ECB raised concerns over new Central Bank of Ireland boss

The European Central Bank (ECB) raised concerns over the Government's choice of a new governor for the Central Bank of Ireland.

The Central Bank is pivotal in regulating the financial services sector in Ireland and its governor sits on the key policymaking council of the ECB.

Leading officials in Frankfurt made direct contact with senior Government figures over the appointment of Gabriel Makhlouf.

His appointment was approved by the Government in May and he will take up the €286,760 post in September.

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He has been chief executive and secretary of the New Zealand treasury since 2011. Mr Makhlouf was previously a senior civil servant in the United Kingdom where he was a principal private secretary to Gordon Brown when Mr Brown was chancellor of the exchequer.

However, the Government decision was caught up in a controversy involving Mr Makhlouf in New Zealand. It emerged he claimed the accidental leak of sensitive budgetary material was a result of a hack, but a follow-up police inquiry found no evidence of a hack.

The Government stuck to its decision to appoint Mr Makhlouf despite ECB concerns, which are understood to include the fact that Mr Makhlouf is not an economist, as well as the controversies in New Zealand.

Another ECB concern, according to sources, was that Mr Maklouf holds a British passport, an indication of post-Brexit tensions at play within the institutions of the European Union. When he takes up his Central Bank role, Mr Makhlouf will also become a member of the ECB's governing council.

There was annoyance in Dublin that the ECB would seek to intervene in a decision that is the preserve of a sovereign government.

A senior ECB official said there was considerable surprise in Frankfurt at Mr Makhlouf's appointment ahead of Sharon Donnery, who narrowly lost out last November in the competition to become the next chair of the ECB's banking supervision arm.

Ms Donnery had been one of the final two candidates to chair the Single Supervisory Mechanism, a post which was regarded as far more senior than governor of a national central bank, said the official.

The previous two governors, Philip Lane and Patrick Honohan, had stood up to the Government on several policy matters, most recently on mortgage lending limits. And Ms Donnery was perceived in Frankfurt as an economist of similar character.

“It seemed the Government had decided it didn’t want an economist like the last two governors,” added the ECB source.

A spokeswoman for Minister for Finance Paschal Donohoe said the department had received "no objection" from the ECB. "The appointment is made under national legislation. Furthermore, it is Mr Makhlouf's intention to obtain an EU passport, to which he is entitled, following his arrival in Ireland later this year."

An ECB spokesman said it is "not involved in the appointment procedures of national governors".

A spokesman for the Central Bank said: “We are not aware of any ECB position in relation to this issue.”