Protest meeting in front of the Icelandic parliament as part of the Kitchenware-Revolution that started in the wake of the collapse of the banking system (© OddurBen)
The activities of Europe’s banks concern all of its citizens
: almost everyone has a bank account, we overwhelmingly use bank credit money, and businesses rely on bank credit. Meanwhile developments such as internet shopping and contactless payment cards bind us ever closer to our banks. It’s safe to say that financial precarity has replaced financial exclusion as a major problem in Europe: Europeans, especially households, are heavily indebted, the financial crisis destroyed millions of jobs, and too-big-to-fail banks continue to dominate.
Given the high stakes you might think Europeans are trying to change how banks operate, but public participation in the banking system remains negligible
, whether through bank governance or regulation or other means. Civil society plays a fairly marginal role in the politics of commercial finance, thereby largely surrendering the advocacy field to industry lobbies and establishment think tanks. As a result, civil society activism to steer financial markets in the common good remains mostly muted and ineffectual, and governance of finance generally eludes democratic accountability. So what blocks public participation?
Find the answers in this great article
by our guest blogger Duncan Lindo
, Research Fellow at Leeds University Business School, University of Leeds and an independent researcher in the political economy of banks and finance.
Be honest: do you always read the terms and conditions before buying online? If yes, that makes you one in a thousand. Online retailers know this and are good at exploiting it (in 2010, a gaming company tricked 7,500 people into selling their immortal souls
– as an April fool’s joke). For financial services, online terms and conditions could be the next big challenge for protecting consumers.
Recently, the European Commission launched a green paper looking at ways to promote the sale of bank accounts, loans, insurance policies and other retail financial services across borders in the EU.
At Finance Watch, we think this is a golden opportunity to promote a range of basic products that can help to protect consumers from being tricked. These products would need to be universally available, comparable, simple and easy to understand, regardless of which member state they are bought or sold in.
People often say “the devil is in the detail” with financial services. We fear that the Commission will miss this opportunity to update consumer protection for the digital era. If you want to know why, read our recent blog article
or watch the video
of our Secretary General’s participation in the Commission’s hearing on this topic.
|Commissioner Hill (left) with his predecessor as the EU’s top financial regulator, Michel Barnier (© Michel Barnier / Twitter 20 April 2016)
Did anyone forget that the recent crisis caused major economic meltdown? And that we needed more than 40 legislative proposals – many still not implemented – to stabilize the situation?
For all those who did not, it might be a bit surprising to see that the European Commission recently published a call for evidence
to assess whether the new rules are overlapping, contradictory and as a result are acting as barriers to financing for growth
(read more in Commissioner Hill’s speech at EUROFI in Amsterdam
on 21 April 2016).
At Finance Watch, we fear that this assessment could take us in the wrong direction – before we even know if the new rules are working.
Firstly, we don’t think that making financial regulation lighter is necessarily good for the real economy. The financial crisis killed millions of jobs and put the EU into recession; it showed pretty clearly that proper financial regulation is a pre-requisite for a healthy economy
, not a barrier to it.
Secondly, the way the consultation is structured favours the financial firms being regulated: it asks only for quantitative evidence, which gives the financial industry an in-built advantage, and it asks the financial industry to say if regulation is too burdensome and where rules need to be adjusted.But regulation needs to weigh societal benefits
as well as costs to industry.
Good regulation is essential to the fairness, efficiency, and effectiveness of economies
and making it work is a never-ending mission. Any steps to diminish the regulatory burden, ask supervisors to step back or trust the financial markets to correct themselves could be a big mistake.
Finance Watch has been invited to speak at a public hearing on 17 May on this consultation, you can be sure that we will address these points clearly!
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