Edgar Meister

In November 2014, the European Central Bank starts supervising the biggest banks in the European Union. From now on, the main responsibility for detecting risky banking or outright failing banks rests with that institution. Preparation has been ongoing since the so-called “Single Supervisory Mechanism” was adopted by the Council and the European Parliament in the autumn of 2013. Ethics rules was part of the considerations leading up to the approval, but it seems the ECB was not concerned with people with close ties to the very megabanks the SSM is supposed to supervise.

The Bank gets considerable powers with the SSM. It can approve, reject or annul a licence for a bank, it can order restructuring, impose a new leadership and it can order capitalisation in case a bank appears to be too vulnerable. All this to make the European banking sector more resilient. The draft decisions are made by the Supervisory Board and presented to the Governing Council of the ECB for a final decision. But should a bank want to object to the report of the Supervisory Board, it can file a complaint to the Administrative Board of Review, a panel of only five persons.

The role of the Administrative Board of Review could become a crucial one, as it could help bank lobbyists to overturn key decisions. For that reason, the composition is important, in particular there has to be rules in place to ensure the members do not have a conflict of interest.

Edgar Meister worked at the “supervisory board” of DWS Investment, and investment branch of Deutsche Bank Edgar Meister was on Germany’s central bank Executive Board between 1993 and 2007 and during that time he chaired the EU’s Banking Supervision Committee from 1998 to 2007, ie. the years before the financial crisis broke. He was then involved in the crisis-stricken German real estate fund, Hypo Real Estate, that had been bailed out by the German government (see: http://www.reuters.com/article/2014/09/08/ecb-banks-watchdog-idUSL5N0R91MT20140908).

Since then, he has worked for German megabanks Commerzbank, which he left in early 2013, and for Deutsche Bank - a fund management arm of the bank called DWS Investment. Also, he currently works as a board member at Standard & Poor’s Credit Market Services Europe.

Clearly, Edgar Meister has gone through the revolving door several times – from public banks to private banks, and vice versa. In this case, there is no time in between: according to information from DWS, Edgar Meister left his post at the investment arm of Deutsche Bank in early September.

ECB ethics rules:

Ethics rules at the ECB have been reviewed in the course of negotiations on the SSM, which will leave the ECB with the responsbility to supervise the biggest banks in the EU. With new powers come more ambitious rules. However, so far the implementation of the rules have been disappointing. For example, the declarations of interest that the top civil servants in the supervisory branch of the ECB are to sign, are merely sworn statements that none of their external activities represents a conflict of interest. Also, new rules on a “post-employment” cooling off period have been agreed (but not implemented yet), but no attention seems to be paid to “pre-employment” problems, the fact that going straight from the private financial sector to the ECB could lead to conflict of interest.

Read the full CEO article on this case. You can also read another ECB revolving doors case, Christian Thimann, who left the ECB to become Group Head of Strategy & Public Affairs at AXA.