ECB Is Said to Spar With Governors on Far-Reaching Conduct Plan

(Bloomberg) -- The European Central Bank has a battle on its hands over new conduct rules for Governing Council members, some of which are seen as too intrusive.

Drafts circulated by the Frankfurt-based ECB to national central banks have sparked concern among some governors, according to people familiar with the matter. They view the proposals as too far reaching or simply unrealistic, said the people, who asked not to be identified because the debate is private.

The new rules are aimed at harmonizing codes of conduct for decision-makers at the ECB -- there are currently separate versions for the Executive Board and the Supervisory Board, as well those covering governors of national central banks. The Governing Council is set to discuss the issue at its July 11 non-policy meeting, said the people.

An ECB spokesman declined to comment.

According to the people who spoke to Bloomberg, the code addresses issues including:

  • how and when to make disclosures of personal financial investments
  • the length of cooling-off periods and compensation during that time
  • conflict-of-interest rules such as non-compete clauses, and spouses’ employment

Rules, particularly relating to personal finances, vary greatly across the 19-nation region. The ECB’s challenge is to find compromises that are compliant with local laws and don’t infringe on officials’ personal freedom and rights of privacy.

While policy makers agree in principle that an overhaul is necessary, they haven’t yet found common ground on all details, the people said.

The matter was started as a written procedure, a form of decision-making European institutions can use for topics not requiring an extensive debate. It was lifted onto the Governing Council’s agenda after national central bank chiefs pushed back against some of the proposals.

An attempt to better coordinate policy messages initially raised concern in at least one euro-zone central bank that the ECB was attempting to curtail governors’ freedom to speak their opinion. The draft language was ambiguous and has since been updated, the people said.

Three years ago, the ECB introduced strict guidelines for Executive Board members’ external meetings after Benoit Coeure was criticized for revealing market-moving information at a private event in London. It is aiming to extend those rules and others already in place for its six-member board to the Governing Council, according to the people. Those include:

  • refraining from speaking to commercial bankers in private to avoid passing on potentially market-sensitive information
  • publication of calendars

ECB ethics have been in the spotlight recently. Last week, the European Union’s ombudsman referred President Mario Draghi’s membership in the Group of 30, which includes senior finance industry representatives, to the European Parliament.

“The ECB attaches great importance to the good conduct of members of the Governing Council,” Draghi told European lawmakers on Monday. He was responding to a question about legal proceedings against Latvian central-bank Governor Ilmars Rimsevics. Rimsevics, who denies all wrongdoing, is accused of bribery and may face an 11-year prison sentence if convicted.

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