The Group of Thirty might finally end its scandalous existence

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By Norbert Häring -  The European Ombudswoman has announced that she will investigate the membership of the President of the European Central Bank (ECB), Mario Draghi, in the Group of Thirty. This is a shadowy forum of the most senior executives from large commercial banks and the most important central banks. The Group of Thirty meets behind closed doors without the press and without minutes taken. Some of the institutions are being supervised by the ECB. This group could come to an end, in its current form, if the EU-Ombudswoman finds fault with Draghi’s membership.

 

Some Background on the Group of Thirty: It was founded in 1978 upon an Initiative of the Rockefeller-Foundation. It has a little more than 30 (usually all-male) members, mostly active or former top manages of large international financial institutions and active or former central bankers. Often they are both at the same time. Almost a third of members are representing US-institutions. Its main purpose is the mingling of commercial bankers and central bankers. The central bankers have their groups in Basel, there they regularly meet. The big international banks have groups like the Institute of International Finance there they discuss current topics and issue reports. The Group of Thirty is the only mixed group and the central bankers that go there, do not apply any of the usual transparency and anti-corruption rules that otherwise govern their relationships with commercial bankers…..

 

There are a number of reasons why the President of the ECB should not participate in closed door meetings with the heads of large commercial banks. Here are the most important ones:

 

    Members of the G30, who are among the most important actors on the financial markets, get first hand insight into the thinking of the head of a market-moving public institution, and this insight is not available to other market participants or the public. This invites illicit insider deals.

    The ECB is the sole supervisor of several of these banks and their competitors. It is very improper for the head of such an institution to conduct a closed-door meeting, with no witnesses from within his organisation and no public record, with representatives of the very institutions he is charged with supervising on behalf of the public.

    The G30 regularly issues reports on banking supervision, central banking and related subjects. These reports invariably contain recommendations which are favourable to the business interests of the large international banks, and which dominate the G30 and advocate light-touch regulation. It is a scandal, that these recommendations from the G30 are relayed to the public as if they had the signature of Mario Draghi and his central bank companions. The ECB denies the last accusation, but I have provided plenty of evidence about a year ago, that the G30 report are indeed presented to the public as if they came from the whole group, as I have shown in detail in an earlier blogpost.

    The Group of Thirty regularly sends out digests called “Members in the Press”, which allows the members from commercial banks to bask in the glory of close association with the most powerful central bankers of the globe. This gives them and their institutions a competitive edge.

    Forced by various scandals involving ECB officials divulging valuable information to market participants behind closed doors, the ECB has given its top brass “guidelines for communication”, which are supposed to avoid all the problems listed above. However, while Draghi’s closed door discussions with bankers are clearly against the spirit of these guidelines, these are formulated in such a way that they only apply to formal speeches in front of market participants and to bilateral meetings with bankers. Multilateral meetings with bankers have been left out (more on this here).

 

Norbert Häring is an economist and journalist, reporting on finance and economics for the German business newspaper Handelsblatt. Read the rest of this analysis