• The anniversary of broken promises | Corporate Europe Observatory

    The anniversary of broken promises

    September 13th 2013 The financial lobby

    5 years after the bankruptcy of Lehman Brothers, and the beginning of the worst economic crisis in decades, the EU has not delivered on promises of strong regulation of the financial sector. A swift overhaul is needed. Together with other organisations (full list at the end), CEO has signed the statement below. 

    The 15th of September marks the fifth anniversary of the most spectacular bankruptcy in the financial crisis of 2007-2008. On that day, renowned Wall Street investment bank Lehman Brothers filed for bankruptcy due to disastrous investments in US real estate through financial products. At the time, European leaders made bold promises to reform financial regulation in the EU “to respond to crises, but also to avoid them in the future”, Commission President Barroso said. Five years on, the results are woefully insufficient.

    The financial crisis led to a devastating economic crisis in Europe. Unemployment in the EU has increased steadily to a record level of nearly 26 million – a staggering 10.7% of the labour force with youth unemployment much higher. It also set the euro crisis in motion which has resulted in painful austerity measures in almost all EU countries and hundreds of billions of euros in expensive bailouts of banks that made bad loans in the first place. Having paid such a high price, European citizens have every right to demand effective action from politicians to protect us from a repeat of this meltdown. But after five years of financial ‘reform’ in the EU, the return on our investment is woefully inadequate.

    The evidence is clear: European banks continue to be undercapitalised, and EU banking regulation continues to allow banks – such as Deutsche Bank and Barclays – to borrow even more than Lehman Brothers did before it crashed1; derivatives markets continue to grow and now stand at a value much higher than five years ago2; few toxic financial instruments have been banned, not even the complicated securities that played a key role in the crisis.

    One key reason for this failure is the success of the financial lobby to keep effective regulation at bay. The financial industry is spending millions to influence decision makers, and scaremongering is their standard argument: they claim that regulating finance would be costly to society in terms of unemployment. However, this is an absurd argument if one looks at the costs of the crisis in 2008, regarding bank bail outs and millions of people losing their jobs.

    Financial corporations have enjoyed uninterrupted privileged access to decision makers, for instance in the debate on new rules on banking and on derivatives. As pointed out repeatedly by the Alliance for Lobbying Transparency and Ethics Regulation in the EU (ALTER-EU) and others, advisory groups of the Commission and the Council were, and are still, dominated by representatives from big financial corporations. A group recently set up to advice the EU on measures to stop tax evasion is full with representatives of the same accountancy industry that is so instrumental in advising companies how they can minimize their tax payments.

    #financial_industry is spending millions to influence decision makers
    #investment is woefully inadequate.
    to #stop_tax evasion
    #regulation of the financial sector