The job of governor of the Central Bank is one of the most important roles in Irish public administration. Even though power to set interest rates and oversee bank regulation is now exercised from Frankfurt, the Central Bank is still a vital player and its decisions have a real influence on our lives. Just look at the controversy over the rules on mortgage lending.
The appointment of Trinity College professor of political economy, Philip Lane, is a clear sign that the top priority in choosing a candidate was to find someone with the strongest possible expertise in the area of monetary and financial policy. In turn this brings credibility in the European Central Bank in Frankfurt where all the big decisions in relation to monetary policy and bank supervision are now taken. Ireland has to aim to punch above its weight in these areas and having a senior economist with highly relevant policy and academic experience in the job should help it to do so.
The Central Bank job is also a senior management position, requiring an ability to lead and direct as the bank moves back to more normal times having survived through the crisis years.
Here Mr Lane also faces a significant challenge, overseeing an increasingly complex regulatory system – run by Cyril Roux – and taking the helm of a large organisation of some 1,500 people. There is a big job to do as the Central Bank oversees the gradual return to normality of the financial sector and deals with the remaining hangovers from the crisis in areas such as mortgage arrears.
As Philip Lane prepares to move in, it is also appropriate to recognise the contribution of outgoing governor Patrick Honohan. He took over at a time when the Central Bank’s reputation had been shattered by its shortcomings in the run up to the crisis, and facing an existential crisis in the banking system. That the financial system is now on the road to recovery, and the Bank’s own credibility has been rebuilt, represents a considerable achievement on his part. His successor must try to complete the journey back to some kind of financial normality.