Bank of Albania’s independence was imposed by its organic law enacted in 1997, but ever since its independence has been either misunderstood, or deliberately misapplied. Past experience suggests that Bank of Albania’s independence has been a fallacy of its rationale, when it has been exposed, and an abuse of its application with serious consequences to its internal governance. Common Albanian people are never told that the rationale of the Bank of Albania’s independence is coupled with the need to ensure the effectiveness of its primary objective-price stability.
From a legal point of view, when it comes to the conduct of monetary policy, article 161 of the Albanian Constitution guarantees only “the instrument or operational independence”, but its organic law goes further and outlines other dimensions of its independence like goal, personal and financial independence. When it comes to the internal governance culture and organizational behavior of the institution, its ruling bodies and executive administrators have tended to abuse the highly important status of the central bank for the national financial system, by covertly exercising their duties as if the Bank of Albania was independent from the state, or outside the institutional and normative constitutional setting. The former Supervisory Board was a major failure in that regard, as it was heavily involved in procurement procedures, and tacitly suppressing the internal audit function, by not allowing it to do its job, forcing one of the Chief Executive Auditors to resign prematurely before the end of the term in 2010. The Internal Audit Department worked with an obsolete regulation dating back to 2001, and the persistent attempts of the last Chief Internal Executive Auditor to replace it with a new one, and to adopt a new policy of internal auditing, drawing heavily on the international auditing standards, were blocked in bad faith and sabotage for years.
As a matter of practice, the appointment of members of the Supervisory Board have been in government’s discretion, lacking not only transparency, but failing to fulfill even the formal requirements. Notoriously, most of the former members of the Supervisory Board were drew mainly from university life, who lacked recognized standing in banking and monetary matters before taking up the job, and “political insurance” saved them from criminal prosecution after the 2014 events.
As these events have shown, lack of common decency and integrity seared itself into the public conscience in Albania, and common citizens still see Bank of Albania as a threat to the democratic character of the state because of its close relations with politics, as a fortress of the political establishment, making the very idea of central bank independence from the government- i.e. a prerequisite for sound monetary policy-a perversion of itself. Against this background, it seems inevitable that the issue of transparency and democratic accountability, by many commentators propounded as the bedrock of central bank’s independence, comes to the discussion as the crucial problem to be resolved in order to restore the credibility of the institution. Regretfully, Bank of Albania is still noncompliant to the legal requirements to publish its structure, budget, internal decision-making and procurement procedures, thus undermining the constitutional right of the public to monitor how it performs its tasks and whether it is run in the best national interests. Its internal administrative bylaws are unpublished, which runs foul to the very idea of the rule of law. The parliament have failed to be a fora of democratic accountability for the albanian central bank independence. It has reacted only when the consequences of its abuse became unacceptable for the wider democratic society, as in 2014.
Unfettered discretion is still rampant in the decision making and public access of its documents is totally lacking, raising serious doubts on internal bad administrative practice and corruption, generating kickbacks for corrupt politicians.Not overstating the problem, its important to note that the institution does not recognize a right of access to its documents to every albanian citizen, rather it considers it a privilege to be granted by its executive administrators, which they can withhold without stating the reasons. Although it has proclaimed its aspiration to follow ECB models, this internal administrative practice is in stark contrast with the legal position stated in Article 4 of the Decision of the ECB 2004/3, as amended. Someone has stated that the independence of the central bank is “context specific”, and he is the “hero of the day” for the albanian people. A new vision, a more legalistic approach is needed, which safeguards and preserves intact Bank of Albania’s independence in the conduct of the monetary policy, but at the same time attaches personal legal liability to the members of its supervisory board, thus preventing fraud in cases of imprudence or engagement in abuse of their fiduciary duties. So far its independence has served as a disguise for internal malpractice, so the Bank of Albania’s organic law needs amendment by setting the tone at the top, possibly splitting its supervisory board to a Monetary Policy Committee, and to another Committe in charge of monitoring the economy and efficiency of use of the institution’s resources and on whether Excecutive Administrators discharge their functions with due propriety.They must be obliged to compile a detailed special report on these matters, as an attachment to the annual report for the albanian parliament, thus making more effective its external control and accountability.