With Mario Draghi, the president of the European Central Bank, stepping down at the end of October, the ECB faces a credibility problem with doubts on whether his replacement will be up to the job. While according to Ferdinando Giugliano (Bloomberg), as long as question marks remain over who will be the next president, the effectiveness of the ECB will be limited, he does believe that Draghi can show that he still controls the message.
The ECB is to offer a fresh round of ultra-cheap loans to banks so they can keep lending at favourable rates to families and businesses. It is also envisioning, a new cut in its negative deposit rate, which banks pay for parking their money with the central bank. Yet, according to Giugliano, the ECB is still looking powerless when it comes to controlling risks to the single currency that come from outside the domain of monetary policy.
BETTER FINANCE takes issue with the notion of a powerless ECB. For years now, BETTER FINANCE’s Slovenian member organisation, VZMD, has been fighting a courageous uphill battle for the rights of non-insider bank investors, following the harshest of bail-ins of the subordinated bondholders of 6 Slovenian banks in 2013, as part of the EU's BRRD (Bank Recovery and Resolution Directive) that only entered into force on 1 January 2016.
The basis for the Slovenian bail-in has been questioned, especially since, in November 2013, the bank’s published financial statements disclosed a positive net equity of + € 835 million but, following an “asset quality review” (AQR) requested by the European Central Bank soon after, the bank’s net equity was suddenly evaluated at minus € 318 million.
To date, the banks in questions and the Central Bank of Slovenia have refused to disclose any information to non-insider bond investors regarding this “AQR”, and this despite a legally binding order by the Slovenian Information Commissioner to do so.
More than that, when non-insider bond investors complained and the Slovenian police was sent in to investigate this case, ECB chair Draghi wrote to the Slovenian prosecutor to protest against the seizure of ECB documents.
In this respect, the Slovenian case has sadly become an example of the power wielded by the ECB, illustrating how it can abuse this power to take advantage of the small Member States and arbitrarily wield its influence at EU level.
- - Bloomberg Opinion: The ECB Is Looking Increasingly Powerless
- - BETTER FINANCE Press Release: BETTER FINANCE BRINGS THE CASE OF THE BAIL-IN OF
- SLOVENIAN BANKS TO THE ATTENTION OF THE EUROPEAN BANKING AUTHORITY
- - Article by BETTER FINANCE: Post-crisis bank rescuing in the EU is unfair and undemocratic