Lebanon needs an exceptional central bank governor for difficult times

Clarity and consensus

It is vital that an anonymous figure is not imposed on the job from behind closed doors. The next governor should have a track record of previous writings, publications, opinions, and reform measures based on experience, with evidence of a strong track record. That is more important than which college was attended.

There should be clarity on what the BDL needs to avoid – and what it must do – to restore its reputation. It would help if the candidate was of sufficient calibre for the announcement of their name would be enough to lift the faith of the markets.

To start with, the next governor must have a clear plan to curb the collapse in the exchange rate. It should be presented to the cabinet and realistic enough to establish consensus support in the country so that citizens can contribute to restoring monetary accountability and responsibility.

Independence and integrity

This would channel the words of Germany's former chancellor, Konrad Adenauer, who said sustaining monetary integrity is "the first condition for the maintenance of a market economy and the free constitution of society and the state."

Perhaps the best way to restore international confidence in Lebanon is to follow the example of other countries that have been able to get out of trouble quickly. One recent example would be Iceland's fightback from financial crisis.

Recovery plans must be based on the will to restore the rule of law. To do that, it will be necessary to identify responsibilities for what took the country into crisis.

The next BDL governor should have experience in remaining independent from politicians. A strong reputation for autonomous management would help guard against any repeat of the central bank becoming a money fund run by a pollical clique.

Lebanon's Code of Money and Credit clearly states that "neither the granting of concessions nor the granting of capital by the government shall make the BDL a government administration."

A proper relationship along these lines would leave the BDL more room for "initiative, independence, and close cooperation".

Independence is an important tenet of central banking. The new governor should be aware of the right – and indeed the duty – not to become subordinated to whoever handed out the job.

Just say no – when necessary

Nonetheless, political pressure goes along with the role, that is to be expected and has occurred all over the world. One of the main measures of senior central bank officials is their ability to say no when necessary.

And so, the credentials held by the next BDL governor must be enough to help abide by laws covering the funding of government, not least because they need careful reading. In Lebanon, the law does not reject such funding for the national Treasury altogether, as is the case in European countries.

Lebanon allows central bank lending to its government in cases of extreme necessity and exceptional circumstances, under specific conditions, and within the framework of a contract to be approved in parliament.

These conditions have been bypassed over the last three decades, where monetary policy has been subordinated to political and electoral interests, leading the country into the great disaster it suffers today.

If the new governor is to save the BDL, its autonomy should be exercised over private-sector banks. No influence on BDL management and decisions, especially those relating to their extraordinary financing, should come from private sector institutions.

This, too, would be a change.

Keep the wolves from guarding the cattle

When the time comes for deputy governors to be appointed, they should not be from private sector banks, in order to avoid what the American economist Barry Eichengreen called  "bringing in wolves to guard a cattle ranch," which is exactly what led to the current crisis afflicting Lebanon and its finances.

The transparency and accountability required must also go beyond Lebanon's borders. The new governor must adhere strictly to the International Monetary Fund's Code of Good Practices on Transparency in Monetary and Financial Policies. It is one of the prerequisites for the conclusion of any agreement or programme between the IMF and a country.

This code requires central bankers to ensure that they communicate with the wider public as openly and accurately as possible, and report the monetary objectives and policies adopted; their legal, economic, and institutional foundations; and statistics and reports related to the bank's operations; the targeted outcomes, and their history.

The future governor must be ready to appear at any time before the government and parliament and also be accountable to the general public. This democratic oversight is important for unelected public officials in roles of national importance. It requires an ability to accept and respond to criticism.

Read more: The destruction of Lebanon's economy is an ongoing crime

Restructuring and the Fischer precedent

The BDL also needs internal restructuring – it has become too powerful.

Its next governor needs to be someone who has a deep understanding of contemporary developments in the management of central banks, where there are precedents for leading officials to call for curbs on their powers, or clearer checks and balances.

Stanley Fischer was invited by Israel to run its central bank, and the country made the former IMF deputy director and World Bank chief economist a citizen when he took the job.

Not long into his term of office, Fischer surprised the Knesset by asking to appear before it and then seeking to disperse some of its powers between oversight committees covering decision-making, implementation and internal control.

Wider restructuring of ailing private sector banks will also be necessary, meaning that an element of private-sector savvy will also be needed by the BDL's knight in shining armour.

Such a rescuer may actually be better described as a chevalier. There is a belief in some circles in Lebanon that the BDL's potential saviour will come from a conservative French cultural background.

This is in part a reaction to the professional financiers of the English cultural tradition who are associated with the extravagance that played a part in Lebanon's recent problems.

A shining homegrown example to international candidates

Looking further back, Lebanon has a clear and long-standing example of the kind of decency and probity in central banking that it has so badly lacked lately.

When Dr Edmond Naim was appointed to govern the BDL, he insisted on opening a personal account in local currency with one of the smallest Lebanese banks, using the kind of facilities citizens depended on.

He aligned himself with the people so the Lebanese could believe his claims as governor that he was working to preserve their currency. He did not want to have personal accounts in foreign currency spread around the world.

Finding a Lebanese candidate will all these characteristics will be difficult, not least at this critical time.

Nothing is wrong with looking outside the country to fill the job. There is recent precedent for nations to appoint foreigners to the top job at central banks, not least Canadian Mark Carney becoming governor of the Bank of England.

Such a move from Lebanon may be the best way the country can show its determination to return to fiscal discipline.