IT WAS NO surprise that the Governor of the Central Bank would issue a statement condemning the publication of the findings of an investigation into the relations between the bank and consultancy firm Alvarez & Marsal.
The investigation, conducted by the Central Bank’s audit committee consisting of three members of the board, found that the Governor had misled the board, ignored its decision, concealed information from it, violated procedural rules, including the awarding of contracts without tenders, and tampered with agreements.
Panicos Demetriades responded to these damning findings in a predictable way, focusing on the technicalities rather than the substance. The committee had exceeded its powers, he said on Monday, because it did not have the approval of the board for the investigation and had not informed the Governor. He described the conducting of the investigation as “illegal” and complained that he had not been asked for his views, something that led to “arbitrary and mistaken observations.”
He was also concerned that a confidential report had been leaked to the media at a time when there was an ongoing police investigation into the leaking of Central Bank documents. Conveniently, he used this excuse yesterday at the legislature to justify the fact that the Central Bank had failed to provide the Auditor-General with all the documents relating to the latter’s investigation into the awarding of contracts to PIMCO and Alvarez & Marsal. Priority had been given to the police investigation and “this was the reason for the delay”. But apart from the delay, the Auditor-General also pointed out that not all the documentation had been given to her office by the Central Bank.
The audacity of the Governor is quite astonishing. He had blatantly ignored the Central Bank’s procedural rules and most principles of corporate governance and all he had to say was that the Audit Committee had exceeded its powers, which it had not. Among other things, Demetriades assigned projects to Alvarez & Marsal in violation of board decisions that had excluded it from handling these projects and sanctioned expenditure that was not budgeted without securing board approval. Has he not been exceeding his powers?
But Demetriades appears to believe that the Governor could do exactly as he pleases, violating procedures, concealing information from the board and ignoring its decision, because he is an independent state official. But independent state officials are not unaccountable, nor are they a law unto themselves as Demetriades would have us believe. Yesterday at the legislature, once again, he reminded deputies about the opinion of the ECB, which urged the House of Representatives to note its comments about the independence of the Central Bank.
But independence is neither licence to ignore procedures and rules nor exemption from accountability. Perhaps the ECB needs to spell these things out to Demetriades, whom it has been giving unqualified public support to, in defence of the independence of the Central Bank. Would Mario Draghi have responded in the same arrogant way as Demetriades if the ECB audit committee carried out an investigation into his decisions? We do not think so.