Brussels, 13 September 2018 – The collapse of one of the largest investment banks, Lehman Brothers, ten years ago must serve as a powerful reminder of the fragility of our financial system. Over the last 30 years, finance has lost its connection to the economy and the needs of society. In its comprehensive analysis of post-crisis regulation, Finance Watch demonstrates that the opportunity for a fundamental realignment of the global financial sector has been missed and that none of the structural vulnerabilities that led to the financial crisis of 2008 have been tackled in a decisive way.

• A thorough reform of the institutional governance framework of the 'global financial architecture', long overdue, has not taken place.
• 'Systemically important' financial institutions have changed little in size and complexity and still pose a major risk to financial stability, with capital requirements only marginally stronger and resolution regimes largely untested.
• The nearly limitless release of liquidity into the financial system by the world's major central banks has re-routed massive flows of capital and created new 'bubbles' that threaten to destabilise the system.
• Artificially low interest rates, misaligned incentives, risky lending and 'moral hazard' have conjured up a worryingly familiar 'déjà vu' of soaring debt, high levels of non performing loans and the looming spectre of large-scale defaults when interest rates rise.
• With every regulatory step, activities have been allowed to migrate towards the poorly regulated 'shadow banking' sector, which has grown in leaps and bounds.

Download the complete Finance Watch report "Ten Years After: Back to Business as Usual. The Pit and the Pendulum – post-crisis financial regulation in Europe" (pdf, 44 pages)

• Finance Watch publishes a comprehensive assessment of post-crisis financial regulation in Europe: “Ten Years After: Back to Business as Usual”
• Opportunity for a fundamental realignment of the global financial sector has been missed
• Civil society groups around the world to mark Lehman Brothers anniversary on 15th September with more than 100 events and protests, kicking off a campaign to demand that global finance be brought back under democratic control.

Brussels, 13 September 2018 – The collapse of one of the largest investment banks, Lehman Brothers, ten years ago must serve as a powerful reminder of the fragility of our financial system. Over the last 30 years, finance has lost its connection to the economy and the needs of society. In its comprehensive analysis of post-crisis regulation, Finance Watch demonstrates that the opportunity for a fundamental realignment of the global financial sector has been missed and that none of the structural vulnerabilities that led to the financial crisis of 2008 have been tackled in a decisive way.

• A thorough reform of the institutional governance framework of the ‘global financial architecture’, long overdue, has not taken place.
• ‘Systemically important’ financial institutions have changed little in size and complexity  and still pose a major risk to financial stability, with capital requirements only marginally stronger and resolution regimes largely untested.
• The nearly limitless release of liquidity into the financial system by the world’s major central banks has re-routed massive flows of capital and created new ‘bubbles’ that threaten to destabilise the system.
• Artificially low interest rates, misaligned incentives, risky lending and ‘moral hazard’ have conjured up a worryingly familiar ‘déjà vu’ of soaring debt, high levels of non‑performing loans and the looming spectre of large-scale defaults when interest rates rise.
• With every regulatory step, activities have been allowed to migrate towards the poorly regulated ‘shadow banking’ sector, which has grown in leaps and bounds.

Download the complete Finance Watch report “Ten Years After: Back to Business as Usual. The Pit and the Pendulum – Post-crisis financial regulation in Europe” (44 pages)

Christian M. Stiefmueller, author of the report, said:

“Compared to 2008/09, the international community’s arsenal for dealing with another global financial crisis has been depleted. Whereas the risks facing the financial systems have remained broadly unchanged, the fiscal and monetary tools available to governments and central banks have been dramatically reduced.

“Even worse, the ‘regulatory pendulum’ is swinging back with a vengeance: the forthcoming Banking Package (CRR II/CRD V/BRRD II) shows every sign of a beginning deregulatory backlash. Warnings by international organisations, central bankers, supervisors and other experts go largely unheeded.”

Benoît Lallemand, Secretary General of Finance Watch, added:

 “The financial lobby has been very efficient in steering the post-crisis debate away from fundamental changes. Instead of focusing on the root-cause of the crisis – 30 years of financialization of the economy – the post-crisis discussion has been framed only in terms of making the existing system a bit safer.

“Citizens are outraged that they had to pay to bail out banks and are still suffering today from the consequences of the crisis without seeing any meaningful change in how finance works and its role in society. As the rise in political extremism since the crisis shows, this poses a grave danger to our democracies. 

“Ten years on from the crisis, a Change Finance movement is growing at global and national level: this should provide hope for citizens who are looking for credible alternatives to 30 years of deregulation, liberalization and booming inequalities.”

Finance Watch has initiated together with more than 60 organisations the “Change Finance Coalition” aiming to transform the financial system into a tool to accelerate a transition to an economy serving people and the planet. The Coalition is organising a “10 Years On”-campaign with more than a hundred actions worldwide on the 15th September 2018 to engage citizens into a call for change.

Brussels, 22 August 2018 - Finance Watch welcomes the opportunity to provide inputs to the Commission’s consultation on the EU reporting framework for companies. For the purpose of this consultation Finance Watch has replied to two of the questions concerning the EU non-financial reporting.

Download consultation response.

