A group of our European elected officials from a range of political families have put their weight and some initial financing to help make their initiative of creating a Finance Watch organisation become a reality for representatives of civil society.
ECRC supports this initiative and invites all its coalition partners to share their ideas and expectations with regard to this initiative with the ECRC Secretariat by writing to firstname.lastname@example.org.
In short, a group of MEPs want to help civil society develop lobbying capacity by creating an organisation which would suggest amendments to MEPs during the legislative process and participate in Committee meetings. Funding for the first 6 months has been secured but the organisation would then need to find its own financing. A hiring process for a person to spearhead the creation of this organisation has been launched follwing the initial meeting in September 2010. Civil society at the meeting included NGOs like Attac, Friends of the Earth, Transparency International, BankTrack but also representatives from the alternative finance sector (such as ECRC partner RFA) and Trade Unions. Only BEUC, Vzbv, Euroinvestors and ECRC represented consumers (list here).
Latest developments of Finance Watch
The details of the call by the MEPs involved can be found here: www.finance-watch.org.
The Minutes of the Meeting and discussions are included below. Here is the latest news regarding Finance Watch (as of 8 October 2010). The message comes from MEP Pascal Canfin leading this initiative for the time being:
As stated by various sides, a major obstacle to a more equal representation of interests of the financial industry and civil society and the buy side is the little access civil-society gets to expert groups and the lax regulation of the lobbying industry. Although we take this issue very seriously, we believe that these questions should be discussed in a separate forum. The signatory MEP’s have launched this call with the prime goal of strengthening the expertise and lobbying power of the civil society on the ground in Brussels.
In order to ensure that this process really moves forward, we now want to employ a person for a start up period. This person is going to be charged with liaising with existing NGO’s, exploring fundraising opportunities and finally to work out with civil-society and the MEP’s a concrete proposal for the foundation of a Finance Watch which should be tabled at a next Finance Watch working session in Brussels in January 2011. Considering that currently the adoption of new financial market regulation at the European level is moving forward very quickly, our goal should to have a Finance Watch up and running in the course of 2011.
The funding for this post will be provided by at least 8 initial signatory MEP’s representing 5 political groups in the European Parliament as well as the Swiss-based "Fondation pour le progrès de l’Homme".
We would like to close the hiring process within the next month and we call upon persons to candidate for the position by writing to Pascal Canfin’s office (email@example.com) within a week’s time. We are looking for an experienced person with a good knowledge of the workings of the European institutions and the civil-society universe in Brussels and with some background either in financial market policy-making or the financial industry. The job description is available here.
In a further step, we announce with this mail also the establishment of a mailing list in a next future, where the big questions regarding the organizational architecture and the financing of Finance Watch can be discussed. We would especially encourage you to tell us what you expect from a Finance Watch organization, in what sense you could envision contributing to the setting up and running of such an organization and what your red lines are.
Last but not least this mailing list will also provide a channel to regularly inform you about the legislative agenda as well as the deadline for the submission of amendments in the parliamentarian process. We will also circulate the latest version of the negotiated texts. As soon as we have it, we will circulate the timetable for shortselling and derivatives regulations, with the deadline for amendments.
Summary of the Finance Watch initiative
www.finance-watch.org calls for the creation of an independent Finance-Watch, an initiative that is a response to concern over the asymmetry in the representation of interests of the financial industry on the one hand and civil society on the other. MEPs want to create greater awareness in the public opinion on this risk for the quality of democracy.
A first Meeting was initiated by the MEPs with the aim to cover the following points:
- How to strengthen the expertise of civil society in the domain of financial policy.
- Explore what concrete measures should be taken in order to develop within the civil-society a greater counter-weight to the financial industry lobby.
