The ECB on the loose

The decision of the EU Ombudsman on a complaint filed by Corporate Europe Observatory enables the European Central Bank to associate even more closely with the financial lobby. The timing couldn’t be worse.

On Monday the 4th of February the EU Ombudsman released his decision on a complaint Corporate Europe Observatory (CEO) filed in June 2012. The complaint was directed against the President of the European Central Bank, Mario Draghi, for his membership of an organisation of high profile bankers from both the private and public sector – the Group of Thirty (G30).

The motive for the complaint was that the G30 has a long history of influencing global financial regulation; in particular it has lobbied to promote self-regulation in banking, paving the way for the financial debacle of 2007-8.

In this context, concerns over the ECB President’s membership of the G30 – including participation in confidential meetings with major Wall Street Banks such as Goldman Sachs and Morgan Stanley – are fully justified. But according to the decision of the Ombudsman no rules have been breached. The Ombudsman does encourage the ECB to improve its communication with citizens, but overall he endorses the justifications put forward by the Bank in defense of Draghi’s membership of the G30.

CEO’s complaint was only one move in a broader effort to roll back the power of the financial lobby and to make the relevant EU institutions less open to manipulation. Nor is the complaint the end of the story. It will still take a while before we have rules in place that can limit the impact of the financial lobby. This is also reflected in the decision that the ECB President has breached no rules 1.

1. Green light for mixed groups with political aims

The most important motivations for CEO to work on the case were concerns that groups which includes both public sector decision-makers (such as central bank presidents) and the private sector, such as the G30, provide the financial lobby with inroads to influencing key public decision-makers. But according to the Ombudsman, the fact that central bankers are present in the group, that public financial institutions co-finance the G30, and that there are public speakers at its meetings, mean that the G30 should be considered a “discussion forum” rather than an interest group (points 72 and 73). This could serve as a carte-blanche allowing the ECB to get involved with even more mixed groups where the financial lobby holds great influence.

2. G30 political role ignored

To understand the concern flagged by CEO with the complaint, one needs to know how a mixed public-private group works to promotes a particular agenda. Unfortunately, the Ombudsman in his decision almost completely ignores the documented cases of successful G30 lobbying that CEO brought forward. These cases are mentioned, as is customary, in the description of CEO’s interventions in the case, but it appears that the Ombudsman disregarded them when formulating his decision. CEO considers these cases, which are based on academic studies, vital evidence. Ignoring them renders the assessment of the nature of the G30 organisation superficial.

The Ombudsman also fails to address CEO’s argument that private financial sector members normally serve as the public faces of the G30, and that they can apparently use the name of the G30 to promote the views of financial corporations.

3. Draghi free to deepen his involvement with the G30

The Ombudsman does side with CEO on several counts. He concludes that the President of the European Central Bank cannot credibly dissociate the ECB from his actions in the G30 with a mere disclaimer, such as the endorsement of reports are “in his personal capacity” (point 77). However, this is not used to raise a warning flag, quite the contrary, since the Ombudsman's conclusion only appears to invite the ECB to deepen its involvement with the G30.

So far, it seems, Mario Draghi has not participated in the important G30 working groups that produce what can often prove to be influential G30 studies. The Ombudsman concludes that Draghi should be able to join these study groups on behalf of the ECB, while stressing he sees “no reason to doubt” that the ECB will protect the interests of the EU and the ECB (point 78). The Ombudsman is not specific about the nature of said interests. In a worst case scenario, then, we could see Draghi write warnings against tougher banking regulation with Goldman Sachs and JPMorgan Chase.

Also, according to the Ombudsman, as the topics discussed at the members meetings are “manifestly relevant” to the work of the ECB, it is appropriate for the ECB “to engage in debate on these issues” (point 66). From the website of the G30, the public can learn that topics at a recent members' meeting (also known as “plenary meetings”) include “repairing economics following the financial crisis, the causes and implications of the crisis, the lessons to be learned, the remaining challenges, and the impact of financial and regulatory reforms on the banking sector” (point 65). The Ombudsman makes no assessment of the topics. In CEO’s view, they are highly political, and of a kind that could pit the interests of big banks against those of broad sections of the public. Therefore it is problematic that the ECB President is encouraged to engage in confidential debates with vested interests on those matters.

