ECB rebuked for Mario Draghi’s links to bankers’ club

An EU watchdog wants the European Central Bank to ban Mario Draghi, its president, and other senior officials from an exclusive club of global financiers, saying the links could erode belief in the institution’s independence.

Emily O’Reilly, the European Ombudsman, said Mr Draghi’s membership of the Group of Thirty club of leading central bankers and senior figures from the private sector, “could undermine public confidence” and “constitutes maladministration”.

The recommendation that the ECB president suspend his membership highlights how the close links between central bankers and the private sector have aroused public suspicion since the global financial crisis triggered a series of bank bailouts, with the perception of a revolving door between financial officialdom and private lenders.

The G30 meets privately and includes representatives of financial sector asset managers and banks such as BlackRock, JPMorgan, Credit Suisse and UBS. None is supervised directly by the ECB.

Mark Carney, governor of the Bank of England, William Dudley, departing president of the New York Federal Reserve, and Zhou Xiaochuan, governor of the People’s Bank of China, are members of the G30 along with former officials including Jean-Claude Trichet and Ben Bernanke. Mr Draghi last attended a meeting in 2015.

While there was no evidence of direct influence on ECB policy, the watchdog said Mr Draghi’s membership “could, by creating a perception that the independence of the ECB is compromised, unnecessarily damage the image of, and thus the vital public trust in, the ECB”.

The ombudsman added that the bank should “seek to ensure” that none of its monetary policymakers or senior supervisors join the body once Mr Draghi’s term at the ECB ends next year.

The watchdog investigated Mr Draghi’s G30 membership in 2012. The case was reopened in 2016, after the ECB took on responsibility for eurozone banking supervision.

“The implied closeness of the relationship through membership — particularly between a supervising bank and those it supervises — is not compatible with the independence obligation of an institution such as the ECB, for which independence is a hallmark of its operations,” the ombudsman said. It has asked the ECB for a response by April.

The ECB has come under fire for its links to the private sector on more than one occasion. In 2015, a market-moving evening speech, made behind closed doors to fund managers and published only the next morning, led to a change in communications policy.

The ECB also now publishes the diaries of its six executive board members after officials were found to have met private sector representatives around the time of monetary policy decisions.

Corporate Europe Observatory, the campaign group that made the complaint to the ombudsman, said the decision was “timely and very positive”.

“President Draghi’s involvement with the Group of Thirty was ill-advised from the start. Since 2016, when the ECB’s mandate for banking supervision was extended, the close ties between the president and the bankers’ group has become absolutely unacceptable,” said Kenneth Haar, monetary and financial policy researcher at the group. “Imbalanced policy consultation at the ECB has made the institution vulnerable to the undue influence of financial industry interests, especially in the aftermath of the financial crisis.”

The ECB has argued that it needs to maintain links with markets to explain its policies and make sure they have the desired impact. The bank said: “We have taken note of the ombudsman’s recommendation and will respond in due course.”

The ombudsman has no power of sanction but can summon officials to testify. Any recommendations it makes are non-binding, although flagrant dismissal of the watchdog’s advice can be referred to the European Parliament.

Additional reporting by Jim Brunsden in Brussels