- Founding of a future Finance Watch organisation - What form such an organisation should take, how it should be financed and what its goals should be
Initial ECRC view: Finance Watch welcomed but the structural democratic deficit remains an obstacle to better regulation of financial services in the EU
It is clear that ECRC has a role to play in a future Finance Watch. The coalition is made up of experts who know how financial services are affecting individuals, families and communities at the grassroots level. Since 2006, ECRC has continually made valuable contributions to the realities taking place in EU Member Sates and elsewhere. The competence of ECRC member organisations in assessing the quality of financial services must feed through to our European elected officials that represent us. Through the Finance Watch we hope to continue to develop the stakeholder dialogue and development of benchmarking tools to measure responsible financial services and fair finance (see ECRC statute). Together with other partners from civil society, and providing the initiative will not be manipulated by own ideologists fixated with pushing their own agenda forward, we are hopeful that once the financing situation for Finance Watch becomes sustainable that we will play our part in providing MEPs with a balanced body of expertise and opinion.
Nevertheless, the MEPs behind this call must acknowledge that the key deciding factor in improving democracy is a critique of the Lamfalussy process. ECRC can only direct MEP attention to what has already been said by many commentaries on this subject e.g. the FIN-USE Forum created in 2004 by DG Internal Market had the first task of producing a report outlining the user perspective on EU financial services policy. This post FSAP report by FIN-USE released in 2004 commented on the four Commission-sponsored reports (banking, insurance, securities and asset management) on the development of the Financial Services Action Plan (FSAP). The FIN-USE report found that the four reports largely ignored concrete user concerns (in part based on the composition of their respective expert groups); that limited references were made to corporate governance issues; the appropriateness of products for specific user needs; limited recognition that the key pre-condition for building a successful single market, consumer confidence, is strongly dependent on national consumer protection systems; and their limited vision with regard to transparency in the regulatory process. The 2004 FIN-USE report also points to the democratic deficit in the Lamfalussy process (page 17).
“In our view, the Lamfalussy Process has serious democratic deficits and, as a result, little credibility as far as citizen involvement is concerned. In dealing with financial services that are essential to the daily activities of consumers and small businesses, it will be essential to include individuals who are knowledgeable about household income and expenditures, educational needs, the problems of old age, and the nature of family businesses. A much wider range of institutional participation must also be sought: consumer and SME organisations, the EU departments and national ministries of consumer affairs, of justice, of social policy and business start-ups all have an important role to play once retail finance is seen as a social good and not only as a business technique. The mere technical approach in the first phase of the Lamfalussy process concerning securities does not match with the implications of the second turn.”
This report was drafted at a time when the Lamfalussy process was initially reserved for securities i.e. before it was extended to the other areas of financial services. The report voiced its caution in extending it to those further areas of retail banking primarily because of the difference it saw between financial services used to facilitate investment (in situations where consumers have surplus income to invest and thus use the services of investment brokers and asset managers) and financial services needed to carry out the activities of daily life (i.e. in situations where consumers resort to credit needs for consumption and housing, services related to old age pensions, loans for education, insurance against personal risks and access to the payment system).
While we welcome Finance Watch, the above mentioned reservations must also be addressed by MEPs. Lobbying should not be seen separately from a more balanced representation within expert groups and composition of committees. We want to see further signs of openness by all European Institutions to reviewing the existing rules towards greater transparency and wider representation. In this sense we would stress the need to address the shocking results published in November 2009 in a report by the Alliance for Lobbying Transparency and Ethics Regulation (ALTER-EU) posted on the ECRC website entitled ‘A Captive Commission: the role of financial industry in shaping EU regulation’ showing the overwhelming pressure exerted by corporate lobbyists on the political agenda in Europe with the resulting loss of democracy in EU decision-making and consequent lack of progress on social, environmental and consumer-protection reforms.
Reminder about the Lamfalussy process: New rules are no longer subject to scrutiny by the European Parliament and Council, the process relies on sector-specific committees, regulators and member-state representatives to shape them - technocracy has replaced democracy - four “levels” : 1) Parliament and Council adopt a piece of legislation proposed by the Commission; 2) technical details of the legislation are worked out between the Commission and committees of officials from finance ministries; 3) Different bodies (CEBS, CEIOPS, CESR), made up of civil servants and each with their own Expert Group (all financial representatives), decide how to implement the law at a national level 4). Commission makes sure member states uphold the adopted rules.
