The Banker’s Central Bank Governor of the Year awards celebrate the officials who managed to restore economic stability and even growth to their countries following a turbulent few years.

Central Banker of the Year, Global and Asia-Pacific

Haruhiko Kuroda, governor of the Bank of Japan 

Japan’s economy has come back to life after receiving a dramatic and unprecedented shot in the arm from its central bank governor, Haruhiko Kuroda. Since the Bank of Japan embarked on its expansionary monetary policy this year, economists have been forced to rethink their view of Japan and revise their expectations of its economy upwards.

This monetary policy is one of the ‘arrows’ of Abenomics – the economic policies under prime minister Shinzo Abe – along with fiscal policy and structural reform, which aim to revive economic growth in Japan. 

Mr Kuroda has been awarded The Banker’s Central Bank Governor of the Year award in recognition of the bold and decisive way in which he implemented this aggressive monetary policy. With his statesmanship he was able to pull such a bold move off in a way that restored credibility to the Bank of Japan and inspired confidence in Japan’s economy

After 15 years of deflation, Japan needed something dramatic to happen to turn around the persistent deflationary expectations, depressed wages and corporate profits, as well as declining spending. As a well-known figure on the international circuit, Mr Kuroda had the skills to implement the policy convincingly and also communicate his intentions clearly to the international community. Mr Kuroda was formerly a Japanese finance ministry official and joined the Bank of Japan from the Asian Development Bank, where he had been president since February 2005. 

The monetary policy meetings were held in early April, soon after Mr Kuroda took the helm at the Bank of Japan, and it was decided that Japan would be committed to a inflation target of 2%. It was also decided that the central bank would double the monetary base in two years and the Bank of Japan would buy Y50,000bn ($486.96bn) of Japanese government bonds a year. 

The central bank has stated that it will continue with this expansionary policy for as long as it is necessary to maintain the price target stability of 2%. The central bank’s actions have improved growth in the real economy, and perhaps more importantly, have improved expectations and the mindset of Japanese people. According to Nomura Economic Research, estimates for 2013 gross domestic product growth are for 1.7% and for 2014 they are 2.4%. 

Mr Kuroda says of his achievements this year: “The Bank of Japan introduced quantitative and qualitative monetary easing in April 2013, immediately after I took office. Since then, it has steadily produced the anticipated effects. We have seen favourable turns in the financial market, economic activity and prices, as well as in the public’s expectation.”

However, there is still a long way for Japan to go, and looking to the future, Mr Kuroda says: “Still, we are halfway on the road to overcoming the longstanding deflation, and the remaining path may be a bumpy one. We will continue to make our utmost efforts in 2014 and after, in achieving the price stability target of 2%.”

Central Banker of the Year, Europe

Miroslav Singer, governor of Czech National Bank

A currency that stayed strong despite weak economic growth, and a banking sector mostly owned by western European parents. These were the challenges facing Czech National Bank (CNB) governor Miroslav Singer during 2013. After cutting interest rates on its two-week repurchase window to 0.05% at the end of 2012, room for manoeuvre was running out, and it was necessary to contemplate radical action. 

After considering foreign exchange intervention several times at monetary policy meetings, Mr Singer and his team took the plunge in November 2013. The Czech koruna fell 4.7% in a day, and had slipped a further 2% by the time of writing.

“In a nutshell, the need to further relax the broad monetary conditions was previously not that dramatic. In the final quarter of 2013, our model was signalling a need to ease monetary policy further by lowering monetary policy rates by almost one percentage point. That was simply too much to ignore,” says Mr Singer.

The impact of the exchange rate on the Czech Republic is particularly marked because of its small, very open economy. Exports accounted for 78% of gross domestic product in 2012, and the country’s major export market in the eurozone is experiencing lacklustre growth.

“I believe central bankers should be ready not only to recognise the effects of the exchange rate, interest rate parity and net foreign trade, but also to acknowledge and analyse the possibility of imported deflationary pressures from major trading partners,” says Mr Singer.

In the domestic economy, the supply of credit is also influenced by events in the eurozone, because western European banks own more than 90% of the sector by assets. Mr Singer is reassured by the strong capital and liquidity position at Czech banks (the loan-to-deposit ratio is below 80%), but he is keeping an eye on the development of banking union in the eurozone. He is also taking an entirely pragmatic ‘wait and see’ approach to the question of the Czech Republic joining the euro.

“We have no wish to hinder the eurozone in its process of institutional restructuring, provided that our own safeguards – for example, our right to perform supervision commensurate with our responsibilities – are respected,” he says.

Central Banker of the Year, Americas

Jose Dario Uribe, central bank governor of Colombia

Colombia is one of the most open and fastest growing economies in Latin America, and the Colombian peso has been on a roller coaster ride in 2013, attracting the attention of foreign investors in the process. In January 2013, about 1759 Colombian pesos would buy one US dollar, but a devaluation saw this figure rise to 1956 pesos in September, when the US Federal Reserve announced it would slow its bond purchasing programme when the time was right.

Such currency highs and lows have been typical of emerging markets as a result of loose monetary policies being pursued elsewhere in the developed world, but some of these markets reacted more promptly than others. At the helm of Colombia’s central bank, Jose Dario Uribe carried out a pre-announced, clearly communicated intervention that helped curb the effects of low international interest rates, which had pushed yield-seeking investors towards the country. The impact of this policy was made stronger by the country’s higher levels of reserves.

Mr Uribe has also shown a flexible approach to inflation, which now sits below the country’s 3% target. Resisting government calls to lower the country’s interest rate, in an attempt to avoid the overheating of an already healthy economy, the central bank waited for the appropriate signs to eventually announce, in the final quarter of 2013, that there would be room for monetary policy actions that would boost the economy – once again preparing both the local and the international markets ahead of a possible cut.

