The European Central Bank needs greater oversight and more accountability, as it has strayed into the realm of political decision-making but without the necessary scrutiny, global watchdog Transparency International said in a report on Tuesday (28 March).
As independence limits the ECB’s accountability to the public, the bank should compensate by increasing its transparency, publishing more of its decisions and opinions, strengthening integrity rules and becoming more open about the political choices it faces, the watchdog group said.
TI singled out the ECB’s role in the Greek bailout, noting that it made political choices instead of merely carrying out technical tasks, putting a strain on the framework which partially exempts it from democratic accountability.
“The ECB’s discretionary powers allowed it to put pressure on Greek banks while negotiating bailout reforms with the Greek government as part of the Troika of international creditors,” TI said in a statement.
“Similar dynamics could play out in the upcoming negotiations with Greece, and with the current recapitalisation of Italian lender Monte dei Paschi di Siena, which threaten the euro zone’s current fragile stability,” it added.
While the ECB has made progress in transparency with the publication of board member diaries and policy meeting minutes, the ECB’s conflict of interest management is flawed and whistleblowing policies are outdated.
“The ECB faces a significant decline in public trust, which alongside its expanded responsibilities put considerable strain on its accountability,” TI said.
The ECB, which gave TI access to senior staff, acknowledged the report and said it had already taken some of the recommended steps.
“Some recommendations in the TI-EU report fall outside the ECB’s mandate or are not foreseen in the Treaty,” the ECB said.
“Some other points have already been implemented, such as publishing decisions, opinions and recommendations as well as providing information on meetings with industry representatives.”
The study makes 18 specific recommendations as to how the ECB can improve its governance. Key recommendations are:
- The ECB should seek an agreement with the Eurogroup and the European Parliament outlining political approval procedures for measures which are necessary but go beyond the mandate of the Bank, e.g. ECB letters with specific recommendations to governments.
- The ECB should make it a rule to publish its decisions, recommendations and opinions.
- The ECB should report to the European Parliament on any positions it takes in meetings of international regulatory bodies, such as the Basel Committee.
- The ECB should overhaul and publish its whistleblowing policy to ensure that individuals feel safe in coming forward and reporting potential cases of corruption at the Bank.