Minister Heinen wants to shorten the duration of the DNB president, but that raises questions about political pressure

It was a surprise with a less surprising appointment last Friday. Domestic Minister of Finance Eelco Heinen not only revealed at the Catshuis that DNB director Olaf Sleijpen will be the new president of the Nederlandsche Bank (DNB). He also seized the opportunity to open the debate about the president’s session. According to the VVD member, the current term is « really long » and must be shortened.

At a time when the American FED chairman Jerome Powell is under pressure from President Donald Trump, Heinens raises questions. Is it intended to increase the political influence on the central bank? Or is it a desirable modernization of the board?

The president of DNB is an important regulator on banks, pension funds and insurers and advises the government in the economic field. The president of DNB is currently appointed for a period of seven years, with the possibility of one extension. The term scheme, laid down in the Bank Act, was introduced when the departing President Klaas Knot, who will say goodbye on 1 July. Before that, the presidency did not know a fixed term.

Heinen proposes to shorten the period to five years, with the possibility of one extension again. According to his environment, his proposal is really his own initiative. At the Catshuis on Friday he emphasized that the functioning of the functioning of Klaas Knot. Heinen says he wants to prevent his proposal from being seen as an opinion about the president. That is why he chose the moment of changing the guard to start the conversation.

Companion

Why does the minister say that he wants this shortening? The Ministry of Finance refers to Heinen’s explanation after the Council of Ministers. As the most important reason for his proposal, the minister called on Friday the risk of ‘compelling’ at a long -term session. According to him, the character of DNB changes over the years and it is good if a president can renew with it. According to the minister, for example, the Central Bank has now become much more supervisor than just a monetary advisor to the government. And the new President Olaf Sleijpen is explicitly commissioned to modernize supervision, « with an open attitude for signals from the sector and society, » said Heinen.

In addition, the minister points to the international context: twice seven years is long compared to other countries.

The last argument is not convincing, says Jens van ‘t Klooster, philosopher and political economist at the University of Amsterdam and specialized in central banks. « The fact that other countries do something in a certain way does not make it a good example, » he says. Then you should argue why things are going better for other countries, he thinks, for example, by evaluating the periods.

Moreover, a period of five years is short compared to other countries. Most countries appoint central bankers for six years, including France. A period of eight years applies in Germany, with an extension option. And in the eurozone, five years is the minimum, according to the articles of association of the European Central Bank.

Political pressure

Van ‘t Klooster points out that a shorter term entails risks. « If deadlines become shorter, central bankers can become more sensitive to political pressure. You then increase the risk that they would earlier make decisions that politicians would like to see. »

He refers to the situation in the United States. The period there is four years, and the habit was to appoint FED presidents multiple periods. President Donald Trump broke with this habit and did not extend Janet Yellen’s first term. Instead, he appointed the Republican Jerome Powell.

In the meantime, Donald Trump is trying to put pressure on Trump to reduce interest rates, because the president is convinced that a lower interest rate is good for the economy. He can’t wait for Powell’s term, he said recently. « A shorter term makes it easier to make political appointments. Trump has already said to appoint someone who listens to him and lowers the interest rates, » says Van ‘t Klooster.

Political pressure can also have consequences in the eurozone. DNB presidents are also on the board of the European Central Bank, which determines the monetary policy for the eurozone. « If deadlines in the eurozone become shorter, the risk that the political importance of an individual Member State will be given priority over the monetary importance of the eurozone. » Van ‘t Klooster calls this undesirable.

Durable

At the same time, there is also understanding for Heinens position. Sjors Overman, associate professor of Administrative and Organizational Science at Utrecht University, conducted research into the duration of the administrators in the semi-public sector. He finds a period of a total of fourteen years. « In ten years you really have enough time to get something done, » he says.

Long -sitting drivers can sail too much on routine, Overman saw in his research. « They know exactly who they should be, have fixed sources and make decisions based on well -known paths. That can affect the care of decisions, especially if the context changes in the meantime. »

That recognizes Van ‘t Klooster. He adds: « A shorter term can give room for renewal and reflection of social wishes – think of the appointment of Frank Elderson at the ECB, which set sustainability higher on the agenda. »

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