On 9 August 2007, the financial world held its breath: interest rates on global trade in financial instruments rose. A global financial crisis followed, culminating with the collapse of Lehman Brothers. Large financial service providers had to be rescued with state debt, some banks were completely nationalized and later closed. The debt of many countries rose sharply, the crisis had an impact on the real economy. Production cuts and company collapses were the result.
The causes of the financial crisis, which according to the International Monetary Fund resulted in securities losses totalling four trillion dollars, are manifold. Among other things, the speculatively inflated real estate market in the USA was to blame. But above all, the crisis showed what critics had complained about for many years: the links between banks, regulators and politicians were far too close, the controls did not work.
A circumstance that has not changed. The latest case: Adam Farkas, executive director of the European Banking Authority, will join the Association for Financial Markets in Europe on 31 January 2020, making him one of the most influential and resource-intensive financial lobby groups in the world.
The disastrous proximity between control authorities and the financial lobby is also caused by people who switch sides: first they work for years with control authorities, then they switch to the financial lobby. Their Insider knowledge makes them sought-after candidates, the Lobby tries to take advantage of it.
For example, the former president of the European Commission, José Manuel Barroso, joined Investment Bank Goldmann Sachs in July 2016. The change caused a lot of criticism. “These miserable side changes from politics to the economy feed the doubts about the common good orientation of politics”, said for example the German MEP Sven Giegold of the Greens. The then European Parliament President Martin Schulz described the procedure as “completely unacceptable”.
Barroso himself stressed that his new Job was only a kind of consultancy. What this looked like in Detail was then documented by a letter. In his new Job, Barroso met EU deputy commissioner Jyrki Katainen, for example, in the immediate vicinity of the commission’s main building. There were no companions, no notes, no written documents. The meeting was officially registered on the website of the EU Commission as a lobby meeting, but only after it had reported.
“Commissioner Katainen’s letter strongly suggests that Barroso is actually using his privileged Position to influence the EU on behalf of Goldman Sachs, “Margarida Silva of Alter-EU, an association of about 200 NGOs and Trade Unions, told Der Spiegel. “No one outside the Institution has more Insider knowledge, contacts and ongoing influence than the former president of the commission.”
The Fox and the chicken
Despite all the criticism, the Ethics Committee of the EU Commission waved through the change from Barroso to Goldman Sachs in October 2016. And this despite the fact that the EU Commission had tightened the code of Conduct for its members and always stressed the need to apply stricter standards of transparency and ethics than national authorities at lobbying meetings. It was enough for Barroso to agree not to use his new Position to personally lobby his former authority.
And now Adam Farkas. The change of the Executive Director of the European banking authority (EBA), the financial lobby group the Association for Financial Markets in Europe (AFME) is bold. Not only because the AFME is considered the most influential financial lobby group in the world. Rather, a former regulator switches to the Association that represents the interests of the Regulated. What should actually be an absolute no-Go was thus approved by the EBA’s highest decision-making body. The so-called” Board of Supervisors”, chaired by José Manuel Campa, saw no conflict of interest and demanded that Farkas only fulfil two conditions: according to this, Farkas must not be involved in lobbying activities against his former employer, the EBA, for two years. He is also prohibited from advising the AFME for one and a half years on issues related to his activities over the past three years.
Requirements that simply cannot be controlled. In addition, the AFME has probably hired Farkas precisely because of his past and will not let him turn his thumb for several years.
Corruption as a business then
The EBA is an EU agency that mainly deals with the supervision and regulation of banks. She also advises the European Parliament and the EU Commission in the development of laws and coordinates the work of national Bank supervisors. AFME represents the opposite interests: it represents more than 180 banks, including some of the largest US and European financial market players. “Lobbycontrol “outlines the aim of the association:” to influence EU institutions and laws according to their interests.“AFME spends around five million euros per year on this.
In order for the EBA to be able to carry out its monitoring tasks independently, it would therefore have to distance itself from the AFME Lobby Organisation. Instead, however, it allows Farkas, who has served as its executive director since the founding of the EBA in 2011 and has acquired unparalleled Insider knowledge and built up a comprehensive network, to move directly to the banking lobby. From 31 January 2020, the valuable knowledge and networks of Farkas will flow to the other side, to the banks, which want to prevent threatening regulations as far as possible.
Rules for others!
Moreover, the change of Farkas is not the first case that makes the EBA and its will for independence look bad. In May 2019, the authority appointed former Santanderbank chief lobbyist José Manuel Campa as its new boss.
There are again human entanglements and a lack of distance between regulators and banks. According to the organization “Financewatch”, the banks have long since begun to corrupt against the stricter rules. Financial crisis?