On related topics, Finance Watch has contributed to the EU public consultations on:

1) [current page] Non-financial corporate reporting in the context of fitness check on the EU framework for public reporting by companies;

2) EC proposal for a Regulation on disclosure relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341;

3) EC proposal for a Regulation on the establishment of a framework to facilitate sustainable investment;

4) EC proposal for a regulation amending Regulation (EU) 2016/1011 aimed at defining low carbon benchmarks and positive carbon impact benchmarks.

In its responses, Finance Watch has highlighted that:

1) When revising the guidance on non-financial disclosure, the Commission should not only assess how to integrate Task Force on Climate-related Financial Disclosures (TCFD) recommendations but should require companies to describe both short and long-term plans to reduce CO2 emissions - scope 1, 2 and 3 - and so how they align their business with the Paris Agreement goals.

2) The definition of sustainability risk shall not be limited to the financial impacts. This would exclude any external costs and so be in contradiction to the aims of sustainable finance agenda.

3) The sustainable finance platform shall include representatives from civil society and the Commission shall conduct an ex-post assessment of the of the effectiveness of the taxonomy.

4) The proposal on benchmarks needs major revision, given that the proposed text’s contribution to any of the objectives of the sustainable finance agenda is highly questionable.

Ten years after the fall of Lehman, a new German non-profit organization "Bürgerbewegung Finanzwende – Finance Watch Deutschland" was created today in Berlin as part of the international Finance Watch network.

Brussels/Berlin, 12 September 2018 – Today's official launch of the new German non-profit organisation "Bürgerbewegung Finanzwende – Finance Watch Deutschland" sends a strong message to policy makers ten years after the outbreak of the financial crisis.  Since financial reforms were only marginal and finance is still not serving society, experts from business, academia and civil society call upon German citizens to join the new movement "Finanzwende" as of today.

The movement asks the German Finance Ministry, amongst others, for an effective leverage ratio for banks, a real financial transaction tax instead of a minimum stock exchange turnover tax, as well as independent financial advice which is not commission-driven.

The German MP Gerhard Schick, who resigns from his political mandate, will lead the organization and start working with his team in Berlin as from today. He said:

"Regulatory efforts since the crisis have too often been watered down or completely thwarted because the financial lobby is still overpowering. Today, financial reforms are even not on the agenda of the new German government anymore. People do not accept that! We want to give those people a voice and represent their interests.

Finance Watch, which has become a respected expert in Brussels, will help us to do so with its expertise and international network."

The Brussels based non-profit organisation Finance Watch supports the creation of Finanzwende as part of its international Finance Watch network of which Finance Watch in Brussels is the center. All members of the network share the same vision that finance should benefit everyone by bringing capital to productive use and without causing detriment to society as a whole and advocate for a sustainable, stable, robust and socially just financial industry in the interest of the common good.

Finance Watch's Secretary General, Benoît Lallemand, said:

"Since our creation in 2011, we have seen that we can only achieve financial reform and sustainable finance, when advocacy and communication towards policymakers and the wider public are conducted in a coordinated manner at the European and the national level.

"We are extremely pleased to welcome Finanzwende as the German part of the international Finance Watch network. We will provide mutual support, exchange information and experience and work on joint campaigns.

"Ten years on from the crisis, a Change Finance movement is growing at global and national level: this should provide hope for citizens who are looking for credible alternatives to 30 years of financialization".

Further information

• Finance Watch's website: www.finance-watch.org
• Finanzwende's website: www.finanzwende.de
• Finance Watch's and Finanzwende's Cooperation Agreement (pdf, 1 page, in English, auf Deutsch)
• Change Finance Coalition: www.changefinance.org

Brussels, 22 August 2018 - Finance Watch welcomes the EC proposal for a Regulation on disclosure relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341.

Download consultation response.

On related topics, Finance Watch has contributed to the EU public consultations on:

1) Non-financial corporate reporting in the context of fitness check on the EU framework for public reporting by companies;

2) [current page] EC proposal for a Regulation on disclosure relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341;

3) EC proposal for a Regulation on the establishment of a framework to facilitate sustainable investment;

4) EC proposal for a regulation amending Regulation (EU) 2016/1011 aimed at defining low carbon benchmarks and positive carbon impact benchmarks.

In its responses, Finance Watch has highlighted that:

1) When revising the guidance on non-financial disclosure, the Commission should not only assess how to integrate Task Force on Climate-related Financial Disclosures (TCFD) recommendations but should require companies to describe both short and long-term plans to reduce CO2 emissions - scope 1, 2 and 3 - and so how they align their business with the Paris Agreement goals.

2) The definition of sustainability risk shall not be limited to the financial impacts. This would exclude any external costs and so be in contradiction to the aims of sustainable finance agenda.

3) The sustainable finance platform shall include representatives from civil society and the Commission shall conduct an ex-post assessment of the of the effectiveness of the taxonomy.

4) The proposal on benchmarks needs major revision, given that the proposed text’s contribution to any of the objectives of the sustainable finance agenda is highly questionable.

Brussels, 22 August 2018 - Finance Watch welcomes the proposal for a Regulation on the establishment of a framework to facilitate sustainable investment.

