The institutional form of independent central banks - from history to contemporary challenges

Summary

BoE Governor Andrew Bailey examined the institutional legitimacy of independent central banks, starting from the intellectual traditions of thinkers such as Montesquieu, Locke and Hume. He argued that monetary and financial stability are public goods belonging to society as a whole, and that central bank independence serves to protect these goods from short-term political pressures. He stressed that the legitimacy of independence derives from Parliament's delegation of authority and from accountability. Noting that central banks are criticised both for being too close to financial circles and for over-regulating, and that populist movements pose a separate challenge, he highlighted the importance of transparency and communication with the public.