7th Dec 2019

British EU commissioner causes controversy on banking reform

  • Jonathan Hill - his letter was sent to Frans Timmermans on 18 November (Photo: European Parliament)

Financial services commissioner Jonathan Hill has named three pieces of legislation that he believes ought to be scrapped, but his choice has sparked criticism among MEPs.

In a letter dated 18 November and seen by EUobserver, Hill wrote that "for this commission to be different, and truly political in its work, I fully agree with you that we focus on priorities."

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 30-day free trial.

... or join as a group

The letter was sent to Frans Timmermans, the commission vice-president in charge of better regulation and copied to two other economics vice-presidents: Jyrki Katainen and Valdis Dombrovskis and to the commission's secretary general, Catherine Day. Its authenticity has been confirmed by the EU commission.

Timmermans has asked all commissioners to send him a list of priorities and pending laws that may be ditched, in an effort to cut red tape.

Hill mentions three pieces of legislation that caught his attention - one on "investor compensation schemes" to be withdrawn immediately, two others on "occupational pension funds" and on "structural banking reform" possibly being recalled in the next years.

The British commissioner does not explain why he wants to ditch the "investor compensation schemes", but EUobserver understands that the bill, dating back to 2010, is anyway all but dead due to a lack of consensus among member states.

The proposal was made by Hill's predecessor Michel Barnier in response to the Madoff scandal in 2008, when the US wealth management fund ran by Bernard Madoff turned out to have been an elaborate Ponzi scheme which gambled away people's money.

Under the 2010 bill, Barnier wanted to set minimum standards for the 39 different investor compensation schemes across the EU that investors can call upon when firms like Madoff's engage in fraud or negligence.

The proposal envisaged an increase of the minimum level of compensation from €20,000 to €50,000 per investor and to make such payments much faster - from years to a maximum of 9 months after the investment firm's failure.

Hill then explains why he "keeps a close eye" on the other two pieces of legislation possibly being ditched next year.

On "occupational pension funds", a bill tabled in March by Barnier which seeks stricter rules on where pension funds are allowed to invest, the Italian presidency is seeking to reach an agreement in the next few weeks "so it would be odd to withdraw it now," said Hill.

"However, if there is no GA [agreement], and no pick up in the EP's interest in this, we should come back to this," he added.

Occupational pension funds are financial institutions which manage collective retirement schemes for companies, so that their employees get retirement benefits in addition to the compulsory state pension.

There are some 125,000 such funds operating across the EU, worth €2.5 trillion in assets and covering 75 million people.

The other bill that may be ditched next year is about "structural banking reform", also dating back to March 2014 and at the time labelled as the "missing piece" of the newly set up banking union.

"We need to see how much progress is made on the much bigger proposal on banking structural reform, where member states are pulling in different directions in opposition to it, so withdrawal could be an option next year if member state support does not pick up," Hill wrote.

EUobserver understands the UK opposes the bill because it has national rules that are stricter than the EU proposal. Meanwhile France and Germany have weaker rules which they don't want to toughen up.

But the timing of Hill's letter has raised allegations of ties to the UK and French banking sector, which is heavily lobbying against the bill.

Just a few days before Hill sent the letter to Timmermans, the British Bankers’ Association and the French Banking Federation jointly wrote to Timmermans to ask that the reform bill be withdrawn because it would harm capital markets and complicate the implementation of national laws.

Green Belgian MEP Phlippe Lamberts, who sits on the economics committee, sees a clear link, citing Hill's previous work as a lobbyist for the British financial industry.

"While we expected that Lord Hill would be sympathetic to the demands of the financial lobby to weaken financial regulation, given his background, it is nonetheless disturbing he is looking to go so far, so soon, with such a lack of subtlety," Lamberts told this website.

"The structural reform of the banking sector, and the proposed separation of banking activities, is one of the central elements of Europe's banking reforms and banking union. To suggest withdrawing this legislation at such an early stage is breathtaking," he added.

An EU commission official told EUobserver that Hill is "committed to taking the proposal forward at his hearings and stands by that commitment".

"Commissioner Hill will continue to work both with the EP and member states to help move negotiations forward and find a sensible pragmatic compromise – one which both meets the aims of financial stability, whilst supporting jobs and growth," the official added.

EU parliament gives final nod to banking union

MEPs on Tuesday signed off on the creation of a new authority and fund for failing banks – a missing element to the so-called banking union aimed at minimising the public cost of future financial crises.

UK commissioner deprived of power to oversee bankers' pay

The European Commission has played down suggestions that it had stripped the UK's commission candidate of responsibility for policing the EU's bank bonus rules, insisting that the decision had been taken before he was nominated.


Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.


EU Africa envoy: Europe needs to look beyond migration

Europe's obsession with migration from Africa means it risks losing out the continent's potential when it comes to trade, says the EU's ambassador to the African Union, Ranier Sabatucci. "Africa is a growing continent, it is the future," he says.

EU agrees 2020 budget deal

EU governments and the parliament agreed in marathon talks ino next year's budget - which will boost spending on climate, border protection, and the European satellite system. It will also be a benchmark if there is no long-term budget deal.

News in Brief

  1. Greece denies access to fair asylum process, report says
  2. Report: Self-regulation of social media 'not working'
  3. Turkey: Greek expulsion of Libyan envoy 'outrageous'
  4. Merkel coalition may survive, says new SPD co-leader
  5. Von der Leyen Ethiopia visit a 'political statement'
  6. Over 5,500 scientists ask EU to protect freshwater life
  7. Iran defies EU and UN on ballistic missiles
  8. Committee of the Regions: bigger budget for Green Deal


Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  2. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  3. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  4. Nordic Council of MinistersNordic Climate Action Weeks in December
  5. UNESDAUNESDA welcomes Nicholas Hodac as new Director General
  6. Nordic Council of MinistersBrussels welcomes Nordic culture

Latest News

  1. Russia makes big promises to Arctic peoples on expansion
  2. UK election plus EU summit in focus This WEEK
  3. Migrants paying to get detained in Libyan centres
  4. Searching for solidarity in EU asylum policy
  5. Will Michel lead on lobbying transparency at Council?
  6. Blood from stone: What did British PR firm do for Malta?
  7. EU Commission defends Eurobarometer methodology
  8. Timmermans warns on cost of inaction on climate

Stakeholders' Highlights

  1. UNESDAUNESDA appoints Nicholas Hodac as Director General
  2. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  3. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  4. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  5. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  6. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues

Join EUobserver

Support quality EU news

Join us