Finance Medley

Draghi the Banker?

Deutsche Bank CEO John Cryan, Commerzbank CEO Martin Zielke ansd European Central Bank (ECB) President Mario Draghi speak during the Euro Finance Week in Frankfurt
Too close? Mario Draghi with Deutsche Bank CEO John Cryan and Commerzbank CEO Martin Zielcke. Source: Reuters

Is Mario Draghi too close to banks?

That is the charge being leveled against the European Central Bank president by a non-profit corporate watchdog.

The group, Corporate Europe Observatory, is challenging Mr. Draghi’s membership in an international organization known as the Group of 30 (G30), a wonkish gaggle of current and former central bank officials, bankers and academics who meet regularly to discuss financial regulation.

The Corporate Europe Observatory argues Mr. Draghi has no business being part of a group that includes the very bankers he is supposed to be supervising. They apparently have enough of a case that the ECB’s own independent watchdog, the ombudsman, has agreed this week to open a case.

The group in a statement said its research “exposed a severe lack of critical distance between the ECB’s decision-making bodies and corporate bankers in the G30.”

“The ECB has become a much more powerful institution lately, and it seems the ethics procedures in the [central] bank do not match this development at all.”

Kenneth Haar, Corporate Europe Observatory

It’s not the first time the group has challenged Mr. Draghi’s membership – the ECB’s ombudsman even looked into their case and dismissed it once before in 2012.

What’s changed? Back then, the ECB didn’t supervise banks. It just set interest rates for the euro zone. But for more than two years now, it has been put in charge of watching over the largest banks in the 19-nation euro zone as well.

That has put the central bank under an extra microscope. Another member of Mr. Draghi’s executive board, Benoit Coeure, came under fire last year for meeting with bankers and even tipping them off to a looming monetary-policy decision on extending a bond-buying program.

“The ECB has become a much more powerful institution lately, and it seems the ethics procedures in the [central] bank do not match this development at all,” Kenneth Haar, the group’s financial policy researcher, said in a statement.

It may look bad, but that doesn’t mean the ombudsman will agree to crack down on the ECB. For one thing, the ECB is hardly the only central bank that blurs the line. Mark Carney, head of the Bank of England, is also a member.

Another thing that might work in the ECB’s favor: While the G30 counts many bankers as members, none of them head the banks the ECB is monitoring at the moment.

Central bankers and bankers have long been a fluid bunch. A look at the G30’s other members will make that obvious pretty quickly. It includes for example Axel Weber, the former head of Germany’s Bundesbank and now chairman of Swiss bank UBS. Or Timothy Geithner, the former U.S. treasury secretary, now head of Warburg Pincus.

“At this early stage in my inquiry, I acknowledge the need to reflect on this new context. However, I have taken no position in relation to any of these matters except to consider that they warrant further inquiry,” the ECB’s ombudsman said in a statement this week.

The ECB said it will cooperate with the inquiry and itself also pointed to the varied membership of the G30 in defending Mr. Draghi’s role in the G30.

“The group in question here is a very diverse forum that includes current and former central bank governors, ministers of finance, academics and private sector representatives, including bankers. As such we see it as a relevant forum to engage with, always remembering that we have a range of rules and instruments in place to avoid apparent or potential conflicts of interest,” a spokesperson said in an emailed statement to Handelsblatt Global.

 

Christopher Cermak is an editor with Handelsblatt Global in Berlin. To contact the author: cermak@handelsblatt.com

This story was updated at 4 p.m. CET on Monday, January 23, to include comment from the European Central Bank.

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