The Banker identifies those that have been integral to their countries' recoveries from various financial crises.
Central Bank Governor of the Year, Europe
Sergei Ignatiev
Before a summer drought pushed up food prices, Russian inflation hit 5.5% in July 2010, its lowest level since the end of the Soviet Union. The strength of the rouble greatly helped this performance, but this does not mean that Central Bank of Russia (CBR) chairman Sergei Ignatiev had a straightforward task.
The rouble exchange rate is heavily influenced by the direction of oil prices, leaving Russian inflation vulnerable to external developments. The CBR therefore stabilises the exchange rate as well as targeting inflation, which is a difficult but necessary juggling act for Mr Ignatiev and his team.
"Households and businesses have a keen interest in the exchange rate - people can easily change rouble assets into foreign currency and vice-versa, so it is important for us to keep a close eye on developments," he says.
Mr Ignatiev wants to retain the option of intervention in the foreign-exchange markets for at least the next two to three years, but his medium-term goal is to achieve a more flexible exchange-rate regime. The CBR is already on that path, widening the trading corridor for the exchange rate from three to four roubles in October 2010, and further liberalisation is planned for the future. This is in marked contrast to other major emerging markets such as China and India, while Brazil has even introduced new capital controls in 2010 to stem the appreciation of its currency. Russia abolished its last capital controls in 2006, and Mr Ignatiev is adamant there will be no backsliding.
"We do not want to reintroduce capital controls, because our experience was that they were not effective," he says.
Mr Ignatiev has been equally active in bank supervision, which is integrated into the CBR. A minimum bank capital requirement of Rbs90m ($2.9m) took effect from January 2010, leading 145 banks (out of more than 1000 in Russia) to either increase their capital or have their licences withdrawn.
Mr Ignatiev is considering higher minimum capital requirements, but he says the CBR's research suggests that the financial sustainability of smaller banks is not necessarily any worse than that of larger institutions. Consequently, he is looking at other ways to drive banking sector consolidation and improve banks' strength.
"We can alleviate the conditions for mergers and acquisitions that depend on our decisions, to make the procedures easier and more convenient for banks. We have made progress on this in the past two or three years, but we maybe need to go further," says Mr Ignatiev.
Central Bank Governor of the Year, Asia-Pacific
Heng Swee Keat, Monetary Authority of Singapore
In the first quarter of 2009, Singapore's economy contracted by 10%. Since then, the Asian island state has recovered strongly, with 2010 growth likely to be 15%.
Faced with such a robust turnaround, the Monetary Authority of Singapore (MAS), headed by its managing director Heng Swee Keat, was quick to tighten monetary policy in early 2010, even while inflationary pressures were relatively weak.
By the end of 2009, it was apparent that the Singaporean economy had already recouped output lost during the crisis and that the recovery was broad-based and stronger than expected.
While the MAS anticipated some slowdown in growth, it believed the economy would continue to expand, implying an eventual pick-up in the use of resources, including in the labour market.
"We decided to take a longer-term perspective and pre-emptively tightened [our policy] in April 2010, even though domestic sources of inflationary pressures were arguably still relatively subdued at that time," says Mr Heng.
"Indeed, these pressures have emerged more strongly recently, validating the need for some restraint on domestic economic activity. The tightening of monetary policy took place alongside the withdrawal of fiscal stimulus, thus ensuring that the macroeconomic setting in Singapore was conducive to sustainable growth and medium-term price stability in this strong recovery year."
With Asian economies growing strongly, and loose monetary policies in place to support anaemic growth in many parts of the developed world, capital is flowing to Asia and inflation remains a key focus for the MAS. "It was inevitable that capital would flow to this part of the world," says Mr Heng. "[But] Singapore has managed to efficiently intermediate these flows through our domestic financial markets and banking system."
Alongside the withdrawal of expansionary macroeconomic policies implemented during the crisis, the MAS has introduced pre-emptive macroprudential measures to ensure stability and sustainable asset markets. The MAS is also working alongside other Asian financial authorities to broaden and deepen local-currency financial markets in Asia to facilitate more efficient intermediation of capital inflows. As ever, safe and sustainable development remains key.
