•  Subject to these legal requirements and restrictions, the CBBH is completely independent of political influence. Monetary policy •  Monetary policy is the CBBH’s most important function. •  The CBBH operates monetary policy through a strict currency board arrangement, which is stipulated in the CBBH law.
•  There were three main reasons for the choice of a currency board for BH’s monetary policy: (a)  It provided a firm nominal anchor in the form of a fixed exchange rate in a situation where there was significant economic instability;  (b)  It removed discretion in a situation where there was considerable difficulty in establishing institutions and making political decisions;  (c)  Currency boards had been established in some other eastern European countries and were working well.