Iceland: Central bank governor could be replaced

SedlabankiIceland has advertised the central bank governor position after current governor Már Guðmundsson questioned the government’s decision to go ahead with the household debt relief programme.

The revelation was made in a central bank memorandum, which also revealed that Finance Minister Bjarni Benediktsson is to appoint a group to focus on the labour division at the central bank and financial regulator.

The ministry said the governor’s position is open for applications, explaining that they made the decision to ensure greater flexibility regarding possible changes to central bank laws.

The memorandum follows reports in Iceland that the government wants to replace Már, or at least limit his influence by adding two more governors. Prime Minister Sigmundur Gunnlaugsson said towards the end of last year that the central bank was “playing politics” by pointing out flaws in his debt relief plans, and recently suggested the bank could be more effective if more people were involved in its decision making.

Asset manager Gamma economist Ásgeir Jónsson, however, claimed there was little need to change the central bank’s structure. He noted that the current setup, with a monetary policy board and a single governor, is well known in the market. He said that if the government goes ahead and changes that there could be a lot more uncertainty within the market.