If central bankers were the ‘heroes’ of the post-financial crisis recovery, Mario Draghi shined among them. But the heel of Europe’s Achilles has been exposed so much that it could jeopardise what he set out to protect: the public good.
The latest test, if not the clearest to date, is the ECB’s refusal to disclose information related to the resolution of Spanish bank Banco Popular. The Single Resolution Board today published documents that shed some light on how the first resolution under the EU’s single resolution framework took place.
It included a report drafted by Deloitte, which described the size of Popular’s financial hole and the price tag of the ailing bank under three scenarios. The report had been requested by the Spanish government and investors that lost their money.
But the Board did not give any information on Popular’s access to the Emergency Liquidity Assistance that could have been provided to keep the bank afloat, the collateral pool (i.e. guarantees) available in the bank to access the ELA, or how serious the outflow of capital was during the last days of Popular.
Without this information, shareholders and bondholders wouldn’t know if their interests were violated and European citizens won’t know if the resolution was actually a success, as officials claim, or even the only option.
As the documents published today confirmed, Popular did not suffer a solvency crisis but a liquidity problem.
SRB officials argued today that they could not publish this information given that the source of part of the information (namely the ECB) did not authorise it when the board contacted the stakeholders.
This information was already requested by lawyers representing some of the largest investors affected by the resolution.
In its response, seen by EURACTIV, the ECB denied access to documents because it could create “uncertainty” and fuel speculation (in the case of information about ELA).
Access was also refused because of the commercially sensitive information contained within that could reduce the effectiveness of ELA (in regards to the collateral) and because it may violate confidentiality rules (in the case of the liquidity situation).
The ECB’s opacity is hard to justify given that the resolution already took place, so the effectiveness of ELA is no longer an issue, and the financial stability is not at stake, at least not because of Popular.
It is not secret the central banks’ secrecy. But efforts by Draghi and his colleagues to hide the black-box of this case bring back memories not from the heroic age of Ancient Greece but rather the benevolent despotism that came after.
But “everything for the people, nothing by the people” no longer works in a European process moving in the opposite direction. Not even in those institutions where, given their nature and tasks, decisions are taken by highly qualified experts in closed-door meetings away from mere mortals.
Moreover, as the ECB and other technocratic institutions are ruled by unelected officials, transparency and accountability must be the highest principles. Any decision that would undermine these pillars should be limited and well-founded against the principle of public interest.
It is not the first time that the ECB has been criticised because of its lack of transparency. Last month, the EU’s Court of Auditors denounced the central bank for not providing “important evidence” related to its supervision of European banks.
It was the third time in less than a year that the European auditors had clashed with Frankfurt over access to information.
In one of the cases related to the Greek bailout, the ECB told the auditors that they were going “beyond” their mandate because they were looking into the role played by the central bank in the Greek rescue programme.
We may still be in troubling times but Europe doesn’t need untouchable heroes. It needs accountable officials. Losing the Olympian shine under the grey suit of bureaucracy is a fair price to pay for that.
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Views are the author’s