EU
11 December 2024
The problem
Central banks, as incredibly powerful financial institutions, hold a pivotal role in the global economy. To be shielded from political pressure, they set their policies independently from elected governments. While this independence is important, central bank decisions have enormous consequences on the cost of living, wealth distribution, employment and much more – for this reason, it is crucial that their policies consider social needs. It is also vital to maintain a high degree of accountability and to ensure democratic oversight over central banks.
The European Central Bank (ECB) is officially accountable to the European Parliament. However, right now, this accountability is weak and limited to a few tools, like when Members of the European Parliament (MEPs) ask clarifying questions to the President of the ECB during so-called ‘monetary dialogues’. Moreover, the Parliament only has a consultative role in the appointment of board members, who are effectively nominated behind closed doors by the European Council.
A key tool for evaluating the ECB’s policies is the resolution that the European Parliament adopts every year on the Annual Report of the ECB. Over time, we have worked with partners and MEPs to ensure that these resolutions highlight the central role the ECB should play in addressing the climate crisis, and other major social issues, such as the distributional consequences of its decisions.
The EU economic system is currently driving social inequalities and debt crises, favouring the interests of a select few people – primarily private banks and big corporations – over the needs of the many. This issue is exacerbated by the lack of diversity and inclusion within institutions that hold economic power. For instance, since its inception in 1998, only five women have served on the ECB’s Executive Board. Despite the European Parliament’s repeated calls for more balanced candidate lists for ECB board appointments, progress has been slow, with most top officials being white, middle-aged men.
What we need now
We believe that balanced and diversified leadership is of paramount importance. If we continue to ignore the lack of diverse voices in economic decision-making, inequality will inevitably persist in our societies.
This is Positive Money’s vision for a more accountable and diverse financial system:
Broader mandate for the ECB: Besides the primary objective of maintaining price stability, the ECB is also bound by a secondary mandate to ‘support the general objectives of the European Union’, including in the social and environmental spheres. This ‘other side’ of the central bank’s role has, however, been neglected. The ECB should adapt its policies so that they support the EU’s green and social transition goals.
Stronger central bank accountability: The European Parliament should play a stronger role in scrutinising the ECB’s activities, in particular by reinforcing the role of the monetary dialogues, and making sure that the ECB responds point by point to the Parliament’s annual report on the activities of the central bank. Accountability systems should also be improved at the national level. Right now, only a minority of central bank governors are legally obliged to account for their actions in parliamentary hearings.
Better engagement with diverse voices, including through civil society organisations: The ECB has already opened up spaces for dialogue with civil society organisations, especially during its latest strategy review in 2021. Going forward, the ECB should strengthen this engagement, for instance through annual civil society meetings and consultations. It should also engage in initiatives to directly listen to people’s demands and consider deliberative processes bringing representative samples of the public directly into the decision-making process.
Increased leadership diversity: The lack of diversity in central bank leadership is often attributed to a flaw in the design of the appointment processes. These processes need to be improved so that diversity becomes structural. One way to do this is by establishing a balanced pool of diverse candidates when appointing leadership figures at the ECB, as well as at the national central banks.
