreements.

Joanne Kellermann drew from her professional experience as a central banker, supervisor and founding member of the Single Resolution Board to reflect on the legitimacy of Central Banks’ action during the crisis. While the first priority back then was to act quickly, ex-post questions were raised not only by technocrats but also by civil society. Kellermann suggested that the setting up of the Banking Union and its two pillars could be set up against the book’s principles. It was noted that the current cross-border financial system and the shift from bailing-out to bailing-in is taking place precludes national control. Adding to this, resolution authorities are only visibly active to the public in times of crisis.

Jean-Pisani Ferry commented on the growing separation between policy and politics, which nowadays raises questions such as: “have we done enough?” and “have we done it in a carelessly?”. Current examples of WTO and Trump and even in Italy, where the constitutional and political spheres are separated, illustrate possible design flaws.

There are good reasons to delegate power – elected governments can fail and technocrats can follow their own agenda. The imperfect information problem is a constant. The question of “how” to delegate becomes more delicate, and there history tells us that we may have been careless so far. An exception is the way how the independence of the Bank of England was introduced. It was an elaborate reflection of how an independent agency can work and still be accountable and transparent, with the ultimate responsibility lying with the government. On the contrary, looking at European institutions, we see for instance that the Commission is partially accountable to the Parliament but has some independent powers, in what regards for instance competition policy.

The way we think about monetary policy has changed over the last decade. For example, policymakers are much more conscious of its distributional consequences. The relationship of savers with Central Banks has changed too – while in the past they were overall protected by the savers given the price stability mandate, nowadays the persistently low inflation rates negatively affect the Central Banks’ popularity. This political economy question will shape the future design of future institutions.

Schedule

May 31, 2018

12:30-13:00

Check in and lunch

13:00-13:20

Book presentation

Paul Tucker, Chair of the Systemic Risk Council and a Fellow at the Harvard Kennedy School of Government

13:20-14:00

Panel Discussion

Chair: Maria Demertzis, Deputy Director

Joanne Kellermann, Former Member, Single Resolution Board

Jean Pisani-Ferry, Mercator Senior Fellow at Bruegel

Paul Tucker, Chair of the Systemic Risk Council and a Fellow at the Harvard Kennedy School of Government

14:00-14:30

Q&A

14:30

End

Speakers

Maria Demertzis

Deputy Director

Joanne Kellermann

Former Member, Single Resolution Board

Jean Pisani-Ferry

Mercator Senior Fellow at Bruegel

Paul Tucker

Chair of the Systemic Risk Council and a Fellow at the Harvard Kennedy School of Government

Location & Contact

Bruegel, Rue de la Charité 33, 1210 Brussels

Matilda Sevon

matilda.sevon@bruegel.org

Read article

Blog Post

Germany’s savings banks: uniquely intertwined with local politics

German savings banks, known as Sparkassen, form an important feature of the country's banking assets. Unlike in other European countries, German Sparkassen also hold direct links with local political communities. This post focuses on the Sparkassen's structural links and relationships with elected politicians. Three findings which do not appear to have been specifically documented previously stand out.

By: Jonas Markgraf and Nicolas Véron Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: July 18, 2018
Read article Download PDF

Policy Contribution

European Parliament

Cryptocurrencies and monetary policy

Can cryptocurrencies acquire the role of money? And what are the implications for central banks and monetary policy? Read the policy contribution to understand what challenges cryptocurrencies have to overcome to replace official currencies.

By: Grégory Claeys, Maria Demertzis and Konstantinos Efstathiou Topic: European Parliament, Finance & Financial Regulation, Testimonies Date: June 28, 2018
Read article More by this author

Podcast

Podcast

Director's Cut: Central banking and the problem of unelected power

Bruegel director Guntram Wolff discusses current tensions in central banking governance with Paul Tucker, former deputy governor of the Bank of England and author of the newly released book 'Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State'.

By: The Sound of Economics Topic: Finance & Financial Regulation, Global Economics & Governance Date: June 5, 2018
Read article Download PDF

External Publication

The changing fortunes of central banking

What are the major challenges of central banks today? This book discusses the developing role of central banks and the policies they pursue in seeking monetary and financial stabilisation, while also giving suggestions for model strategies.

By: Philipp Hartmann, Haizhou Huang and Dirk Schoenmaker Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: May 29, 2018
Read article Download PDF

External Publication

Central banking in turbulent times

Central banks came out of the Great Recession with increased power and responsibilities. Indeed, central banks are often now seen as 'the only game in town', and a place to put innumerable problems vastly exceeding their traditional remit. These new powers do not fit well, however, with the independence of central banks, remote from the democratic control of government.

By: Francesco Papadia and Tuomas Valimaki Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: May 22, 2018
Read about event More on this topic

Past Event

Past Event

Central banking in turbulent times

This event looked at fundamental questions about the central banking systems and how the Great Recession might have prompted a reassessment of the old central banking model.

Speakers: Maria Demertzis, Paul De Grauwe, Marianne Nessén and Francesco Papadia Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 25, 2018
Read article More by this author

Podcast

Podcast

Director's Cut: Developing deposit insurance in Europe

In this week’s Director’s Cut of ‘The Sound of Economics’ podcast, Bruegel director Guntram Wolff talks with Nicolas Véron, senior fellow at Bruegel, about the implementation of a European Deposit Insurance Scheme (EDIS), one of the three pillars needed for the completion of banking union.

By: The Sound of Economics Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: April 3, 2018
Read article More on this topic More by this author

Blog Post

Central banks in the age of populism

Two years of elections have shown that we live in an age of increasing political and economic populism. What are the consequences of that for central banks? We explore opinions about it, from both 2017 and more recently.

By: Silvia Merler Topic: Finance & Financial Regulation Date: March 19, 2018
Read article

Blog Post

Breaking the Stalemate on European Deposit Insurance

Many EU-level reports have highlighted a European Deposit Insurance Scheme (EDIS) as a necessary component of banking union, but none of these options has met sufficient consensus among euro-area countries. The authors of this blog propose to end the deadlock with an EDIS design that is institutionally integrated but financed in a way that is differentiated across countries.

By: Isabel Schnabel and Nicolas Véron Topic: European Macroeconomics & Governance, Finance & Financial Regulation Date: March 5, 2018
Read article More on this topic More by this author

Blog Post

Bad News and Good News for the Single Resolution Board

A first report on a key plank of the European Union’s banking union reflects on shortcomings thus far, but also suggests that recent improvements might ultimately lead the SRB to be successful in its critical missions.

By: Nicolas Véron Topic: Finance & Financial Regulation Date: January 15, 2018
Read article Download PDF More by this author

Policy Contribution

European Parliament

Bank liquidation in the European Union: clarification needed

Critical functions and public interest. What role do they play in Member States’ decision to grant liquidation aid? The author of this paper looks at how resolution and liquidation differ substantially when it comes to the scope of legislation applicable to the use of public funds and how the diversity in national insolvency regimes is a source of uncertainty about the outcome of liquidation procedures.

By: Silvia Merler Topic: European Macroeconomics & Governance, European Parliament, Finance & Financial Regulation, Testimonies Date: January 10, 2018
Read article Download PDF

Policy Contribution

European Parliament

How should the European Central Bank ‘normalise’ its monetary policy?

During the crisis, the ECB resorted to a number of unconventional monetary tools. This paper discusses how to phase out these policies and what the ‘new normal’ in monetary policy should look like.

By: Grégory Claeys and Maria Demertzis Topic: European Macroeconomics & Governance, European Parliament, Testimonies Date: November 23, 2017
Load more posts