Daw Tenzin was appointed by His Majesty the King as the country’s first ever governor of the central bank yesterday

Any new ngultrum notes printed hereafter will bear the signature of Daw Tenzin, the managing director of the royal monetary authority (RMA), who was yesterday appointed as the country’s first ever governor of the central bank.

Greeting well-wishers at his residence on the banks of the Thimpchu at Lungtenphu, Daw Tenzin said that he was proud and delighted. “The position is a challenging one, considering that the country is developing. Many new things are happening and the financial institutions in Bhutan are not very old,” said the governor, who joined the RMA in December 2003 as the managing director.

Asked what difference the central bank would make by having a governor as the chairperson of the RMA board, which has until now been occupied by the finance minister, the 54-year old governor said that, although RMA would have the autonomy, the central bank and the treasury (finance ministry) have to work together, both on fiscal and monetary policy, if they are to take the economy to the next level.

Daw Tenzin said the key functions of the central bank would be stabilising prices, and ensuring financial stability, by regulating financial institutions. “We’re experiencing what’s called the impossible trinity – we have free exchange rates, free capital flow and an independent monetary policy and these three things will never happen together,” he said. But, on the monetary side, the central bank can roll out treasury bills to mop up the excess liquidity, and use cash reserve ratio to cool down the credit growth and inflation in the market.

The governor said that Bhutanese financial institutions are not very old and need to be regulated to make them healthy and sound. “We have to correct them and regulate them. The central bank will supervise the banks, primarily because the money in the banks is not theirs or the government’s, but belong to clients and shareholders,” he said.

Meanwhile, Daw Tenzin said that the country’s oldest bank, the Bank of Bhutan would have to divest 25-30 percent of its shares to the public by December 2010. “If the bank doesn’t offload 25-30 percent, it would make them unsafe,” he said. “If they aren’t listed on the exchange, they’ll have no image whether they are big or old. They’ll have to divest and go for IPO, it’ll improve their disclosure and discipline, which are key features that will add to their IPO.” Source: Kuenselonline