Wednesday, March 22, 2023

ECB to review format of chief economist’s private calls to investors

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The European Central Bank is to revisit the format of private appeals its chief economist has held with financial market players, including Goldman Sachs, JPMorgan Chase and BlackRock, to discuss its monetary policy decisions.

Christine Lagarde, President of the ECB, defended the calls a letter to a Dutch member of the European Parliament which was released on Friday, in which she also said the practice was under review.

Individual calls were made by Philip lane, the ECB’s chief economist, to a handful of investors and bankers at major financial institutions in the hours following Ms Lagarde held press conferences to present her latest monetary policy measures.

The calls were leaked, several weeks late, in Mr Lane’s diary on the ECB’s website. But they raised the question of whether the chief economist could have given sensitive information to a few privileged investors.

Ms Lagarde said in her letter to Derk Jan Eppink, a Dutch MP, that “the ECB is fully transparent about its interactions with its stakeholders, and with financial market players in particular”.

“The launch of the calls had been planned well before their first execution, in order to facilitate systematic exchanges on the newly published information,” she said.

Some investors, who have asked to remain anonymous, have suggested the ECB could follow the Bank of England, which invites all analysts to a single briefing shortly after its policy decisions are announced. The US Federal Reserve has a 12-day blackout period that runs up to one day after its policy decisions, during which its officials do not speak to investors.

ECB tightened its communication rules in 2015 after one of the members of its board of directors at the time, Benoît Coeuré, told an audience of hedge fund managers, academics and finance officials at an event in London that ‘he planned to proceed with his asset purchases. An internal error meant that the information was not made public until the day after the event. When the comments were published, the euro fell sharply.

Mr Lane’s calls began after a press conference in March when Ms Lagarde was instrumental in a bond market liquidation by saying it was not the role of the ECB to “close the spreads”, in reference to the difference in financing costs between Italian and German government bonds.

To be on the list of people he called, the ECB said someone had to be an active observer of the institution. Other groups Mr. Lane has made calls with include Deutsche Bank, Axa, UBS, Citigroup and Pimco. The ECB said Mr Lane made most of the calls asking questions and clarifying details of policy decisions. No investor has indicated having transmitted sensitive information to the market.

The ECB revealed in Mr Lane’s online diary on Friday that it had held teleconferences with eight banks, including Bank of America, Barclays, Societe Generale, Credit Suisse and UniCredit, shortly after an online press conference by Mme Lagarde on October 29.

Ms Lagarde said: “For the ECB, as for all central banks, an exchange of views with representatives of the private sector – including financial market participants – is important to fulfill its mandate.”


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