Monday

27th Feb 2017

ECB hires controversial consultancy for bank audit

  • Oliver Wyman is a known name in the world of eurozone bailouts and bank 'stress tests' (Photo: Valentina Pop)

The European Central Bank (ECB) on Tuesday (24 September) said it hired Oliver Wyman, a US-based financial consultancy, to help out with a thorough audit of the 130 largest banks in the eurozone.

The review of the banks' balance sheets and capital needs is a prerequisite for the ECB to take on a new task - that of a single supervisor (SSM) for these "systemic" banks.

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Oliver Wyman is a known name in the world of eurozone bailouts and bank "stress tests."

Back in 2006, it famously said the Anglo Irish Bank was the best bank in the world. Three years later, the bank had to be nationalised and almost bankrupted the Irish state, which then needed a eurozone bailout.

Last year in the Spanish bank bailout, Oliver Wyman provided eurozone decision-makers with the numbers they expected and which were politically acceptable - around €60 billion instead of a much larger gap that the banks actually had.

Oliver Wyman also did consultancy work in the Portuguese bailout, according to the central bank of Portugal.

The ECB gave no details about the fee or the tender procedures which led to the selection of Oliver Wyman.

It said the firm was "appointed to support the preparation and implementation" of the big banks review.

"Oliver Wyman will support the ECB’s management and coordination and will provide financial advisory services for this project, notably in refining the methodology for the assessment," the ECB said in a press release.

Speaking in the European Parliament on Monday, ECB chief Mario Draghi stressed the importance of this review to be "credible," else it would be "completely useless, if not counterproductive."

But the choice of Oliver Wyman is set to lend credence to claims that it will be a rubber-stamping exercise that banks are lobbying for.

If the balance sheets prove to have too many bad loans and a high risk exposure, there is little the ECB can do - as even the eurozone bailout fund would be too small to fill the gap of big houses like Deutsche Bank or Societe Generale.

The worry in eurozone central banks, according to one insider, is that if banks are reviewed too thoroughly and their problems exposed, they will stop lending and revive the financial crisis.

ECB set to become more transparent

The European Central Bank kept its main interest rate at a historic low Thursday and indicated that in future the reasoning behind such decisions will be made public.

EU audit reform reduced to 'paper tiger'

The EU is close to agreeing new rules for financial auditors, but critics say the draft deal will do nothing to end the dominant position of the "Big Four."

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