Besieged by bankers opposed to regulation of their sector, members of the European Parliament (MEPs) have taken an unusual step
A cross-party alliance has called for an international campaigning organisation to concentrate on remedying the flaws of the financial services industry with the same tenacity that Amnesty International focuses on victims of torture and Greenpeace on toxic chemicals and whales.
The call -- signed by 70 of the Parliament's 736 elected members -- was prompted by concerns over how the financial lobby had marshalled its ample resources over the past few years in a bid to dilute legislation drafted in response to the global economic crisis. According to the MEPs, the pressure they have been placed under by the financial industry is so intense that it represents a threat to democracy, especially as public interest groups have generally lacked the means or the expertise to mount a robust counter- offensive to the banks' efforts.
The pressure from the financial industry is unlikely to be eased in the coming months as the European Union's only directly elected body considers a number of crucial dossiers.
First, the Parliament will vote Jul. 7 on proposed new rules on capital requirements for banks and on how much financial 'whiz-kids' may be paid in bonuses. Written in response to the immense public anger over how banks rescued at the taxpayers' expense were maintaining lavish pay-and-perk deals for their management, the latest draft of the proposal would require that upfront cash bonuses do not exceed 30 percent of total bonuses. Instead of doling out bonuses in cash, between 40 percent and 60 percent of all bonuses would have to be deferred and could be recovered in cases where investments fare badly.
Arlene McCarthy, British Labour Party member of the European Parliament (MEP) who has been leading the Parliament's negotiations with EU governments on the proposal, is among those who have expressed misgivings about the influence that banks wield over politicians and civil servants. She has stated that her plan is not designed to punish bankers but rather to ensure that bonuses they receive are linked to their performance.
The European Banking Federation (EBF), an umbrella group for 5,000 banks, is claiming that this kind of ceiling on bonuses would prove economically damaging.
"The European Parliament is promoting rules that are more stringent than those of our major trading partners and competitors," Robert Priester, an EBF representative, told IPS. "The stricter rules in the EU raise issues of competitiveness for Europe's banking or financial services sector."
According to data it made available to an EU register of lobbyists, EBF spent over a million euros (1.3 million dollars) last year in trying to influence the Union's institutions. "Lobbying in the EU is fundamentally different from the U.S. where donations and contributions are commonplace to exert influence," said Priester. "The European institutions do not work that way and EBF does not need to make such donations."
Despite claiming to have a relatively small budget for its activities, the EBF has been able to ensure it has full access to the Brussels elite. Its secretary- general Guido Ravoet doubles up as chairman of the European Parliamentary Financial Services Forum.
Presenting itself as dedicated to spreading "neutral information", the forum nonetheless brings together some of the best-known players in the global banking industry such as Goldman Sachs, Deutsche Bank and JP Morgan, and MEPs sympathetic to them. Some MEPs -- including McCarthy -- who have warned about the power of the financial lobby are also active in the forum.
In February, the forum published a briefing paper, exhorting MEPs to radically reshape a proposed EU directive regulating hedge funds. Originally this directive had been slated for a vote in the Parliament in July but the decision has been postponed for another few months, while the main EU institutions continue to deliberate over its contents.
The hedge fund industry -- financial speculators largely based in the City of London -- has literally been seeking to write the rules it should play by itself. In April, the Parliament's main committee for economic affairs voted on its response to the proposed law. MEPs had to wade through 1,600 suggested amendments to the law on that occasion. Although only MEPs themselves can sign amendments, it is common practice for industry lobbyists to act as "ghost-writers". More than half of the amendments in this case were written by the financial services industry, according to Parliament insiders.
Whereas hedge funds have been widely accused of engaging in highly risky practices that helped trigger the global financial crisis, their supporters have been portraying them as economically beneficial. Open Europe, a corporate- funded "think-tank" in London, has published several pamphlets arguing that hedge funds and private equity bring billions of pounds in tax revenue to the British economy each year, while not addressing evidence compiled by the Tax Justice Network and anti-poverty advocates of how hedge funds can be vehicles for tax evasion.
A hedge fund lobbyist, who spoke on condition of anonymity, said it is "absurd" to argue that financial services endanger democracy. "Before now, we were criticised for not engaging - in inverted commas - with policy- makers," he said. "Now that we have engaged, the perception is we have engaged too much. The truth of the matter is that many MEPs are so ignorant of how financial services work that there is an absolute need to have the relevant industries offering their views. Otherwise, the consequence would be dreadful legislation."
Olivier Hoedeman from Corporate Europe Observatory, a lobbying watchdog, says that the financial services representatives have "no reason to complain whatsoever" about belated efforts to regulate their sector.
"The banking lobby in Europe has been very successful so far in postponing and avoiding any serious new regulation," he said. "The EU is far behind the U.S. We have a very ironic situation, where there have been more positive changes and tougher regulations passed so far in the U.S. The EU has left things up in the air."
http://www.tni.org/article/save-us-these-bankers-fast
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