Restore purpose and democratic accountability to financial institutions and financial regulation
Build a Citizen dashboard of financial institutions, measuring risk, costs and benefits to society
Building such a dashboard will have a number of merits, including engaging civil society (together with elected officials, policy makers, regulators/supervisors and the financial industry) in a discussion around the purpose of finance and the definition of key quality, risk and cost indicators, from a public interest’s perspective. Once defined, these indicators would allow for comparability across financial institutions, fostering genuine, socially useful competition. This would also make possible a public oversight of major financial institutions.
Build a Citizen dashboard of financial reform, measuring progress against objectives
The complexity and, to a certain extent, opaqueness of the reform process feeds scepticism as to its effectiveness. A citizen ‘reform dashboard’ would compare the progress of financial reform with its overall objectives (defined from a citizen’s perspective), helping to restore public confidence and allowing stakeholders to align their efforts. Today, even specialists cannot agree on whether financial reform is progressing as citizens need it to, due to the lack of clear indicators. Importantly, a number of legislations passed (or rules implemented) is not an indicator of success. An example of such indicator is rather the volume of OTC derivatives traded on exchange and cleared centrally – measuring the progress of the related G20 commitment.
Increase the democratic accountability of financial regulators and supervisors
The European Central Bank’s powers are due to be increased soon in the context of the single supervisory mechanism for banks. Obvious areas for improvement in terms of transparency and accountability (as well as existing positive practices) have been documented, together with detailed recommendations. A lack of trust or even resentment vis-à-vis such a crucial institution poses a threat to democracy.
Finance Watch also supports giving extra powers and resources to the European Supervisory Authorities (EBA, EIOPA, ESMA), provided these are balanced by increased democratic accountability. This should start with full transparency of the rule-making process and include a much more balanced representation of stakeholders in consultations and stakeholder groups.
Proactively engage civil society organizations, unions, consumers and investors in the steering of financial governance and reform
It is not enough to have transparency and accountability, there needs to be a permanent and genuine engagement of organizations and individuals representing society at large in:
This requires, in addition to the recommendations above, a constant, active pedagogical approach from actors of the financial system at large, with the support of specialized civil society organizations.