Monday

15th Aug 2022

Opinion

MEPs must examine the role of financial services lobbyists in EU law-making

  • The European Commission's voluntary register is inadequate for uncovering financial lobbying shenanigans (Photo: CE)

Europe and much of the rest of the world is suffering from the worst economic crisis in more than 70 years, resulting from a meltdown in poorly regulated financial markets. In this unprecedented situation of evaporated wealth, massive job losses and devastating social insecurity, it is of crucial importance to fully understand the causes of the crisis in order to prevent such a disaster from ever happening again.

In the US, the birthplace of the crisis, one of these causes has been readily identified. A report published last month by a US watchdog group reveals that the financial sector invested more than $5 billion in gaining political influence in Washington DC in the past decade, with as many as 3,000 lobbyists pushing deregulation and other policy decisions that led directly to the current financial collapse.

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The report, Sold Out: How Wall Street and Washington Betrayed America, concludes that between 1998 and 2008, Wall Street investment firms, commercial banks, hedge funds, real estate companies and insurance conglomerates made $1.725 billion in political contributions and spent another $3.4 billion on lobbyists, creating a financial juggernaut that consistently undermined regulation that could have prevented the meltdown.

The role played by industry lobbying in the European Union must similarly be examined, including an assessment of how lobbyists prevented adequate EU regulation and successfully pushed for deregulation and 'liberalisation' of the financial markets both inside Europe and globally. The European Parliament has the tools to carry out such an assessment.

But what evidence is there that financial market regulation in the EU has suffered from a similar degree of corporate capture?

In a recent speech at the Institute of International and European Affairs in Dublin, internal market commissioner Charlie McCreevy suggested that this has indeed been the case: "What we do not need is to become captive of those with the biggest lobby budgets or the most persuasive lobbyists: We need to remember that it was many of those same lobbyists who in the past managed to convince legislators to insert clauses and provisions that contributed so much to the lax standards and mass excesses that have created the systemic risks. The taxpayer is now forced to pick up the bill."

McCreevy himself has a record of granting industry lobbyists privileged access, but his statement underlines the need to assess the role of lobbying in contributing to the financial meltdown in Europe. It touches upon an issue that is easily recognisable to observers of the financial lobby in Brussels.

There is evidence for example that MEPs have faced heavy pressure from the financial sector lobby that has resulted in watered down regulations. In 2005, for instance, the Wall Street Journal uncovered how links between some MEPs and big banking lobbyists led to a weaker Money-Laundering Directive.

Have groupings such as the "European Parliament Financial Services Forum" (EPFSF) also been part of the problem? This "forum for industry-Parliamentary dialogue", launched in 2000, brings together MEPs and banking lobbyists. The Forum's Steering Committee is composed of 14 MEPs, 13 of which are members of the parliament's Committee on Economic and Monetary Affairs.

Despite the EPFSF's claims that "the forum does not lobby", the 50 industry members, who cover all the costs of running the EPFSF, clearly use it as a vehicle to lobby MEPs.

Nor should we forget the lobbyists' tactics towards the Council, the commission and not least to McCreevy himself, whose approaches to financial regulation "appear to be more appropriate for a paid lobbyist than a European commissioner," according to the Socialists in the European Parliament.

But there are major obstacles to overcome before we get the full picture. The US study is based on data from the mandatory US lobbying disclosure system. Unfortunately, the European Commission's inadequate voluntary register does not provide anywhere near the same level of transparency. The commission's register fails to show which companies and lobby groups are the main players, who are the actual lobbyists and how much money the financial industry is spending on influencing EU decisions.

So, while there is almost a consensus that the present regulation of financial markets in the European Union has proved too weak, there are still big voids in what is known about the activities of EU financial services lobbyists and their impact on regulatory decisions of the commission, the Council and the parliament.

Given the unprecedented severity of the crisis and the obvious inadequacy of the EU regulatory system in preventing its escalation, the European Parliament should establish a parliamentary inquiry committee to investigate the degree to which corporate policy capture has prevented the emergence of desperately needed regulation of financial markets.

This should not be done simply out of historical interest. Such a committee should make recommendations for how to prevent excessive corporate influence and to safeguard democratic decision-making in the future.

The writer is a campaigner for Corporate Europe Observatory, a transparency pressure group

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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