RIGA, Dec 18 (Reuters) - Reeling from the fallout of a bribery scandal, Latvia’s central bank must become more transparent to clean up its image and must also push for greater transparency at the European Central Bank, its incoming chief Martins Kazaks said on Wednesday.
The Latvian bank, one of the 19 central banks that make up the ECB, was briefly shut out of European decision-making last year when Governor Ilmars Rimsevics was barred from office on charges of taking a bribe and money laundering.
While Rimsevics has denied all wrongdoing and resumed his ECB work on the orders of European courts, he still faces a criminal probe at home even as his mandate as central bank chief expires this week.
“The bank’s reputation has suffered and it’s unpleasant,” said Kazaks, already a Council member at the bank, whose term as governor starts on Dec. 21. “There will be hard work to restore the reputation with specific tasks, and the bank is already doing a lot of things.”
Kazaks, who will sit on the ECB’s rate setting Governing Council, said the bank will become more open in its communication and take its message directly to the people, trying to shed the ‘ivory tower’ image that prevailed under Rimsevics.
The government has already introduced a term limit for the governor, and Kazaks said it was “absolutely necessary” to address the fight against money laundering on the pan-European level because it is a global issue.
Several European banks are facing allegations of being involved in a Baltic money-laundering scandal and failing to prevent tainted Russian money from flowing through their branches across the world.
Nordic banks have been especially hit by a steady stream of allegations, with Sweden’s Swedbank and SEB and Denmark’s Danske Bank all facing allegations.
The problem had become so widespread that the International Monetary Fund is expected to investigate efforts by Nordic banks and regulators to stop money laundering in Estonia, Latvia and Lithuania.
“When we look at it as a question of the whole European Union, as a global matter, then I think of the initiative to create a united anti-money laundering supervision in the whole euro zone, in the whole European Union as a very good one,” Kazaks said.
Although Kazaks declined to discuss current monetary policy he said that the ECB’s stimulus efforts had been effective, even if the ECB’s ability to influence the economy has diminished.
“The strength of monetary policy to manage economics is not that effective as one would like, for instance, low interest rates. Cooperation between monetary policy, fiscal policy and structural policy thus becomes very important,” he said.
Kazaks also declined to discuss the ECB’s upcoming strategy review in detail but said the issue of digital central bank money should be on the table because there is demand for such an instrument and there was a risk that private sector players would seek to fill this void.
He also said the ECB has an influence over a broad range of issues related to climate change so the bank should discuss its involvement even if its main role remains fighting inflation. (Reporting by Balazs Koranyi; Editing by Hugh Lawson)