New central bank law for Serbia

Amendments to Serbia’s central bank law have been adopted by MPs today that could both help and hinder the Bank’s independence. A new governor is expected soon, now that the law has been approved.

Under the new rules, Serbia’s president will be able to nominate the bank governor. Previously, the governor was previously named and approved by parliament. Parliament will still confirm the nomination by majority vote.

Presidential nomination raises the fear of political meddling. Reuters expands:

The last governor, Radovan Jelasic, resigned in March after six years in office, with analysts saying he was unwilling to ease monetary policy in line with government demands to help the economy, which contracted three percent in 2009.

But many interpret the law overall as strengthening the independence of the bank. Belgrade media organisation B92 reports:

As stated in the law, the NBS bodies are the executive board, which is comprised of the governor and vice-governors, the governor and the governor’s council.

The executive board will take over all responsibilities of the Monetary Policy Committee, setting monetary and foreign exchange policy and working to maintain and strengthen the stability of the financial system. It will also focus on determining NBS monetary policy, NBS interest rates, terms and methods of issuing securities and short-term loans policy.

The Governor’s Council will comprise five members, including the chairman, who will be nominated by the parliamentary Finance Committee and approved by the parliament for a period of six years with a right to re-election. Among other things, the council will propose the NBS Statute, determine the exchange rate policy, adopt the NBS financial plan and annual financial reports and appoint an external auditor.