Finance Watch Statement for the conference "Regulatory cooperation in the TTIP": Civil society
stakeholders discussion with the EU Chief Negotiator
European Economic and Social Committee, 02.07.15
Finance Watch is an NGO supported by a network of more than 40 European civil society
organizations from a dozen European Union countries. Its Secretariat is composed of 13 financial
experts and acts as a counterweight to the private interest lobbying of the financial industry.
Finance Watch’s opinion is that the EC proposal for a regulatory cooperation chapter, if applied to
financial services, risks lowering an already fragile and insufficient regulatory set-up when it
comes to the financial sector. It also risks further undermining the voice of civil society.
Let us first keep in mind that we are not done yet with the post-crisis regulation agenda. In
particular:
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First of all, the European financial system is still dominated by 16 Globally Systemic Important
Financial Institutions, which benefited directly or indirectly from massive public bail-outs over
2008-2011.
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In addition, while much has been done to reduce risks at an institution’s individual level, much
more remains to be done at a macro-prudential level to reduce the risk of future systemic crises
and the interconnectedness in the system.
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Moreover, the narrative is now changing, from the post-crisis need for more regulation, to a
belief that regulation is a burden for economic growth. The reality is that the risk of future crises
and related potential costs for taxpayers and citizens is still here and that the financial sector is
still – and by a long way – not at the service of the real economy and society.
We are also still in a situation of very imbalanced representation of interests. As you may know, the
financial industry is represented – only in Brussels - by an estimated 1700 lobbyists. As a
comparison, civil society representatives working on financial regulation might at best account for
one out of 100 financial industry representatives.
This situation needs to be tackled in order to restore some form of balance in the debate over
financial regulation, should we be willing to regulate in the best interests of citizens. In that context,
a Regulatory Cooperation chapter on financial regulation in TTIP is certainly not the appropriate
answer, and we would argue that it would even increase the bias in favour of private interests,
against the public interest.
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First, a free trade and investment agreement is not the place to discuss financial regulation
because its primary objective is to give priority to free trade and investment, not to defend the
public interest.
Finance Watch – AISBL | Rue d’Arlon 92, B-1040 Brussels | www.finance-watch.org
Tel: +32 (0)2 880 04 45 | Fax: +32 (0)2 888 63 80 | coordination@finance-watch.org
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Second, regulatory cooperation aims at diminishing the cost of regulatory divergence. But this
cost is to a large extent that of the industry, not that of society. It needs to be seen alongside the
high cost to society of an inadequately regulated financial system, including the costs of the
crisis and its impact on public finances.
Third, and as provided by Article 15 of the European Commission textual proposal published in
early May, authorities and regulators would have to take stakeholders’ “concrete suggestions for
further regulatory co-operation” into account and give them “careful consideration”. This could
be welcome, but given the imbalance in stakeholders’ representation, there is a high chance that
the financial industry will use this cooperation platform as another means to influence the
regulatory process in its own interest. In contrast, civil society groups have limited resources and
are already struggling to make their voices heard. Today’s meeting is further evidence of this.
Adding another lobby opportunity will just make the imbalance worse. In fact, private interests
have a reason to call for more equivalence and harmonisation in regulation, but how will the
impact on the economy and on society be assessed?
In conclusion, Finance Watch’s position is that financial services should be removed from the scope
of the TTIP:
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Investor protection mechanisms are a clear step back from a public interest perspective and they
should not be included in the TTIP – nor in any other (trade and) investment agreement, as they
risk undermining states’ willingness and ability to regulate, reduce or even ban some activities
and practices deemed harmful.
Market access rules aim to further liberalise the financial sector, whereas it is broadly
acknowledged that excessive deregulation and liberalisation are some of the main causes of the
financial crisis and the dramatic economic and social consequences we know and are still
struggling with.
Regulatory cooperation should not be included in a free trade and investment agreement, as it
further opens the regulatory process to private interest lobbying.
In short: when it comes to financial services and financial regulation, the TTIP is another step in the
wrong direction. If anything, the trade-off between the risks for society and the marginal and
hypothetical future gains that TTIP would bring in terms of GDP growth does not seem to be a good
one.
Finance Watch – AISBL | Rue d’Arlon 92, B-1040 Brussels | www.finance-watch.org
Tel: +32 (0)2 880 04 45 | Fax: +32 (0)2 888 63 80 | coordination@finance-watch.org