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26 June 2015
Financial industry lobbyists are using concerns about market liquidity to try and scare policymakers away from necessary reforms to bank structure and capital. This renewed focus on financial market liquidity risks confusing the symptom with the cause. If policymakers react in the wrong way to “liquidity lobbying”, they risk leaving us with more short term investing and a financial system that is more fragile and pro-cyclical than it needs to be.
10 June 2015
The European Commission is very confident about the level of support they claim for its Capital Markets Union project. But this support is not representative: the Commission’s event on 8 June mostly gave the floor to representatives of the finance industry, which will benefit from CMU, while civil society representatives with a different viewpoint were given very limited space.
In his new fascinating lesson from history, our guest blogger Fabien Hassan tries to explain the origins of the Monaco crisis in the early 1960s. He compares the treatment of tax havens by bigger countries before and after the globalisation of capital flows, and shows how tax havens were emancipated from their patron state.
Thomas Lines, a British consultant and former journalist and lecturer, says the mandatory separation of retail and ‘casino’ banking would improve financial stability by discouraging wholesale funding and bank interconnectedness. He argues that the EU and UK bank structure reforms should go further by encouraging banks to engage in more economically useful activities.
Iain Hardie and Huw Macartney present here the outcome of their research on the political process that led to the European proposal for a structural reform of banks, sheding light on the role played in particular by France and Germany in the process. As lecturers in International Relations at the University of Edinburgh and in Political Economy at the University of Birmingham respectively, they provide us with a political perspective on the debate and its possible outcome, and show how the defense of national champions has been predominant in the policy making process.
Our contribution from Italy by Andrea Baranes from the Finance Watch member organisation Fondazione Culturale Responsabilità Etica brings a view from a country that should have a strong interest in banking separation, yet politicians are reluctant to pursue the issue. The author describes the political standstill during Italy’s Council Presidency and argues that Italy’s failure to push the proposal during this period was a missed opportunity for Italy, which could only gain form banking structural reform.
German policy-makers have passed preemptive legislation on banking structure with the aim of influencing the direction in which the EU should go. Christian Ahlers from the consumer organisation “Verbraucherzentrale Bundesverband” (vzbv, a Finance Watch member) argues that the German reform is not well equipped to protect citizens and consumers. He warns that regulatory arbitrage and nationally fragmented supervisory approaches have in the past allowed the financial industry to bend existing rules, and this played a role in allowing the last crisis to happen.
Compared to its neighbours France and Germany, Belgium passed a far more ambitious banking reform. However, as the contribution by Rosa Stucki from the Finance Watch member organisation Réseau Financité and Frank Vanaerschot from the NGO Fairfin will illustrate, the reform still falls short of guaranteeing systemic safety leaving many exceptions and loopholes, which is why the authors stress the need for ambitious reform at European level.
Finance Watch has invited guest bloggers from various Member States to share their national perspectives on banking structural reforms pursued by their countries and at European level, and share their views as voices of civil society on the issue.
Charlotte Geiger 17 February 2015
Since January 2015, Finance Watch has a new Secretary General: Christophe Nijdam. If you want to get to know him – what he did before joining Finance Watch and his views on reforming finance – we invite you to read this interview. You will learn more about his time as a banker in New York, his views on markets, and how today, he is still convinced that finance, when it is done properly with the right incentives and the right time horizon, can be a very powerful tool for economic progress.
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