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25th Sep 2022

ECB chief under scrutiny for alleged conflict of interest

The EU ombudsman has launched an investigation into an alleged conflict of interest by European Central Bank (ECB) chief Mario Draghi due to his membership in a club of top bankers, the Group of Thirty (G30).

"We received a complaint and sent a letter to the ECB. Now we are waiting for a reply," Gundi Gadesmann, spokeswoman for EU ombudsman Nikiforos Diamandouros was quoted as saying by Reuters.

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The ECB also confirmed it received a request from the ombudsman and will respond in due time, while rejecting the claim that membership in the G30 is against the bank's ethics code.

The complaint was filed last month by Corporate Europe Observatory, a Brussels-based transparency group, which criticised Draghi's membership in a bank lobby group whose declared statement is to influence the debate on regulation of the financial sector.

"There's the opaque nature of the group's activities and of its membership. There is no way for the public to know the details of the President's involvement, since the meetings of the members are confidential. Information on the discussions that take place, and whether the members commit to certain lines of action is not accessible to the public," the complaint says.

"In our view, given the above, the group has the characteristics of a lobbying vehicle for private financial interests. It is an important interface between the private banking sector and central banks, and allows some of the biggest private banks in the world to exert a direct influence on the top executives of the most important central banks, including the European Central Bank."

"We believe that any president of the ECB has to make it absolutely clear that he or she is not under the influence of the financial lobby at any time, and has to ensure that he is not attached to a forum or process that could jeopardise his independence or give rise to conflicts of interest."

With the ECB in line to receive greater powers of scrutiny over banks in the eurozone, independence from the private banking sector is becoming more important, the group added.

Draghi already came under fire shortly after his ECB appointment for his past as a manager at US investment bank Goldman Sachs, where he oversaw European operations which included debt swaps with Greece that allowed Athens to cover up its real deficit.

Later on, in 2010, the deficit was too big to handle and Greece became the first euro country to ask for a bailout.

Bloomberg news agency has also filed a case at the EU court in Luxembourg against the ECB for its refusal to disclose internal documents which refer to the Goldman Sachs-Greece operations.

At a hearing in June, the ECB said it decided not to release the documents in 2010 when Bloomberg first asked for them, because it would have "fueled negative perceptions about Greece's ability to honor its debt."

Greece earlier this year was unable to honour its debt and signed up to a 'voluntary' debt restructuring in which banks slashed half of its obligations.

"Markets will perform better when they have transparency ... The question is who knew what; and when did they know it?" Timothy Pitt-Payne, a lawyer for Bloomberg News, told the court in June.

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