New Central Bank governor faces bulging in-tray on first day

Key ECB meeting on rates and stimulus looms

Incoming Central Bank governor Gabriel Makhlouf.

Incoming Central Bank governor Gabriel Makhlouf.


After Gabriel Makhlouf finishes wandering around the Central Bank’s headquarters in Dublin’s north docklands on his first day on Monday and negotiates the canteen’s lunchtime offerings – including a roast chicken dish and a vegetarian curry – the bank’s 12th governor will find a deep in-tray waiting in his second-floor office overlooking the River Liffey.

First and foremost will be preparing for a key European Central Bank (ECB) governing council meeting on September 12th, at which members, including Mr Makhlouf, will consider whether to ease rates, launch a new bond-buying programme – or both – to shore up the euro zone economy.


While it was all-but-certain a few weeks ago that a massive ECB stimulus package was on the way, some of the council’s more hawkish members, including executive board member Sabine Lautenschlaeger and Dutch central bank president Klaas Knot, have indicated in recent days that they will be among those calling for the ECB to hold off on the bazooka.

It is unlikely that Mr Makhlouf – a newcomer to the table, who does not have the economics credentials of many other members, including his predecessor, Philip Lane, now the ECB chief economist – will be a leading voice in the debate.

Back at home, the main item on the agenda over the coming months will be the Central Bank’s annual review of mortgage restrictions, introduced by then governor Patrick Honohan in 2015 to prevent a new credit bubble.

Already pressure is rising, with Taoiseach Leo Varadkar saying at the end of July that he hoped the Central Bank will loosen the rules, saying it was “very tough” for many would-be home buyers to build up a deposit for a mortgage while pay up to €2,000 a month in rent. Observers will keen to see how doggedly Makhlouf guards the bank’s independence.

Banks, which have had to deal with a series of additional regulatory capital demands in recent years to ensure they have enough money to deal with another crisis, will also watching for how fast Makhlouf moves to direct them to hold another layer of reserves. Before departing in May, Lane asked the Government for powers to impose a so-called systemic risk buffer – or SyRB – on banks. Minister for Finance Paschal Donohoe agreed to the request in July.

Egyptian-born Mr Makhlouf, son of a Cypriot-British father and Greek-Armenian mother, has also inherited a number of enforcement investigations against the banks involved in the tracker-mortgage crisis. The Central Bank, under Lane, signalled that it was taking a tough line on the issue, imposing a record €21 million penalty in May on Permanent TSB, the first of the banks to reach a settlement over its failings.


Meanwhile, the new governor will also be responsible for introducing a new regime that will make it easier to hold senior bankers accountable for failings and wrongdoing under their watch. The so-called senior executive accountability regime (Sear) is expected to come into force next year, following enabling legislation and Central Bank consultation period.

More pressingly, however, Mr Makhlouf will need to draw a line finally under his controversial handling of a security breach in New Zealand shortly after his Irish nomination was announced.

Mr Makhlouf, a former UK civil servant who was hired in 2011 to head New Zealand’s treasury department, claimed in his last weeks in office in May that the ministry’s IT system had been deliberately and systematically hacked, resulting in the lead of sensitive budget information.

However, it later emerged that the information had been published on the ministry’s website and could be accessed using a search function. New Zealand’s public service watchdog concluded at the end of June that Mr Makhlouf sought to blame others and managed the incident poorly.

Makhlouf said in a letter dated July 15th to Mr Donohoe that he could have handled the issue “more clearly and with a different emphasis”, though he was “pleased” that he “honesty, integrity and political neutrality are not in question”.

It is understood that the new Central Bank governor is aware that the issue continues to cast a cloud over his appointment and is considering ways to address the issue in a more publicly in Ireland in the coming weeks. He will need to do so if he is to hit the ground running.

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