"As we deepen our markets, we are building mutually reinforcing financial safety nets and putting in place effective surveillance to strengthen the resilience of our economies and financial system," says Mr Heng.
"Asean+3 countries [the 10 members of the Association of South-east Asian Nations plus China, Japan and South Korea] have put into force the $120bn Chiang Mai Initiative Multilateralisation, which serves as our regional financial safety net."
He adds: "To support [this], the Asean+3 Macroeconomic Research Office is being set up to contribute to the early detection of risks in regional economies, swift implementation of remedial actions and effective decision-making."
Central Bank Governor of the Year, Americas
Mark Carney, Bank of Canada
The Canadian economic recovery has been among the fastest in the G-7, helped by its central bank's responsible monetary policy. Mark Carney, governor of the Bank of Canada, began hiking interest rates pre-emptively during 2010. The central bank communicated the likely path that interest rates would follow in an exceptionally transparent way.
The central bank's prompt and clear behaviour gave additional stimulus to Canada's economy during these difficult economic times. The bank's response to unexpected economic improvements was also prompt and, as the recovery's pace proved to be slightly faster than the bank had forecasted, interest rates were quickly raised with no major disruptions to the financial markets.
"Our challenge through the year was to move away from what was an emergency set of policies [in a timely way]," says Mr Carney. "We raised interest rates a minute earlier than our original conditional commitment [had planned]. This is because the economy improved at a faster pace than we had originally expected when we put the commitment in a year earlier.
"We were able to do this without shocking the market and we were able to tighten the policy with three interest rate increases over the course of spring and summer to bring rates to 1% - well away from the emergency setting."
Mr Carney is proud to point out that the Canadian economy closed the year above pre-crisis peak levels of output and recovered the number of jobs lost - while its neighbour, the US, recovered only 10% of jobs lost. Canadian domestic demand had also been better than in the US, growing at twice the rate. Credit available to individuals and businesses has been growing very strongly too, thanks to a financial system that has been functioning particularly well - although Canada's rising personal debt has been worrying some analysts.
Mr Carney has also contributed ably to international discussions on financial stability, drawing on the relatively positive performance of Canada and its banks during the crisis. He has been heavily involved in the ongoing, challenging discussions between the G-20 countries on the resolution of global imbalances and the evolution of monetary systems. The regulation of international financial markets will continue to be a challenge too.
"A lot of progress was made, but a lot is still left to be done," says Mr Carney. "The big issues are to get market infrastructure right, defining contingent capital [cushions against unexpected losses] and [defining] the responsibilities of governments and regulators to come up with more effective domestic and cross-border regulatory regimes, so that the industry can get on with its job and the public sector can step back from a more explicit support of the [banking] institutions."
Central Bank Governor of the Year, Middle East
Muhammad Al-Jasser, Saudi Arabian Monetary Agency
The Saudi Arabian Monetary Agency's (SAMA's) prudent stewardship of the country's banking sector has sheltered the kingdom from greater fallout from the credit crunch. Faced with the Algosaibi corporate scandal, which threatened to engulf the whole sector, Muhammad Al-Jasser steered the agency towards a more cautious approach to banking, resulting in less exposure to US subprime debt.
Many Saudi banks had significant lending exposures to the troubled Saad and Algosaibi corporate groups, which depressed the banks' profitability. Yet thanks to Mr Al-Jasser's tough stance, forcing banks to provision against exposure to the groups, the sector emerged relatively unscathed.
"We were accused of micro-managing. They said that SAMA was intrusive when we said 'slow down'. Now they want to kiss our foreheads. We never ceased believing that regulation must be part of the financial markets. The private interest of bankers must be guided like traffic. The rules must be applied to prevent excessive risk-taking," he says.
The governor has consequently elevated Saudi Arabia's status in discussions on global financial stability at G-20 meetings and the country is now regularly consulted during meetings on the financial crisis.
The financial crisis has heightened the country's awareness of a fully interconnected and interdependent global economy, which has led Mr Al-Jasser to endeavour to enhance financial solvency and promote integration between the units of the financial system.
He has also been promoting consistency and coordination between monetary, fiscal and banking policies as well as exchange-rate policies to support economic growth and intensify economic and trade co-operation among the region's countries.
