New Issue of EU Financial Reforms Newsletter

The year 2011 will bring decisions on important financial reforms. This newsletter covers some of the new EU rules that are already in the decision making process or in the legislative pipeline of 2011:

• Regulating derivatives trading — including food commodity derivatives — its operators and trading platforms (e.g. exchanges), over-the-counter deals and backing services;
• Deciding on a financial transaction tax or financial activities tax;
• Fundamentally reforming the system of credit rating agencies;
• Some small technical changes to collective investment instruments;
• Changing how the EU economy is being governed to maintain the Euro.

Other wide ranging reforms that are in the pipeline are the EU implementation of the so-called Basel III capital requirements, restricting tax evasion, and mechanisms to deal with financial conglomerates or banks that are failing. The final article provides some overview of the EU current financial reform agenda not covered elsewhere in the Newsletter, followed by interesting dates.

The European Commission (EC) has been posting a series of public consultations on a whole range of issues on its website over the last few months. These consultations are used in the preparation of legislative proposals by the EC on which the European Parliament (EP) and the EU Council of Finance Ministers have to co-decide. The complexity of the proposals and the short term period for response has made it difficult for civil society to give input. Some have tried, as you can read in this newsletter, but the majority of the respondents have been from the financial industry.

The EU decision-making process can be described in the way Dennis J. Snower, President of the Kiel Institute for the World Economy has stated in Davos (as quoted in The New York Times): “Many policymakers are seriously scared of making fundamental policy decisions. People in the banking industry have an interest in making the situation seem complex and difficult, even when it isn’t.” A Brussels based expert described the EC proposals as generally accommodating the existing business models of the European financial industry and not forcing the financial industry to adapt its business model to new regulations. The EU regulations are not based on a model in which finance is at the service of sustainable development of Europe and its citizens.

The enormous lobby of the financial industry in Brussels remains a serious problem. It has enabled the financial sector to weaken many legislative proposals and reduce them to small steps in a web of piecemeal EU laws, measures and instruments. Civil society is hardly heard in Brussels, even if the EC has been somewhat accommodating towards NGO complaints over the last year. After MEPs called for a Finance Watch by civil society last year, discussions are ongoing in Brussels for new capacity for NGO monitoring, lobbying and advocacy.

This year will need continued vigilance, action and perseverance from civil society. Opportunities and mobilisations for actions are under way, amongst others in France, who is holding the G20 and G8 presidency in 2011, and in Hungary, the current president of the EU.

This newsletter aims at being an instrument to monitor the EU’s financial reform process. Given the volume and complexity of this reform, however, it is selective. A particular focus in this newsletter is given to how the EU is currently dealing with curbing financial food speculation.

Download the newsletter EU Financial Reforms (PDF, 411 KB)