My view is that there is a strong case for making, on a periodic basis, comprehensive and transparent assessments of the distributional impact of monetary policy. This would help people understand the purpose and impact of monetary policy, both on the economy in general and on them as individuals, on “their GDP”. I give some illustrative examples of a “Monetary Policy Scorecard” summarising the impact of monetary actions on particular cohorts. Greater transparency of this type would not, by itself, reduce any distributional effects of policy. But it could help in explaining the impact of these actions, in a localised and personalised way, as a means of improving understanding and trust in central banks. Both have been a casualty of the crisis. Why Distributions Matter  Let me start with a bald statement: all public policy is distributional, be it monetary, fiscal, structural or social. The reason I know this is because redistribution is the way public policy works; it is what policy does for a living. Some policies redistribute resources between agents at a point in time. Others redistribute resources between agents over time. If policy is not working through one of these channels, it is not working. If all policy is distributional, it does not take much of a leap of imagination to see that policymakers may wish to understand and explain its distributional impact. In some policy settings, that already happens – in fiscal policy, social policy, climate change policy, pension policy.
And this, coupled with the challenges that lie ahead, has led us to look at ways in which corporate governance among the banks might be further enhanced. If I could sum up our objective, it would be to try to reassert the role of the board of directors in banks. While the day-to-day running of banks should certainly be left in the hands of the management, the board must play a leadership role in approving the objectives, strategy and business plans of the bank, monitoring the performance of management and ensuring that the internal control and risk management systems of the bank are effective. The board must also make sure that the bank conducts its affairs with integrity and in accordance with high ethical standards. The board is part of the system of checks and balances that ensures that neither large shareholders nor management abuse their power and that decisions are taken with the bank’s best interests in mind. If the board does not play its full part, a vacuum in leadership will be created. This vacuum may be filled by the shareholders becoming directly involved in running the bank’s affairs, or by the executive management acting more or less in isolation. In either case, the board of directors is bypassed and checks and balances are lost. The HKMA has recently issued for consultation a draft guideline for banks and other authorized institutions which sets out what the HKMA expects of them in relation to corporate governance. The guideline aims to establish minimum standards.