Mr Uribe’s work at the central bank has undeniably reinforced the institution’s independence, something it has only held since 1990, when inflation in the country was more than 30%. Since he took the top job at the bank, inflation and inflation expectations in Colombia have stayed at about 3%, something that has given Colombians a more stable macroeconomic environment and in turn seen a generally high level of support for the central bank among the population.

Mr Uribe is also keen to stress that preserving an adequate level of international reserves and correcting exchange rate misalignments are not incompatible with inflation targeting – and that, as the recent financial crisis has shown, narrow inflation targeting can be risky. Under Mr Uribe, Colombia’s central bank has also played a role in stabilising or pushing the country’s economy when appropriate.

Confirmed in his position for a third term, Mr Uribe has led Colombia’s central bank since 2005, after having served as deputy governor from 1998 to 2004.

Central Banker of the Year, The Middle East

Stanley Fischer, governor of the Bank of Israel

Stanley Fischer began his service as governor of the Bank of Israel (BoI) in May 2005 and was reappointed for a second term in May 2010, before stepping down at the end of June 2013.   

The success of his stewardship is reflected in the fact that while many banking sectors continue to struggle in their recovery, Israel today boasts a well-regulated banking system with banks posting healthy growth and sound financial ratios. The Swiss-based Institute for Management Development ranked the BoI among the top five central banks in its 2012 World Competitiveness Yearbook for the third year in a row.

Mr Fischer notably earned plaudits across the world for his deft but courageous handling of the Israeli banking sector since the onset of the global financial crisis. Only one of Israel’s top five key banks recorded an annual loss in 2008, with all having remained profitable ever since. 

He will best be remembered for his willingness to take tough regulatory action to maintain financial stability – interventions which raised eyebrows at the time, but that with hindsight are widely praised.

Between mid-2008 to mid-2009, Mr Fischer led one of the world’s most rigorous interventions ever in currency markets through overseeing the BoI’s purchase of $100m on a daily basis. This marked the first time the central bank had intervened in currency markets since 1997, and consequently, its foreign exchange reserves – critical to sustaining global confidence in Israel’s economy – rose from $29.4bn in 2008 to about $75bn in 2012.

This policy dramatically reined in the rapidly appreciating shekel, in turn supporting ailing exporters who account for about 45% of Israel’s gross domestic product.

Then in September 2009, the BoI became the first central bank in the developed world to hike its interest rates since the financial crisis began by raising its overnight lending rate from 0.50% to 0.75%. The move helped to moderate inflation but did not come at the expense of the economic recovery as many had feared; the Israeli economy grew by an annual average of more than 4% between 2010 and 2012.

Meanwhile, with a shortage of housing in Israel sending house prices soaring by about 20% between 2010 and mid-2012, the BoI announced in October 2012 that it was introducing maximum loan-to-value ratios for the first time, restricting mortgages to 50% for investors, 75% for those who have never purchased a home and 70% for everyone else. 

In terms of what needs to be done to ensure global financial stability, Mr Fischer tells The Banker: “A great deal of important work has been done by the international regulators, including the Basel Committee and the Financial Stability Board, and also by national legislatures and regulators. Many of these changes will markedly strengthen financial systems, but we will not know until the new framework is stress-tested by reality how effective the suggested changes are.”

Read more about Stanley Fischer and his work as governor of the Bank of Israel in Bank of Israel turns theory into practice

Central Banker of the Year, Africa

Gill Marcus, governor of South African Reserve Bank

To say that the South African Reserve Bank (SARB) had a tough year in 2013 would be an understatement. The central bank’s core mandate is to keep inflation in Africa’s biggest economy within a range of 3% to 6%. Last year, it had to deal with plenty of upward inflationary pressure. Much of that stemmed from concerns among foreign investors that the US Federal Reserve would start tapering, something which contributed to the rand weakening by more than 15% versus the dollar between January and early December.

Yet the SARB is also required to take into account growth and employment. And South Africa’s economy, which has come under strain in the past few years, was forecast to rise barely 2% in 2013.

Under the leadership of Gill Marcus, a former anti-apartheid activist who became the country’s first female central bank governor in mid-2009, the SARB took the decision to hold its base rate at 5% throughout the year, even after inflation breached the 6% ceiling in July and August.

Ms Marcus says it was crucial for the SARB to be flexible. “Being an inflation targeter doesn’t mean you are indifferent to other issues,” she says. “In a weak environment, we conduct monetary policy as a flexible inflation targeter. That means we don’t ignore issues such as cyclical growth and unemployment.

“We were more tolerant of inflation at the upper level because we thought a pre-emptive tightening would undermine the fragile growth outlook.”

Part of the SARB’s success – inflation fell to 5.3% in November and Ms Marcus expects it to average 5.7% this year – has been its ability to communicate that it will only tolerate a small breach of the ceiling and only then if it feels the rise is temporary. “If there was to be a sustained and material breach, particularly if it was accompanied by an increase in inflation expectations, it would require more action on our part,” she says.

She has also made sure that the SARB, while maintaining its independence, coordinates with South Africa’s fiscal authorities. She emphasises that the country’s structural problems cannot be solved through monetary policies alone. “Unemployment in South Africa is structural by and large,” she says. “We can have an impact on the cyclical component, but to have an impact on the long-term trend is beyond the scope of monetary policy.”

Once the Fed does decrease its quantitative easing programme, the SARB will face more challenges. “In the medium to long term, tapering will be a very positive step [if it means the US economic recovery is being sustained],” she says. “But in the short term, it’s going to have a huge impact. Central banks always deal with uncertainty. But this is uncertainty in the extreme.”

If the SARB’s recent performance is anything to go by, however, it will handle the pressures well.


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