ECB urged to toughen trading rules for policymakers



* Only two decision-makers use the wealth manager

* Most others choose funds, stocks

* ECB says rules are being revised

By Francesco Canepa

FRANKFURT, Oct. 22 (Reuters) – The European Central Bank should toughen rules governing the personal investments of its policymakers if it is to avoid controversies like the one that confuses the Federal Reserve, say lawmakers, academics and transparency activists .

Their proposals consist in particular of having the rate regulators of the euro zone invest only through asset managers, to publish the time of any personal transaction and to prohibit them from touching securities that directly benefit from asset purchase programs. of the ECB.

The Fed on Thursday banned purchases of individual stocks by its top officials and unveiled other restrictions after an uproar over transactions in 2020, when the US central bank intervened to stop a collapse in financial markets as the pandemic raged.

The ECB’s own publications for last year show 13 of the 25 members of the Governing Council have chosen their own funds, stocks and bonds – including in some cases government bonds that the ECB sucks as part of its stimulus programs or stocks in companies whose debt it is buying back.

Ten rate setters had zero or negligible investments while two had an independent manager looking after their wealth.

There have been no suggestions of wrongdoing on the part of ECB policymakers, whose decisions – such as setting interest rates or buying trillions of euros in bonds – influence financial markets.

But some lawmakers, academics and activists who spoke to Reuters say the current rules do not protect policymakers or the eurozone central bank from potential questions about conflicts of interest.

“There is a need to thoroughly review the ECB’s rules on private financial transactions,” said Kenneth Haar, analyst at Corporate Europe Observatory, a campaign group that focuses on transparency.

He proposed to force policymakers to use an investment manager they cannot influence, a recommendation backed by EU lawmaker Sven Giegold and activist Alessia Del Vasto of Positive Money Europe.

An ECB spokesperson said the central bank had been revising its ethical framework for some time, mainly with the aim of harmonizing rules between different national authorities.

She declined to comment on any specific changes until the review was finalized later this year.

The Governing Council of the ECB, which comprises the six-member executive board and the 19 governors of the national central banks of the euro area, is bound by a code of conduct / FR / TXT / PDF /? Uri = CELEX: 52019XB0308 (01) & from = EN.

Approved in 2019, it specifies that they must not use confidential information for their benefit and recommends that they “place their investments under the control of one or more recognized portfolio managers who have full discretion”.

French central bank governor François Villeroy de Galhau and Luxembourgish Gaston Reinesch are already doing it, but most of their colleagues are making their own investments.

All of this is allowed by ECB rules and every investment has been approved by the ethics committee as required.

ECB rules prohibit staff from investing in financial companies, but allow most other types of investments, with some controls.

By contrast, active transactions by senior Fed officials will now be expressly prohibited, with purchases limited to investments such as mutual funds, and all transactions vetted in advance by the ethics officer of the Fed. American central bank.

“The ECB should also make it clear that active investment is prohibited,” Del Vasto said.


A Reuters analysis of information from the ECB shows that nine members of the Governing Council held shares in investment funds, which is permitted by staff regulations.

Two government bonds held, the main purchase of the ECB’s massive quantitative easing programs and an investment that requires prior approval from the ethics committee.

Four have invested in listed stocks, including some companies whose bonds are part of the ECB’s Corporate Sector Purchase Program (CSPP).

Although this complies with ECB rules, Haar of Corporate Europe Observatory said it should be banned because “there should be a distance of dependency between ECB officials and companies that could be covered by the CSPP” .

Five decision-makers held stakes in private companies, including some real estate companies. Rules allow policymakers to buy stocks and then declare that they have done so.

Unlike the Fed, the ECB does not publish the date of decision-makers’ transactions or their value, although these are verified by the ethics committee and, each year, by an outside firm.

“We need more transparency, at least the same level of disclosure as the Fed,” said Benjamin Braun, senior researcher at the Max Planck Institute for the Study of Companies and author of a 2017 report on the responsibility and independence of the ECB.


The Fed will also now require policymakers to hold any investment for at least a year – a rule Positive Money’s Del Vasto said the ECB should copy.

The ECB is currently requiring policymakers to seek permission to close a deal within a month of opening it.

But the ECB documents do not indicate any major changes in the holdings of policymakers compared to their disclosures in 2019, meaning they already tend to hold their investments for more than a year.

The ethics committee is appointed by the board of governors and currently includes two former members – Patrick Honohan and Erkki Liikanen – and Virginia Canter, previously ethics advisor to US presidents and the International Monetary Fund.

This is not enough for leftist Manon Aubry, who is among European Parliament lawmakers supporting the creation of an independent body to check ethical issues relating to senior EU officials.

Giegold of the Greens said the proposed changes would be steps in the right direction but would not resolve the underlying conflict that the wealth of policymakers tends to be affected by their decisions.

“There is some tension if the rich are in politics,” Giegold said. “But what’s the alternative? That only the poor can become decision-makers or that they have to give everything to charity? I don’t think that would be a good solution.”

(Additional reporting by Reinhard Becker; Editing by Catherine Evans)



Leave A Reply