Monday, February 20, 2012

Draghi-Morgan-Stanley

Draghi stated in writing that there were no relevant personal factors to be taken into account in considering his nomination in June 2011. It is misleading because it fails to disclose a conflict of interest, that is, his son working as an interest trader at Morgan Stanley. Another contentious issue in relation with the nomination hearing is the Goldman-Greece-Draghi affair.

This written statement, included in the nomination report,
4.  [...A]re there any other relevant personal factors [...] that need to be taken account of by the Parliament when considering your nomination?

[Draghi] No.
is misleading because Draghi's son (LinkedIn) has been a bond trader at Morgan Stanley for some years, it was reported in January 2012 (Nouvel Obsevateur).

Morgan Stanley, a primary dealer in the EU, could potentially profit or unduly influence the markets, from an information leaked by Draghi to his son. The section on conflict of interest (4.1) of the ECB code of conduct (2002/C 123/06) specifically addresses "potential advantage for their families".  It's a real risk. Recently, Switzerland's central banker had to step down because his wife traded on insider information about the Swiss National Bank's market interventions (The Telegraph).

Further to a discussion at Global Economic Intersection, it is necessary to clarify that a conflict of interest is neither an impropriety (corruption, breach of duty/confidentiality etc.), nor does it presume that the the characters of the parties involved are in question.1

Draghi's written answers must have been carefully pondered, probably with the help of trusted advisers. It wasn't a fluke, but we don't know what his rational was for failing to disclose this personal conflict of interest. Another contentious issue in relation with the nomination hearing is the Goldman-Greece-Draghi affair.

Notes
  1. Sometimes people use the expression potential conflict of interest, as opposed to an actual conflict of interest, the latter designating an impropriety resulting from a (potential) conflict of interest.

 

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