"We have witnessed how the failure of one international bank affected the liquidity in all markets and how cross-border banking flows contracted," he says.
As a result of its sound approach to regulation and its careful management of its reserves, Saudi Arabia is in better shape than some of its Gulf Co-operation Council (GCC) neighbours. The country posted solid financials in all areas and remains on a firm footing, with HSBC's confidence index for 2010 ranking it the highest of all GCC countries.
Saudi Arabia's experience of the 1980s oil crisis, during which it suffered from the collapse in oil prices, leading to its first ever banking crisis, left it better equipped to face up to more recent events.
Finance Minister of the Year, Europe
Jurgen Ligi, Estonia
When Jurgen Ligi takes his place for the first time at meetings of eurozone finance ministers in 2011, some of his peers may well be seeking his advice. He assumed office in mid-2009, with the country in the grip of what turned out to be one of Europe's deepest recessions; gross domestic product (GDP) contracted almost 14% in 2009.
The previous Estonian finance minister had just pulled his party out of the coalition government, following disputes over the need to pursue tighter fiscal policy to avoid the budget deficit surpassing 10% of GDP. Yet Mr Ligi managed to drive through measures that helped shave 9% off the deficit in 2009, and a further 3% in 2010.
"We had to keep explaining all the time, to remain tough making decisions, and we did not hesitate. You have to be brave if you are threatened by such a large deficit. Estonian people in general understand that it is impossible to spend more in the long run than you earn," says Mr Ligi.
His approach embodied a carefully calculated series of balances between revenues and expenditures, and between short-term and structural measures. There were also changes to labour laws to improve general economic flexibility. "There were almost no exceptions to the changes we made. These were estimated to be good choices by the EU, and some other countries are now following the model we used," says Mr Ligi.
It is a painful irony that these measures helped Estonia qualify to enter the eurozone, just as the latter is battered by the failure of some existing members to pursue such rigorous fiscal policy. But Mr Ligi remains confident that euro adoption is right for Estonia, which pegged its currency to the deutschmark, and later the euro, as long ago as 1992.
"We have effectively been in the eurozone for almost 20 years, but it was time to make it official, a natural step to be better understood by the markets. Events in the eurozone strengthen our belief in our own conservative fiscal policy, and we will have our say on the need for other countries to meet the deficit criteria," he says.
Mr Ligi's policies will be put to the political test at elections in March 2011. But he will not let this distract him from his longer-term goals, and is setting out a programme to return Estonia to fiscal surplus by 2013.
Finance Minister of the Year, Americas
Felipe Larrain, Chile
When Chile's current government came into power last year, it had a very ambitious agenda: to double the growth rate of both the economy and of employment to become a developed country by 2018. Over the four years to 2009, gross domestic product (GDP) growth averaged 2.8% and, during the election campaign, the party now in government said it would raise it to 6%. Job creation was slightly above 100,000 per year and the new government wanted it to reach 200,000.
But the government plans were dramatically derailed even before they could be set in motion. One of the most violent earthquakes ever recorded hit Chile in February 2010, taking 500 lives. The damage cost the economy $30bn, or 16% of GDP.
Since then, finance minister Felipe Larrain has kept the budget on track and responded effectively to emergency demands. Despite the challenging conditions, Chile's prompt reconstruction efforts contributed to putting the economy back on the growth path, and GDP is expected to grow between 5% and 5.5% in 2010 and at 6% in 2011.
As part of its emergency measures, the Ministry of Finance undertook various initiatives to support businesses, including the elimination of corporate income tax for the reinvested earnings of small and medium-sized businesses and the reduction of the credit tax from 1.2% to 0.6% of the value of a loan. Mr Larrain also oversaw a speedy approval of the new budget, approved in mid-November 2010, and negotiated a public-sector wage reduction a month later, to bring the wage bill within budgetary limits.
Confidence in the country was regained promptly among businesses and investors. This was mirrored by the success of a recent government bond issuance on international markets, which achieved the lowest interest rate ever for the country at 3.89% - a sign of confidence in the economy.
