Outgoing DNB president Klaas Knot warns against shortening Central Bank president terms
Klaas Knot, the outgoing president of De Nederlandsche Bank (DNB), has strongly criticized plans by interim Finance Minister Eelco Heinen (VVD) to reduce the appointment term for future central bank presidents from seven to five years. Knot expressed his concerns in interviews with NRC and Het Financieele Dagblad (FD), emphasizing that longer terms are essential for maintaining the bank’s independence and international influence.
Knot highlighted that building authority in international financial bodies takes many years. “I became chairman of the Financial Stability Board (FSB) in December 2021,” Knot told FD. “That was 10 and a half years after I took office as DNB president. With two five-year terms, I would not have reached that position.” He stressed that such international roles are crucial for the Netherlands because financial risks often cross borders and affect the national economy. “Only with a strong position in international supervisory bodies can the Netherlands respond timely to developments impacting its financial system,” Knot said.
The criticism comes in response to the appointment of Olaf Sleijpen as Knot’s successor, who will serve a seven-year term starting July 1. Simultaneously, Minister Heinen announced plans to shorten future terms to five years. Heinen argued that long leadership can lead to “tunnel vision,” where one person develops an overly dominant or limited perspective within the organization.
Knot acknowledged risks tied to long terms. “After fourteen years, everyone in management has ultimately been appointed by me,” Knot told NRC. “That is a vulnerability you must be aware of.” However, he argued shorter terms are not the answer. “In my fourteen years, I have always been vigilant about critical and independent voices. If you were a fly on the wall during our board meetings, you would see plenty of pushback.”
He cited efforts to increase transparency, including renovations to the DNB headquarters in Amsterdam that made the ground floor publicly accessible and an independent evaluation of DNB’s economic advisory role led by former Minister Aart Jan de Geus. “They noted how open the bank is,” Knot said. “Of course, they had recommendations, but the main tone was praise for the bank’s active participation in public debate.”
Knot warned that shorter terms would make the central bank more vulnerable to political pressure. “The independence of the central bank is a key factor in a stable institutional climate and high creditworthiness,” he said. “Long appointment terms contribute to that independence. We see that countries with high credit ratings usually have long appointment terms.”
He illustrated the importance of central bank independence by recalling the U.S. in the 1970s, when Fed Chairman Arthur Burns, under President Nixon’s pressure, kept interest rates low amid rising inflation, leading to stagflation. Burns’ successor, Paul Volcker, only managed to break inflation by sharply raising rates, causing a deep recession. According to Knot, “We have now been able to reduce inflation with far fewer societal costs because inflation expectations remained well anchored, unlike in the 1970s.”
Though shorter terms are common in the private sector, Knot argued they should not be directly applied to central banks. “The trend in corporate governance codes is toward shorter terms, but you cannot simply transfer that to the world of central bankers. This is a different world, with its own customs and the importance of seniority,” he told FD.
Knot’s tenure ends June 30 after 14 years at DNB. On his future plans, he said, “From July 1, I will have the mental space to think about that.” He expressed no regrets about his long presidency. Asked by NRC if he would have done anything differently, Knot replied, “Oh, not for a moment.”
He did acknowledge the personal cost: “I sometimes physically, sometimes mentally missed my family. In this job, it’s unavoidable that you build a deficit toward your closest loved ones. I hope to make up for that in the coming months.”
