Closed-Door Talks Have Bank of Canada Concerned About Trust

The Bank of Canada’s top policy makers spoke almost twice as often behind closed doors as they did in public over a three year span, according to an internal review that also said private speeches could undermine public trust.

Of 229 Governing Council engagements between 2014 and 2016, 64 percent were to private audiences, according to the review, which was obtained by Bloomberg through a freedom of information request. The Dec. 12 report made several recommendations, some of which are already being implemented, a spokeswoman said.

“Fanned by a general lack of trust in the financial system in many advanced economies, and by the desire for increased transparency, private speeches by central banks are increasingly viewed with skepticism because of concerns about possible conflicts of interest, or access to privileged information for certain groups,” the bank’s communications department said in the report.

Global central banks face heightened scrutiny as they play an increasingly critical role in propping up economic growth, with interest rates at historical lows and the use of unconventional tools like asset purchases. Canada’s central bank has kept its benchmark rate at 0.5 percent since 2015.

Erik Hertzberg/Bloomberg

The Ottawa-based bank “has taken action” including plans to revise guidelines and publish them for the first time, spokeswoman Louise Egan said by email. The way private speaking events are planned has also been reviewed and press officers are now traveling with policy makers to some private engagements, she said.

“Governing Council highly values the input and insights it receives from business, labor and academic groups in private settings, where members of those interest groups are able to share their views with candor and frankness,” Egan wrote. “Members also reiterated their strong commitment that remarks made in private settings must only reflect views we have already communicated publicly.”

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Photographer: David Kawai/Bloomberg

There will have been 32 private speaking engagements by members of the governing council in the first six months of 2017, Egan said, including nine by Governor Stephen Poloz.

Shaun Osborne, chief foreign-exchange strategist in Toronto at Bank of Nova Scotia, said while the bank does a good job of “communicating appropriately,” it’s “quite surprising that they do engage in that level of off-the-record briefings.”

Privileged Access

The report highlights four main challenges associated with private speeches: the rise of social media, expectations of transparency, public mistrust and complaints from the media.

“Any perception that central banks are providing to a select group privileged access to the banks’ information or policy thinking risks damaging well-earned reputations and further exacerbating mistrust in the financial system as a whole,” it said.

Extraordinary measures implemented since the financial crisis are making it necessary for central bankers to explain the policies more frequently, fueling the need for more outreach of the sort the report is flagging and increasing the risks information will be inappropriately shared.

Recommendations in the eleven-page memo include publishing a set of guidelines for external communications and developing a “a more robust set of criteria to help define what constitutes an acceptable private speaking engagement.”

That would bring Canada more in line with changes made at the U.S. Federal Reserve, the European Central Bank and the Bank of England, the memo said. The report cited recent controversies, including when remarks from a 2015 closed door speech by European Central Bank Executive Board member Benoit Coeure “was viewed to have to have contained” market-moving information about ECB bond-buying plans.

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Mistaken Tweet

Last year, private remarks by Senior Deputy Governor Carolyn Wilkins were tweeted out by an audience member “which many mistakenly interpreted as the Bank planning to launch a digital currency,” the memo said.

The most common private engagement is a 20- to 25-minute presentation to a professional association or a board of directors. Others include remarks at academic conferences or to university classes.

The Bank of Canada’s code of conduct already bars staff from disclosing confidential information when speaking at events, or from giving an unfair advantage. The existing approach still has “few hard restrictions” on accepting private speaking invitations, the report said. One guideline is the bank shouldn’t provide new information on the economic outlook at an event or venue that doesn’t provide instant public access to the information.

Publishing more speech texts could be overkill, said Andrew Kelvin, senior rates strategist at Toronto-Dominion Bank’s TD Securities unit.

“I don’t see what it adds truthfully, and if anything it might invite a whole bunch of unfounded speculation,” Kelvin said by phone. “From a perception standpoint I understand the appeal of tightening it up a bit, but I don’t think there’s a perception that there is a whole bunch of people getting information that other people aren’t.”

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