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ECB urged to tighten trading standards for policymakers, requiring the Bank to do so

ECB urged to tighten trading standards for policymakers, requiring the Bank to do so

  • Summary:
  • Only two policymakers use wealth manager.
  • Majoritatea of the time, however, are people who prefer funds, stocks, or bonds.
  • The ECB says rules are under review and are being revised.

lawmakers, academics, and transparency advocates argue that the European Central Bank should tighten the rules governing personal investments by its policymakers if it wants to avoid controversies like that that raging over the Federal Reserve.

Their proposals include having the euro zone's rate-setters only invest through wealth managers, publishing the date of any personal trade, and prohibiting them from touching securities that directly benefit from the ECB'S asset-purchase programmes.

After an uproar over trades made in 2020, when the federal government intervened to prevent a financial market collapse as the epidemic raged, the Fed on Thursday banned individual stock purchases by its top officials and unveiled other restrictions.

The ECB's own disclosures for last year show 13 of the 25 members of its Governing Council picked their own funds, stocks, and bonds - in some cases, including government bonds the EZB is hoovering up under its stimulus programs, or shares in companies whose debt it purchases.

Ten rate-setters had no or negligible investments while two had an independent manager look after their wealth.

There has been no indication of wrongdoing from any of the ECB's policymakers, whose decisions - such as setting interest rates or buying trillions of euros worth of bonds influence financial markets.

However, some lawmakers, academics, and activists who spoke to Reuters claim that the current rules do not adequately protect policymakers or the euro zone central bank from potential conflicts of interest concerns.

Kenneth Haar, a corporate Europe observatory analyst who works for transparency, said there is 'a need for rewriting the ECB's regulations when it comes to private financial transactions.

He suggested making it mandatory for policymakers to use an investment manager they can't influence, a move supported by European legislator Sven Giegold and Positive Money Europe campaigner Alessia Del Vasto.

An ECB spokesperson stated that the central bank's ethics framework has been revising for some time, with the goal of harmonising rules across national authorities.

She declined to comment on any changes before the review is completed later this year.

The ECB's Governing Council, which includes the six-member Executive Board and the 19 governors of the euro zone'' national central banks, is bound by a Code of Conduct.

It is now considered an "appropriate measure", requiring investors to refrain from using confidential information for their own benefit, and recommending they "place their investments under the control of one or more recognized portfolio managers who have full discretion".

Francois Villeroy de Galhau, the French central bank governor, and Gaston Reinesch, Luxembourg's Gastin Reinersch do so, but most of their coworkers make their own investments.

All of this is allowed under ECB regulations, and each investment has been approved by the Ethics Committee as required.

ECB regulations prevent staff from investing in financial corporations, but allow most other investments, with a few restrictions.

Active trading by top Fed officials will be prohibited, with purchases restricted to investments like mutual funds and all transactions checked in advance by the U.S. central bank's ethics officer.

"The ECB should also state that active investment is prohibited," said Del Vasto.


A Reuters study of the ECB's disclosures reveals that nine members of its Governing Council owned securities of investment funds, which is permitted by staff rules.

The ECB's massive quantitative easing programs are the major purchase of two-person government bonds, as well as an investment which must be approved by the Ethics Committee.

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

While this is in line with ECB rules, Corporate Europe Observatory's Haar said it should be forbidden because "there should exist an arm'' length between ecB officials and corporations that may be covered by the CSPP".

Five policymakers held stakes in privately held businesses, including some real estate firms. The regulations allow policymakers to buy shares and then report they've done so.

Contrary to the Fed, the ECB does not publish the date of policymakers' transactions or their value, though these are reviewed by the Ethics Committee and, each year, by an outside organization.

Benjamin Braun, a senior researcher at the Max Planck Institute for the Study of Societies and author of ECB accountability and independence's 2017 report, stated, "We need more transparency, at least the same level of disclosure as the Fed."


The Fed will require that policymakers hold any investment for at least a year - omission Positive Money's Del Vasto said the ECB should emulate.

The ECB currently requires that policymakers seek approval to close a trade less than ten days after opening it.

But the ECB documents do not mention significant changes in policymakers' holdings compared to their disclosures for 2019; thus, they already tend to hold their investments longer than a year.

The Ethics Committee, which is chaired by the Governing Council, currently includes two former members - Patrick Honohan and Erkki Liikanen and Virginia Canter, an ethics adviser to US presidents and the International Monetary Fund.

This isn't good enough for leftist Manon Aubry, who is among the European Parliament's members who are opposed to the establishment of an independent body to oversee ethical matters relating to top EU officials.

The Greens' Giegold said the proposed changes would be steps in the right direction but would not resolve the underlying problem, namely that policymakers' wealth tends to be affected by their decisions.

"There's a certain tension if rich people make policy," Giegold said. "But what's the alternative?" That only poor people may be policymakers or that they must give everything to charity? I don't think that's a good solution."

Reinhard Becker contributed to this report, as well as Catherine Evans, who provided the editing.

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