The financial crisis of 2008 did not lead to the anticipated jolt. This is the conclusion reached by the organisation Finance Watch in a report published on Saturday 15 September, which observes that none of the structural vulnerabilities that led to the financial crisis has been tackled in a decisive way.
“Within the space of ten years we have, once again, completed the familiar journey from public outrage and loud chants of ‘never again’ back to the comforting hum of ‘business as usual’”, the organisation laments.
The in-depth reform of the institutional governance framework of the global financial architecture, long overdue, has not taken place. Systemically important financial institutions still pose a major risk to financial stability. The moral hazard in the financial system is just as omnipresent as before. This, in summary, is the picture painted by the report, which runs to nearly 50 pages.
Even worse, Finance Watch believes that the forthcoming banking package (CRR II, CRD V and BRRD II) bears all the hallmarks of a “beginning deregulatory backlash”, as it waters down already weak international compromises, such as the ‘Basel III’ international prudential rules, and weakens the role of the supervisory authorities.
The Belgian MEP Philippe Lamberts (Greens/EFA) also took this anniversary as an opportunity to speak out in an open letter published in the Belgian newspaper Le Vif, on 14 September. In it, he also criticised the “legislative talking shop” that followed.
“Dozens of legislative texts have been adopted at European level to better regulate banks [...]. In the vast majority of cases, however, the measures approved have been watered down by exemptions, weightings and loopholes directly embedded in European legislation. And if that were not enough, their scope has been reduced by the subsequent adoption of technical implementing standards”, he wrote (our translation).
However, he points out that there is nothing stopping the political decision-makers from choosing simplicity by banning certain dangerous financial products or by requiring major banks to separate their risky market activities from their customer loan activities.
“Yet they have deliberately opted for complexity, an approach that still allows the devil to hide in the details”, he concludes.
The report is available at: https://bit.ly/2OvGslf. (Original version in French by Marion Fontana)