The empty proposals of Michel Barnier and the European Commission concerning the banks

10 February 2014 by Eric Toussaint


At the end of January 2014, Michel Barnier, European Commissioner for internal market and services publicly announced a proposition of banking reform that would concern the 30 most important European Banks [1]. The bankers responded with cries of terror at the idea that they be forced to separate their potentially riskiest operations and transfer them to ad hoc subsidiary companies [2]. The Economist, which rejects the proposal, was quite clear and frankly cynical, “Happily, Mr Barnier does not have the final word. His proposal must now be approved both by European governments and by the European Parliament. There is still time for the elaborate to-ing and fro-ing of European lawmaking to improve his proposal—or to bury it.” [3] In fact, with European elections coming up in May 2014 the proposal cannot be adopted before the end of 2015, largely time for the banks to apply their weight on the European authorities unless a new Krach forces Brussels and Frankfurt [4] to impose truly strict regulations.

Michel Barnier and the European Commission are not at all proposing a splitting up of banking activities, just a little management of the worst. The decision to create the ad hoc subsidiary will emanate from the regulating authorities in the bank’s country, this, in the eurozone, is the ECB ECB
European Central Bank
The European Central Bank is a European institution based in Frankfurt, founded in 1998, to which the countries of the Eurozone have transferred their monetary powers. Its official role is to ensure price stability by combating inflation within that Zone. Its three decision-making organs (the Executive Board, the Governing Council and the General Council) are composed of governors of the central banks of the member states and/or recognized specialists. According to its statutes, it is politically ‘independent’ but it is directly influenced by the world of finance.

https://www.ecb.europa.eu/ecb/html/index.en.html
, which is little inclined to imposing any strict discipline on the banking sector. The continual about turns, compromises and half measures that we have already seen for such a long time are clear proof that the governments and authorities currently in place cannot be trusted to really put order into the murky world of finance.

By the decisions they have made, the banks had a large part in the worst economic and social crisis since the 1930s. The decisions of the central banks to give them unlimited access to credit, without imposing any changes in the rules of the game have aggravated the effects.

The real crux of the problem is that because of their size and the devastating effects their mismanagement can have on the economy, banking is much too serious an activity to be trusted into private hands. The banking sector uses public money, has a State guarantee and provides an essential and fundamental service to society. Banking must be considered a public service.

The States must take back their capacity to manage and direct the country’s economic and financial activities. They must also have methods for investing and for reducing public borrowing from private institutions to a minimum. This supposes the expropriation of the private banks without indemnities and that they be put under public control. By taking such radical action it will be possible to protect savings, finance activities useful to the common good and guarantee the jobs and working conditions of banking sector employees. For this it is necessary and indispensable to create public systems for savings, credit and investment.

The necessary choices suppose the suppression of the capitalist banking sector, as much for credit as for savings and deposits and in the field of investment banking. In fact there should only be two types of banks: Public banks with public service status (under citizen control) and moderate sized cooperative banks.

Translation : Mike Krolikowski et Christine Pagnoulle




Eric Toussaint, who holds a doctorate in political science from the universities of Liège (Belgium) and Paris VIII, is the president of the CADTM Belgium (Committee for the Abolition of Third World Debt), www.cadtm.org) and sits on the Scientific Council of ATTAC France. He is the co-author, with Damien Millet, Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. See Series “Banks versus the People: the Underside of a Rigged Game!” http://cadtm.org/Banks-Fudged-health-report

Footnotes

[2Complete Text on the European Commission website: http://ec.europa.eu/internal_market/bank/structural-reform/index_en.htm#140129 For an official summary see European Commission press release: http://europa.eu/rapid/press-release_IP-14-85_fr.htm
Finance Watch has a favourable reaction: http://www.finance-watch.org/press/press-releases/828-eu-bank-structure-proposal-jan-2014
And the following in French only. For a favourable reaction see: Le Monde.fr, « L’ambitieuse réforme des grandes banques européennes de Michel Barnier », 29 January 2014 http://www.lemonde.fr/economie/article/2014/01/29/michel-barnier-propose-une-reforme-ambitieuse-des-grandes-banques-europeennes_4356337_3234.html See also favourable, but less enthusiastic, of the European Green party reaction : “Séparation des métiers bancaires. Les Verts au PE appellent à des mesures plus ambitieuses” (Seperate banking activities, the European Parliament Green Party group calls for stricter measures) http://www.philippelamberts.eu/separation-des-activites-bancaires-reaction-a-la-proposition-de-la-commission-europeenne/

[3The Economist, “Safeguarding European banks. Volcker plus. The European Union proposes a radical overhaul of its banks”, 1 February 2014 http://www.economist.com/news/finance-and-economics/21595469-european-union-proposes-radical-overhaul-its-banks-volcker-plus

[4Head office of the ECB.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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