This newsletter is part of the project “Towards a Global Finance System at the Service of Sustainable Development”,  implemented by six European NGOs with the aim of ensuring that European economic stimulus packages do not impact negatively on development. Please follow the instructions on our mailing list server to subscribe or unsubscribe.

Although it may seem impossible to tackle the financial, economic, climate, food and social crises all at the same time, reforming the financial sector would be a good point of departure. The financial sector has the potential to serve the real economy, to improve sustainability and to help people in need, for instance, through credit and investments. However, recent financial crises have shown that the financial industry primarily serves itself. The financial sector has become so powerful that some say we “live in financial times”. It is therefore important to seize the momentum of the ongoing financial reforms to truly transform the financial sector so it serves the real economy, the environment and the interests of the most vulnerable within Europe and especially within developing countries.

Since the financial crisis, the European Union started to reform the financial services industry by improving regulation and setting up more coherent supervision. While European institutions are in a process of deciding on ways to improve the stability of financial markets, the financial industry has continually and fiercely lobbied against regulations it considers to be too stringent. In order to reform the financial sector to serve the interests of all, views of civil society organisations, trade unions, consumer organisations and citizens need to be heard.

Read more >

The financial crisis has exposed the dangers of the current fragmented European system of supervision with as many as 80 national and sectoral supervisors being responsible for EU wide cross-border financial operators and products. Currently, reform to create a new and more coherent ‘European System of Financial Supervisors’ is under way, but this system is still subject to criticism from various sides. The EU Council of Ministers of Finance have already reached a certain level of compromise on the Commission proposals for a new supervisory system. The European Parliament will probably cast its final vote in June or July 2010 on these new supervisory regulations, which is expected after an agreement has been reached with the Council. This would ensure the new supervisory structure to be in place by early 2011. In addition, one EU reform that should be implemented by the end of 2010 is the compulsory cooperation of national supervisors for large EU-based cross border banks in so-called ‘colleges of supervisors’.

Read more >

These past few months, a Commission proposal aiming to regulate hedge funds and private equity funds was heavily debated by the Ministers of Finance and the European Parliament. These funds are important players in casino-style financial markets and off-shore financial industry. Their short-term and sometimes aggressive investment and speculative strategies are now recognised by the EU to have contributed to the instability of financial markets. But so far, they have remained largely unregulated.

By late April 2010, there was still no EU-wide consensus on the issue of regulating so-called ‘Alternative Investment Funds Managers’ (AIFM) and both the Council of Ministers of Finance as well as the Parliament have been postponing decisions, which are, however, expected to be taken in the coming months. The responsible EP Committee (ECON) will vote on a draft report on 10 May 2010. Given the huge financial industry lobby against strict regulations, which European civil society, trade unions, socialists in the EP and others have been demanding for many years, the coming period will be decisive.

Read more >

After many years of advocacy and frantic campaigning by NGOs during past months, the Financial Transactions Tax (FTT) had initially gained remarkable support, amongst others from the governments of France, Germany, Austria, the UK, from EU Commission president Barroso, and from the European Parliament. However, after the US government prioritised a bank levy in January 2010, the German and French governments recently announced they will introduce a bank levy rather than an FTT. After a Commission document from April 2010 also criticised the FTT, the Commission announced at the informal meeting of the Ministers of Finance it would present a legislative proposal on a levy for future rescue funds in October 2010. At the G20 finance ministers meeting in Washington on 23 April, there was no agreement to implement a bank levy or a financial transaction tax after the IMF submitted a draft report on how the financial sector should pay for rescue packages. However, an FTT and bank levy are not mutually exclusive, as the French minister of finance says, and NGOs continue to advocate for an FTT as a better solution than a bank levy.

Read more >

Derivatives are highly speculative financial products that the EC now recognises to have contributed to increasing volatility and financial risks in financial markets. Despite calls from civil society and experts, no legal reforms to fully regulate all derivatives trading have as yet been introduced; a failure which some NGOs blame on aggressive and successful lobbying by the financial industry. However, Commission documents from 2009 already indicated that the EU wanted to introduce some regulation to make derivatives more transparent and less risky, including commodity derivatives markets. Definitive proposals to that effect are now expected for June and October 2010. The European Parliament is already voting on a draft report on derivatives on 4 May 2010.

In 2010, criticisms of derivatives as major instruments of speculation were increasingly voiced by policy makers and NGOs alike. In particular, speculation on food and energy prices through commodity derivatives, and alleged speculation against the Euro and to exploit the Greek budget crisis through ‘credit default swaps’ were subject to debate.

Read more >

Since the start of the 2008 financial crisis, it has become evident that banks have neither sufficient capital reserves nor liquidity to deal with the risks of sudden high levels of defaults on loans and financial products. Widespread fear that banks would default on loans to each other halted interbanking loans and made banks restrict their lending to business and other customers, which significantly contributed to the economic recession and job losses. The EU is now in the process of reviewing different aspects of its legislation, in particular the Capital Requirements Directive (CRD). The European Parliament is currently considering the adoption of the second revision of the CRD and starting to discuss a third revision. The Commission is also preparing the third revision, which includes a major review of capital requirements and risk management rules. NGOs are concerned that no measures have been included to ensure financing for sustainable development.

Read more >

In March 2010, the European Commission presented its annual work programme for 2010. This programme translates the priorities of the European Commission’s political guidelines into concrete actions. Among others, the Commission has outlined its ambition to ensure “stable and responsible financial markets at the service of the wider economy”.

Read more >

26 April, Brussels (EC), Public hearing on further possible changes to CRD IV.
27 April, Brussels (EP), ECON hearing on OTC derivatives
2-4 May, Mexico city, Forum on Alternatives to Financial Crisis
3 May, Brussels (EP), Public hearing on CRD 4;
4 May, Brussels (EP), ECON votes on derivatives and new supervision system
10 May, Brussels (EP), ECON votes on hedge funds etc. (AIFM)
18 May Brussels (ECOFIN), Finane Ministers meet
26-27 May, Paris (OECD), Ministerial meeting
20 May, Berlin (G20), Summit on financial regulation
25-26 May, Brussels (EC), Brussels Economic Forum
28 May, Brussels (EC), Conference on financial literacy
3-5 June, South Korea - Busan (G20), Finance Ministers Meeting
7 June, Brussels (EC), Conference on supervising financial conglomerates
8 June, Luxembourg (ECOFIN), Finance Ministers meet
17-18 June, Brussels, European Council
18-20 June, Toronto (NGOs), 2010 People's Summit
25-26 June, Canada – Muskoka (G8), Summit
26-27 June, Toronto (G20), Summit
28 June, Brussels, (EP), vote on CRD 3  in ECON (indicative date)
2 July, Brussels (EC), Conference on Market Abuse Directive
6 July, Strasbourg (EP), plenary vote on AIFM directive (indicative date)
20 September, Strasbourg (EP), plenary vote on CRD 3 (indicative date)
20 September, Brussels (EC), hearing on Financial Instruments Directive
21 September, Brussels (EC), hearing on commodity & carbon emission derivatives
9-11 October, Washingon (World Bank/IMF), Annual meeting
10-11 November, Yokohama (APEC), Ministerial meeting
11-12 November, Seoul (G20), Summmit