April 18, 2018 / 2:01 PM / 2 years ago

ECB's Draghi to stay in opaque G30 club despite watchdog's warning

(This April 18 story corrects to clarify Jacob Frenkel is chairman of JPMorgan Chase International, not JPMorgan)

FILE PHOTO: European Central Bank (ECB) President Mario Draghi holds a news conference at the ECB headquarters in Frankfurt, Germany, March 7, 2018. REUTERS/Ralph Orlowski

By Francesco Canepa

FRANKFURT (Reuters) - European Central Bank President Mario Draghi has decided to remain a member of an opaque club of top figures in finance despite a watchdog’s call to leave it to protect the ECB’s reputation.

The Group of 30 is a private forum of financiers, economists and current and former policymakers who meet behind closed doors to discuss global economic issues.

European Ombudsman Emily O’Reilly had recommended that Draghi gave up his membership to fight “a public perception” that the ECB’s independence as a banking supervisor could be compromised.

The ECB rejected the Ombudsman’s recommendation on Wednesday, arguing G30 discussions helped it understand economic and financial developments.

“The ECB continues to consider the President’s membership of the G30 to be fully compatible with the independence, reputation and integrity of the institution and, most importantly, to consider that this does not entail any conflict of interest,” the ECB said.

Ombudsman O’Reilly said the ECB was missing “an opportunity to increase trust” and failed to explain why Draghi needed to be a member of the G30, rather than just taking part in its meetings.

Corporate Europe Observatory, the activist group which triggered the Ombudsman’s investigation, accused the ECB of dealing “carelessly ... with financial lobbyists” and called on Europe’s political leaders to act.

At present, G30 members include Draghi and the central bankers of Britain and China, Mark Carney and Zhou Xiaochuan, as well as Jacob Frenkel, a vice-chair of U.S. banking giant JPMorgan Chase, whose Luxembourg subsidiary is ECB-supervised, and chairman of JPMorgan Chase International.

The chairman of UBS (UBSG.S), Axel Weber, and the chief executive of Credit Suisse (CSGN.S), Tidjane Thiam - two large Swiss banks with several subsidiaries in the euro zone - are also members.

O’Reilly, whose recommendations are not binding, had said she had found no evidence that the participation of Draghi and other ECB officials in the G30 had influenced Frankfurt’s work as the euro zone’s banking watchdog.

But she criticized what she described as the “secrecy” surrounding the G30, including how members are chosen and what is discussed at the meetings.

She added the ECB should tighten its rules regarding public engagements - a recommendation that the ECB pledged to take on board in its response on Wednesday.

But the central bank also stressed Draghi and other officials act “with the utmost prudence” at G30 events, where they only take part in “intellectual debates”.

Corporate Europe Observatory has criticized the ECB for being too close to the financial sector it is meant to supervise, including by letting financiers take most of the seats on its advisory groups.

In a concession, the ECB has started meetings with entrepreneurs outside finance.

Earlier this year, Draghi rejected calls from European lawmakers to have financiers who give advice and feedback to the ECB register as lobbyists, saying they merely provide “information”.

Editing by Toby Chopra, Larry King

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