Pulse.ng logo

RPT--ECB under fire over market-sensitive closed-door speech

  • Published:

Join the "sabi" clique. Don't miss a thing, get the latest updates to fuel your conversation daily

By signing up , you agree to our Privacy Policy and European users agree to the data transfer policy

Thank You! You have successfully subscribed to receive pulse.ng daily newsletter.

(Repeats story that ran Wednesday; no change to text.) By Marc Jones May 20 () - * 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: http://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) nL5N0YB4KN (Editing by Larry King)

Do you ever witness news or have a story that should be featured on Pulse Nigeria?
Submit your stories, pictures and videos to us now via WhatsApp: +2349055172167, Social Media @pulsenigeria247: #PulseEyewitness & DM or Email: eyewitness@pulse.ng. More information here.