4. Acceptance of G30 opacity

In our complaint, we point out repeatedly that the lack of information in the public domain on the G30 members' meetings represents a major problem. No lists of speakers, no minutes of the meetings – or anything else that would give a better idea about the internal proceedings and their purpose – is publicly available. The Ombudsman, on the other hand, seems to be satisfied – as indeed the ECB – with the information available on the G30 website.

The text of the decision of the Ombudsman does contain long lists of speakers at the seminars of the G30, including the topics addressed. The complaint, however, does not cover these seminars and it is slightly misleading when the Ombudsman concludes that “the agendas and diversity of speakers at the plenary meetings and seminars of the Group of Thirty lead to the conclusion that the Group as such should be characterized as a discussion forum” (point 71).

The Ombudsman points out that any citizen can write to the ECB and has a right to an answer. Though little was obtained in CEO’s communication with the ECB, this is an avenue to be further explored. However, this is a rather general right of citizens under the Charter of Fundamental Rights, not a strong code for access to documents.  So far, the ECB has not disclosed any documents relating to the G30 members' meetings.

5. Intense consultation with financial sector labeled as “balanced”

After quoting article 11 in the Treaty on the European Union, the Ombudsman concludes in his decision that dialogue with civil society should be “balanced, affording diverse interlocutors an appropriate opportunity to debate issues of relevance to the work of the ECB” (point 82). In CEO’s reading, this means the ECB should take care not to be one-sided in its interaction with civil society; that it should have dialogue with groups with diverging interests and different perspectives on financial regulation, from consumers and unions, to investors and the financial sector. The Ombudsman, on the other hand, see this as confirmation that it is important for the ECB to engage with groups such as the G30, and notes that the ECB “recognises this principle and that it applies it by organising multiple seminars on issues relating to its work” (point 82). CEO has not seen any evidence on diversity of interlocutors and fears the decision of the Ombudsman will consolidate and perhaps even strengthen the ties between the ECB and the financial sector.

6. Failure to clarify what would constitute a “conflict of interest” for the ECB President

CEO never believed this was a clear-cut case of a “real conflict of interest” in the sense that a direct connection between Draghi’s membership of the G30 and his work as ECB president was already fully established. The case is about an “apparent conflict of interest”, a recognised concept in international codes against maladministration as pointed out by the Ombudsman (point 48). CEO would have liked to see thorough considerations from the Ombudsman on the circumstances under which an “apparent conflict of interest” arises, but the decision at hand leaves the public in the dark on that matter.

In particular, we would have liked to see an assessment of the ECB ethics rules in light of the two international standards referred to by the Ombudsman himself2 (from the OECD and the Council of Europe respectively). During the proceedings, the Ombudsman asks the ECB to comment on the two documents, but does not pick up on the matter in his decision, apparently because he accepts the ECB’s unqualified claim that its rules are indeed in line with said documents (point 24).

7. No assessment of ECB ethics rules

The final surprise is the treatment of the ECB’s ethics rules by the Ombudsman. According to these rules, members of the Executive Board of the ECB should consult the Ethics Officer of the ECB when in doubt about invitations. In this case, the Ombudsman considers there was no reason for doubt, and consequently no reason to consult the Ethics Officer (point 89). As the Ombudsman clearly sides with the ECB, perhaps we should not have been surprised. However to CEO the fact that that such a decision is left for the members of the Executive Board to decide at all is very concerning. A chance to assess the ethics rules of the ECB has been lost.

Bad timing

Had there been an appeal body, CEO would not have hesitated. Taken together, the Ombudsman’s decision puts key points made by CEO to one side and supports the ECB. In fact, according to the Ombudsman there is an even bigger space for close interaction with the financial lobby than even the ECB seems to assume.

That conclusion is highly disconcerting, and the timing could not be worse.
Already the ECB is conceding loans of hundreds of billions of euros on favourable terms to banks, and furthermore it is about to become the ultimate supervisor of the biggest banks in Europe. Insofar as it is clear that the top brass of the Bank have close relations with the institutions they’re supposed to regulate, and that the ethics rules have so far been the under the aegis of the Bank itself, there is a need for a thorough assessment and strengthening of the ethics rules of the ECB.

Consequently, CEO will continue its attempts to investigate and disclose the problematic symbiosis between ECB officials and the financial lobby.

  • 1. The decision of the EU Ombudsman can be viewed here.
  • 2. “OECD’s Recommendation of the Council on guidelines for managing conflict of interest in the public service” and the Council of Europe’s Recommendation no. R 10 of the Committee of Ministers to Member States on codes of conduct for public officials”.

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Joaquín Arriola