May 20, 2015 / 7:15 PM / 4 years ago

ECB under fire over market-sensitive closed-door speech

* ECB speech released only day after delivery
    * Euro fell sharply after comments published
    * Event attended by hedge funds, bankers, academics
    * Informal meetings "give rise to serious questions" - MEP
    * "Cardinal" disclosure rule violated - strategist

    By Marc Jones and John O'Donnell
    LONDON/FRANKFURT, May 20 (Reuters) - The European Central
Bank is under fire after one of its  policymakers gave market
sensitive information to an invitation-only conference attended
by hedge fund managers, a day before his speech was publicly
released.
    Politicians and market participants criticised the ECB over
the speech by board member Benoit Coeure, in which he said the
central bank would accelerate bond buying under a programme
aimed at averting deflation and helping to revive the euro zone
economy. 
    Coeure gave the speech to the conference in London, which
was also attended by bankers and academics, on Monday evening.
When it was finally released on the ECB's website on Tuesday
morning, the euro fell sharply while stock and bond prices
jumped. 
    The ECB has blamed the delay between the speech's delivery
and publication on an "internal procedural error". An official
said on Wednesday it had taken steps to ensure that there would
be no repeat of the problem.
    While it is not clear at exactly what time Coeure revealed
the information on the bond buying, charts show the euro fell
sharply against the dollar also around the time he spoke. The
reason for this move is unclear, as is whether anyone who heard
the speech traded on it before the public release.
    But the ECB's handling of such sensitive information came
under attack. "There should be clear and transparent policy of
the ECB what to do and what type of information to share in
these informal settings in order to guarantee equal access to
market sensitive information," said Sven Giegold, a member of
the European Parliament's economics committee.
    He questioned how ECB President Mario Draghi attended forums
such as of the Group of 30, an elite body of financiers,
academics and central bankers who meet around the globe.
    "The informal meetings, briefings, dinner speeches and group
memberships such as Draghi in the Group of 30 give rise to
serious questions," said Giegold, a German Green.
    The euro fell over half a cent against the dollar in
Monday evening's move. At the time, the San Francisco Federal
Reserve had just released a paper saying the U.S. economy was
doing better than estimates suggest and this boosted the dollar.
    But Ashraf Laidi, chief global strategist at City Index in
London, said he believed Coeure's comments had played a role.
    "The cardinal rule of publicly disclosing central bank
comments in real time was violated," he said. "The euro's sudden
decline shows that somebody traded on Coeure's remarks."
    The global foreign exchange market is not subject to the
strict rules that govern release of sensitive information on
stock markets, and there is no suggestion of wrongdoing by 
anyone who heard the speech.
    One of the organisers of the London event was the Howard
Centre for Financial Analysis at Imperial College's Business
School. This is funded by Brevan Howard, a hedge fund set up by
Alan Howard, an Imperial College graduate who was listed in the
programme for a panel discussion.
    Brevan Howard declined to comment on whether it had traded
on the speech. The speakers' list also included officials from
other top funds plus bankers, central bankers and academics.
(for details click: bit.ly/1dk9YHR)
    
    
    
    PRIVILEGED ACCESS
    Central bankers regularly speak at events, give briefings
and attend meetings that are not open to the media. ECB
officials alone go to hundreds every year, hosted by a wide
variety of organisations.
    But the criticism comes at a delicate moment as the ECB
oversees emergency funding for Greece's fragile banks and rolls
out the money printing programme, which has drawn accusations in
countries such as Germany that it is punishing savers by driving
interest rates so low. 
    The ECB is answerable only to the European Parliament. While
Draghi and other officials regularly attend question sessions
there, they are not bound by lawmakers' demands. 
    One former long-time ECB banker, who now works in the
private sector, said the reaction to Coeure's comments marked
the biggest market move he could remember following a
closed-door event, adding that he was shocked. 
    Bernd Lucke, a founder of the eurosceptic party Alternative
for Germany, said he would question Draghi about the episode
when he next appears in the European Parliament.
    "It is very clear that the ECB has behaved in a
non-transparent manner which was beneficial to a private hedge
fund and to the detriment of others," Lucke, who also sits on
the parliament's economics committee, told Reuters.
    "We need something like a code of conduct which demands that
the ECB does not reveal information in private meetings which
can benefit investors with priority access."

 (editing by David Stamp)
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