It was not just the promise to grow the economy at a faster rate that was maintained, despite the emergency situation. Job creation rose significantly too, helped by reconstruction. "The [investment in] reconstruction is part of the reason why the economy restarted," says Mr Larrain. "The other reason is that we were able to regain the confidence of both investors and entrepreneurs."
He adds: "Some recoveries are called jobless recoveries. This is a job-full recovery. So far, in seven months, we have created 315,000 jobs and the unemployment rate is down to 7.6% - in 2009 it was almost 11%."
Finance Minister of the Year, Middle East
Mohammad Abu Hammour, Jordan
In terms of economic performance, Jordan continues to do well despite being one of the smallest economies in the Middle East. Making a valuable contribution to that performance is finance minister Mohammad Abu Hammour, who has managed to keep the budget on track, boost foreign investment and launch a Eurobond, all within less than 12 months.
Although Jordan is a non-oil economy, careful and prudent management led by Mr Abu Hammour has enabled the country to maintain stability and growth while continuing to foster business confidence.
Jordan's foreign reserves have increased steadily, reflecting the government's sound and efficient management of the financial sector.
In his latest budget, the finance minister promised that domestic revenues would cover as much as 97% of current spending. "The government will continue to enhance dependency on income generated locally as well as continue with efficient use of resources," says Mr Abu Hammour, pointing to economic indicators showing that in 2012 and 2013 domestic revenues will equate to 102% and 108% of current spending, respectively.
Mr Abu Hammour says that the budget seeks to restore a balance in public finance by reducing the deficit and bringing down public debt to safe levels.
Jordan has been consistently ranked first by international organisations among Arab countries in terms of transparency in state budgets and Mr Abu Hammour emphasises that the budget will continue controlling current spending by halting the purchases of furniture and cars by public agencies and freezing their recruitment.
The government has lowered Jordan's deficit in the 2010 budget to Jd1.02bn ($1.43bn), or 5.3% of gross domestic product (GDP), from the unprecedented deficit in the 2009 budget of JD1.5 bn, 8.5% of GDP.
Jordan's conservative approach to banking can be seen in the high level of its banks' excess liquidity and their flat credit growth. Liquidity increased significantly in 2009 to Jd4.3bn.
On top of these prudent measures, industrialists in the country have lauded a new income-tax law designed to stimulate the economy.
So while the country has not yet fully recovered from the global crisis, Jordan has the financial management in place to steer the economy back in the right direction.
Finance Minister of the Year, Africa
Kwabena Duffuor, Ghana
Ghana's economy is now in a position of relative strength thanks to prudent policies initiated by Kwabena Duffuor.
In less than two years at the ministry, Mr Duffuor has been leading an arduous campaign to weed out wasteful public spending and enhance revenue through a significant improvement in tax policy. His vision for the medium term has been to accelerate growth of the Ghanaian economy without compromising macroeconomic stability. He has also established an oil fund aimed at ensuring that revenue from the country's emerging oil and gas industry is used wisely.
Mr Duffuor has also implemented fiscal and financial policies that promote fiscal sustainability and support the domestic financial system.
"The distance we have travelled in these few months is remarkable. The benefits of the government's commitment to its economic programmes are clearly visible and the decline in the overall budget deficit this year is appropriate," he says.
The government's budget has helped to keep inflation low, providing a stable environment that has generated interest among the international business community.
Disciplined economic policies have contributed to the government's good performance. In line with Mr Duffuor's policies, the government's objective of reducing the fiscal deficit over the medium term has proved critical in achieving private sector-led growth.
On inflation, the minister says "the implementation of policy measures has significantly improved the economy", adding that the rate of inflation is now 9.3%, which represents the 10th consecutive month of decline since inflation peaked at 20.7% in June 2009.
Ghana is expected to produce 120,000 barrels of crude oil per day from its offshore Jubilee oil field during 2011 and observers say Mr Duffuor's oil fund is an appropriate use of the country's new-found wealth.
Ghana is likely to maintain the stability of its domestic currency, the cedi, supported by growth of the country's international reserves to $4bn by early 2011, from $3.3bn in June.
The cedi has gained 4.5% against the US dollar since July 2009, helping to slow inflation from a five-year high, proving that sound policies and efficient management are key to salvaging a volatile economy.
