Monday

27th Mar 2023

Ombudsman slams EU bank watchdog for 'revolving doors'

  • The money-laundering scandal wiped more than a third off Danske Bank's shares (Photo: danskebank.com)

The EU's banking watchdog should never have allowed its former head to become the chief executive of one of the world's largest financial lobby groups, according to the European Ombusdman.

The verdict against the European Banking Authority (EBA) concerns Adam Farkas, who participated at a board meeting that glossed over the largest money-laundering scandal ever known in Europe.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Farkas was EBA's executive director from 2011 until he was hired by the Brussels-based Association for Financial Markets in Europe (AFME), a job he started in February this year.

The association represents some of the world's largest banks. Last year, it spent up to €4.7m lobbying the EU.

"If this move did not justify using the option, provided under EU law, to forbid someone from moving to such a role, then no move would," said European Ombusdman Emily O'Reilly on Monday (11 May).

O'Reilly said the EBA had also failed, once notified of the move, to immediately withdraw Farkas' access to confidential information.

Asked to comment, the EBA said they are confident that the restrictions imposed on Farkas "to limit the conflict of interest were commensurate and proportionate."

Those restrictions included not allowing him to meet in a professional capacity his former subordinates for two years.

Moving from a position of public institutional power to a private one that then seeks to exert influence over legislation is commonly known as a 'revolving door.'

Previous such conflicts of interest have also implicated the European Commission, whose former president José Manuel Barroso took a senior post at Goldman Sachs International.

April: Farkas and Danske Bank

The EBA was set up to address the role of banking institutions, such as Goldman Sachs, in creating the 2009 financial crisis that left millions destitute.

Last April it was put to the test when EBA's board was asked to act on recommendations involving a money-laundering scandal where some €200bn of illicit Russian funds had been channeled through Danske Bank's branch in Estonia.

The board meeting, invoving Farkas, refused to act.

"He ran that meeting, he came very well prepared and seemed to have a very clear idea where this would be going," said Kenneth Haar at Corporate Europe Observatory, which was among the NGOs that filed the complaint against the EBA.

The next day he was approached by a recruitment firm on the behalf of AFME, according to the European Ombudsman. Farkas officially accepted the job in August 2019, although he only recently started this year.

The lobby group has since held at least four-high level virtual meetings with the European Commission to discuss capital requirements and the financial markets in the context of the pandemic.

For its part, the European Commission said the EBA is independently responsible when it comes to staff decisions.

Meanwhile, Farkas may be banned for two years from entering the European Parliament to lobby MEPs - if he ever requests an access badge.

Efforts are now underway to extend the same restriction to the European Commission, said Paul Tang, a Dutch socialist MEP.

"MEPs already unanimously supported my call to ban Mr Farkas from accessing the Parliament's premises and committed not to meet him in his new role. I hope other EU institutions follow suit," he said.

'Disappointing' watchdog may get new EU banking role

The European Commission is floating plans to beef up the fight against money-laundering, including possibly giving a supervisor role to the European Banking Authority. Yet the authority's board refused to act on a €200bn money-laundering scandal involving Danske Bank.

Opinion

Fundamental snag with new EU money-laundering rules

New EU anti-money laundering laws came into affect last month. But they depend on 'Ultimate Beneficial Ownership' registers - the majority of which are never checked or verified.

Opinion

20 years of public access to EU documents: time for makeover?

One shortcoming is that this cornerstone of EU transparency comes from a radically different era, predating many modern communications tools, such as smartphones and instant messaging, and the emergence of 'Big Data'.

Opinion

Biden's 'democracy summit' poses questions for EU identity

From the perspective of international relations, the EU is a rare bird indeed. Theoretically speaking it cannot even exist. The charter of the United Nations, which underlies the current system of global governance, distinguishes between states and organisations of states.

Opinion

Turkey's election — the Erdoğan vs Kılıçdaroğlu showdown

Turkey goes to the polls in May for both a new parliament and new president, after incumbent Recep Tayyip Erdoğan decided against a post-earthquake postponement. The parliamentary outcome is easy to predict — the presidential one less so.

Latest News

  1. Biden's 'democracy summit' poses questions for EU identity
  2. Finnish elections and Hungary's Nato vote in focus This WEEK
  3. EU's new critical raw materials act could be a recipe for conflict
  4. Okay, alright, AI might be useful after all
  5. Von der Leyen pledges to help return Ukrainian children
  6. EU leaders agree 1m artillery shells for Ukraine
  7. Polish abortion rights activist vows to appeal case
  8. How German business interests have shaped EU climate agenda

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  2. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  3. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence
  4. Nordic Council of MinistersCSW67: The Nordics are ready to push for gender equality
  5. Promote UkraineInvitation to the National Demonstration in solidarity with Ukraine on 25.02.2023
  6. Azerbaijan Embassy9th Southern Gas Corridor Advisory Council Ministerial Meeting and 1st Green Energy Advisory Council Ministerial Meeting

Join EUobserver

Support quality EU news

Join us