Minutes of the Finance Watch Meeting - 27th September 2010 in Brussels. 12h30 to 14h30
Participants: 4 MEPs: Canfin (FR), Berès (FR), de Jong (NL), Giegold (DE) [i] 50+from civil society: See List of participants
MEP Canfin opened the meeting reminding the audience that the Finance Watch Call had 160 signatories half from European MPs and the other half from national MPs. He mentioned that some Member States were still lacking involvement in this call (e.g. UK, ES, IT). A meeting of MEPs with civil society had already taken place in France and he announced that 2 further national meetings were planned with NGOs in London and Berlin in October. Canfin specified that EP direct involvement with the creation of this Finance Watch organisation (FW) was only short-term, that it would not be run by the EP, and that its role was as an initial catalyst to help with the start-up phase of FW and that its organisational role would then be over. The MEP objectives of FW are the following:
- Rectify the imbalance in lobbying capacity (i.e. facilitate counter-lobbying capacity): MEPs have not identified a civil society lobbying capacity and they lack counter-lobbying initiatives and expertise. Concern is not so much about access to civil society expertise but about transforming this expertise into lobbying capability i.e. creating a structure that can help generate added value of this expertise.
- Enhance Communication: Pressure from media reporting can have a significant effect on public attitudes to financial issues (e.g. tax havens, bonuses) and these can in turn affect outcomes of legislative agreements (e.g. FR and UK in area of regulation of compensation). However, despite the battle of ideas often being won on certain issues, these winning arguments and NGO expertise are not currently helping MEPs in their deliberations and their law making. A FW organisation would thus provide such a channel for communication of those ideas.
MEP Berès then talked about her experience and stressed the following: Lobbying should reflect the added value of all NGOs and FW should be seen as an umbrella to all that expertise; there is currently a window of opportunity for proactively fixing the lobbying imbalance; people are aware of the imbalance but addressing it seems impossible which is why FW should aim to do so. MEP de Jong pointed out that MEPS have a need to reach out to NGOs for opinions and analysis and that FW would be one way of helping to bring this expertise to MEPs. He gave the example of the policy of taxing financial institutions that has lacked a counter report on estimated effects of the tax, material which would have generated meaningful debate.
A number of civil society participants then took the floor making statements: Mittermaier (Transparency International) asked for further specification as to the role, responsibilities and financing of the FW secretariat and stressed the importance of changing methods in representation of NGOs in expert groups (using quotas); Wahl (WEED) mentioned that the financial transactions tax (FTT) campaign showed that a lot of NGO participants had been involved in discussing this issue; Pentzlin (Friends of the Earth Europe) stressed that MEPs had a part to play in the rebalancing of the strength of industry lobbying. He mentioned the Kangaroo group which brings MEPs and industry together and asked for such talking shops to be open to and inclusive of civil society. He also warned of ‘red herrings’ of being drawn into the details of issues where the financial industry has significantly stronger experience, and that FW strength would be to provide a better perspective on issues. He mentioned the initiative Europeans for Financial Reform as an example of work spearheaded by campaigners; Werner (Southampton University) pointed out the need to involve academia and that alternative economic thinking had acquired credibility and a strong counter-balance to the Washington consensus interpretation of economics and policy making. Key for FW to be able to make concrete recommendations is financing because the necessary academic research and drafting of legislation would cost for FW to deliver; De Montfort Cronin (CFA) said that while his institute would support a broad coalition, his charter did not allow them to do lobbying; Prache (Euroinvestors) also asked about resources available and mentioned their initiatives for better representation of financial users such as a letter to Commissioner Barnier; Berthon (Faider) said that FW must have clear objectives and that he would try and get the support of the actuarial profession at a pending meeting in Vienna; NN (Fondation pour le progrès de l’Homme) stressed the importance of conducting further fund raising and the need for a steering group; Goyens (BEUC) warned of cosmetic democracy, saying that BEUC was increasingly invited as a stakeholder in meetings and groups but that there was no real desire to take account of the consumer perspective in decision making. She pointed out that funding from the European Commission would be welcome especially since DG SANCO made €1mn available for financial education in August 2010 and