Riksbank proposes framework to improve parliamentary scrutiny

One possibility is to create a permanent body to brief the parliamentary finance committee
stefan-ingves-2
Stefan Ingves

Sveriges Riksbank published a set of proposals on June 8 designed to improve public scrutiny of its policies.

The text – authored by governor Stefan Ingves and deputy head of the general secretariat Pernilla Meyersson – explains how the central bank has become increasingly transparent about its processes and decisions over the last three decades.

However, as the Riksdag (parliament) has recently concluded that current forms of evaluation are unsatisfactory, Ingves and Meyersson lay out alternatives to address this situation.

“The ability of the Riksdag to conduct effective scrutiny is a prerequisite for the Riksbank to maintain its legitimacy and public confidence,” say the central bank officials. “It is therefore important for the Riksbank to reflect on what more we can do to strengthen the scrutiny of the Riksbank’s activities.”

The parliamentary Riksbank inquiry deems it important to reduce “the information and knowledge imbalance that exists between the Riksbank’s management and the members of the parliamentary committee on finance”.

The general council of the Riksbank is made up of 11 members of parliament. The Riksbank appoints its members, and their terms coincide with the time in office of other MPs.

In order to address the knowledge imbalance, Ingves and Meyersson propose the creation of a permanent review body. The general council would oversee this body, which would be independent from the Riksbank’s executive board.

This could be achieved by reinforcing the general council’s secretariat. The council’s chair could appoint a director, who would produce evaluation reports for the parliamentary committee on finance. “The secretariat could examine all policy activities such as monetary policy, financial stability, payments (including cash) and payment systems, and processes in these areas,” says the text.

An alternative could be appointing an external independent expert group. The committee on finance would finance it and would receive its input. This group would also examine central banking policies.

“The mandate of the Swedish fiscal policy council could also be extended to also include analysis of monetary policy,” Ingves and Meyersson mention as a third alternative. “The fiscal policy council could thus analyse monetary policy and fiscal policy coherently. A further possibility would be for the Riksbank to make experts available to the committee on finance for a limited period of time to assist the committee.”

Pioneer institution

The Riksbank officials provide a historical perspective to illustrate how the central bank has evolved regarding transparency and public scrutiny over the last few decades.

For instance, they point out Sweden was one of the first countries to introduce an inflation target, in 1993. That same year, the institution published the first inflation report, now known as the monetary policy report.

“Another milestone in the work towards greater openness and transparency was in 1999, when the Riksbank began to publish minutes from the monetary policy meetings,” say Ingves and Meyersson. “We also started to issue a press release with a brief summary of the discussion the day after the monetary policy decisions were taken.”

Starting in 2007, the central bank began to publish its own forecasts for the policy rate. Additionally, the institution modified the language it used to convey decisions in a bid to make it more accessible to the general public. The same year, the Riksbank started holding press conferences the day after its policy decisions.

Furthermore, the central bank started to include the names of executive board members in the minutes, something numerous central banks still do not provide today.

More recently, the institution published its first report on the e-krona in 2017 and new steps in the study of a central bank digital currency are published on the Riksbank’s website. In 2019, the central bank published the first report on the payment market, a key policy area in the country due to the rapid decline in cash usage.

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