that the majority of this would end up going to consultants of the industry; Röthig (UNI Europe Finance) said that it is difficult to pool expertise and mobilise actors for comments and that academic expertise was not spontaneous; Strickner (Attac Austria) asked about the process going forward and highlighted that structural issues needed clarifying (e.g. formal organisational structure or a civil society platform) . She pointed out that solutions needed to take account of the different backgrounds of the NGOs present and the different sensibilities of the partners; de Clerck (Friends of the Earth Europe) said that forming a coalition may be a more pragmatic approach, that a start up phase of more than 6 months was necessary, that EU Commission funding would take too long to secure and that FW should organise meetings with MEPs to promote cross-fertilising as soon as possible; Dembinski (Observatoire de la Finance) said that the FW initiative should not only have a policy driven agenda and that it was lacking in the necessary vision to make real change possible; Guene (SOFI) agreed that FW was lacking a vision and mentioned how the traditional EU banking model had been dropped over the past decade. He also suggested to involve certain banks into the discussion and organisation of FW; Vander Stichele (SOMO) called for a cross-sectional network of NGOs and asked for MEPs to improve practical things such as getting information on the deadlines for parliamentary amendments, also stressing the important translation function of FW work;
The responses from the MEPs included:
MEP Berès then warned that there should be no ‘in-fighting’ between elements of civil society and that together there is no lack of expertise for them to offer. She gave the example of ‘dark pools’ as a topic which is very wide and where MEPs would need FW to send specialists on. She suggested that the EP could launch a club allowing civil society to feed its views. Her closing words included a reminder of the urgency, that civil society voice should be echoed through FW; that invitations to civil society persons was currently a bilateral process and that ECON committee would benefit from having an official structure that it could invite to hearings (FW would be someone you cannot forget to invite) and that there would be no token invitations as MEPs are missing a bridge to access grassroots experience and knowledge. MEP de Jong reiterated the need for FW to ‘beef up’ what MEPs are missing. MEP Giegold sated that the new EU financial supervision authorities being created would allow for a balanced representation of civil society and the consumer and user side. He gave the example of work on the issue of financial compensation as encouraging added value and said that FW will increase progressive capacity as more and more information can be passed across to MEPs from civil society.
MEP Canfin replied by saying that the call would not be based on creating a similar model as that of the initiative Europeans for Financial Reform which counted on the mobilisation of far greater resources, and repeated the need for NGO input in MEP amendments giving the example of the Proposal for a Directive on Alternative Investment Fund Managers (AIFM) where trade unions had voiced a clear position. The targets during the start-up period are to: draft a charter for an umbrella organisation and draft a financing plan before the end of 2010. He then outlined details on what he saw as FW financing options following initial outlays from MEPs and the Swiss-based "Fondation pour le progrès de l’Homme" (primarily for the hiring of one person to man the FW initiative). After 6 months, if goals of FW are clear and well accepted by civil society participants, there will be a need for broader financing. MEPs can not directly finance FW other than via indirect funding via the commissioning of reports from FW. Other than approaching the private sector, he outlined 3 possible sources of financing: the European Commission; trade unions (ETUC support should be forthcoming); foundations and charities (EU or international).
MEP Canfin closed the meeting by saying he would send an email with the minutes of the Meeting and that 1) Participants would be informed of the planned MEP legislative agenda; 2) A proposal for FW would be drafted following the hiring of 1 staff member for FW (terms of reference for the job will be sent); 3) FW is tending towards an organisational status (representatives, a budget etc.) not just a coalition.
[i] Pervenche Berès (France, Group of Socialists and Democrats, Rapporteur in the Committee on Financial, Economic and Social Crisis, Substitute in the Committee on Economic and Monetary Affairs, Chair of the Committee on Employment and Social Affairs), Pascal Canfin (France, Group of the Greens, Vice-Chair in the Committee on Financial, Economic and social Crisis), Cornelis de Jong (The Netherlands, GUE/NGL, Member of the European Parliament), Sven Giegold (Germany, Group of the Greens, Coordinator for the Greens in the Committee on Economic and Monetary Affairs, Rapporteur for the directive European Securities and Markets Authority).