Download consultation response.

On related topics, Finance Watch has contributed to the EU public consultations on:

1) Non-financial corporate reporting in the context of fitness check on the EU framework for public reporting by companies;

2) EC proposal for a Regulation on disclosure relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341;

3) [current page] EC proposal for a Regulation on the establishment of a framework to facilitate sustainable investment;

4) EC proposal for a regulation amending Regulation (EU) 2016/1011 aimed at defining low carbon benchmarks and positive carbon impact benchmarks.

In its responses, Finance Watch has highlighted that:

1) When revising the guidance on non-financial disclosure, the Commission should not only assess how to integrate Task Force on Climate-related Financial Disclosures (TCFD) recommendations but should require companies to describe both short and long-term plans to reduce CO2 emissions - scope 1, 2 and 3 - and so how they align their business with the Paris Agreement goals.

2) The definition of sustainability risk shall not be limited to the financial impacts. This would exclude any external costs and so be in contradiction to the aims of sustainable finance agenda.

3) The sustainable finance platform shall include representatives from civil society and the Commission shall conduct an ex-post assessment of the of the effectiveness of the taxonomy.

4) The proposal on benchmarks needs major revision, given that the proposed text’s contribution to any of the objectives of the sustainable finance agenda is highly questionable.

Brussels, 22 August 2018 - Finance Watch is glad to provide the following contribution to the public consultation on the EC proposal for a regulation amending Regulation (EU) 2016/1011 aimed at defining low carbon benchmarks and positive carbon impact benchmarks.

Download consultation response.

On related topics, Finance Watch has contributed to the EU public consultations on:

1) Non-financial corporate reporting in the context of fitness check on the EU framework for public reporting by companies;

2) EC proposal for a Regulation on disclosure relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341;

3) EC proposal for a Regulation on the establishment of a framework to facilitate sustainable investment;

4) [current page] EC proposal for a regulation amending Regulation (EU) 2016/1011 aimed at defining low carbon benchmarks and positive carbon impact benchmarks.

In its responses, Finance Watch has highlighted that:

1) When revising the guidance on non-financial disclosure, the Commission should not only assess how to integrate Task Force on Climate-related Financial Disclosures (TCFD) recommendations but should require companies to describe both short and long-term plans to reduce CO2 emissions - scope 1, 2 and 3 - and so how they align their business with the Paris Agreement goals.

2) The definition of sustainability risk shall not be limited to the financial impacts. This would exclude any external costs and so be in contradiction to the aims of sustainable finance agenda.

3) The sustainable finance platform shall include representatives from civil society and the Commission shall conduct an ex-post assessment of the of the effectiveness of the taxonomy.

4) The proposal on benchmarks needs major revision, given that the proposed text’s contribution to any of the objectives of the sustainable finance agenda is highly questionable.

Finance Watch has published a briefing note on the European Commissions Action Plan on FinTech

• Download Briefing note (pdf, 6 pages)

Finance Watch welcomes the European Commission's Action Plan as a timely recognition that the digitalisation of financial services is too fundamental a process to be left to the – all too limited – self correcting forces of the market. We are, however, less convinced by its lack of a methodical approach. The Action Plan combines a jumble of proposals that range from the protection of civil rights to industrial policy, with the odd 'goodie' for the banking industry thrown in (software accounting).

It would have been helpful if the Commission had been clearer and more transparent in setting out its intentions and objectives for each of these policy initiatives and involved all stakeholders in the preparation of legislative proposals and policy initiatives within its FinTech expert group.

Brussels, 21 June 2018 - Finance Watch has responded to the public consultation on two EU initiatives requiring investment firms, insurance undertakings and insurance intermediaries to take into account clients’ Environmental Social and Governance (ESG) preferences in the investment advice.

• Download consultation response

The initiatives are part of the EU sustainable finance agenda, aimed at creating a more favourable environment for sustainable investments.

In its contribution Finance Watch highlighted that:

1) The definition of ESG preference needs to be clarified and expanded.

2) The clients should be informed about the trade-offs associated with each financial instrument (risk, return and ESG profile of the investment).

Background information

The draft amendments being in the scope of the consultation concern the following two delegated acts:

• Commission draft delegated regulation amending Regulation (EU) 2017/565 supplementing Directive 2014/65/EU as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that directive.

• Commission draft delegated regulation amending Delegated Regulation (EU) 2017/2359 with regard to environmental, social and governance preferences in the distribution of insurance-based investment products.

The delegated acts shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of three months from the notification.

Joint Statement by Finance Watch, Better Finance, Beuc, Coface Families Europe, Age Plateform Europe

On Tuesday 10th of July, the European Parliament co-rapporteurs published a disappointing draft report on the review of the European System of Financial Supervision [1]: not only lacking any ambitious changes on the much needed reform of the governance model and funding of the European Supervisory Authorities (ESAs – EBA, ESMA and EIOPA), but even weakening some direct supervisory powers for ESMA proposed by the European Commission.

Since 2008, the ESAs have prioritized prudential supervision, while consumer protection and conduct of business have remained on the side-lines. In 2017, when the European Commission published its proposal for the review of the ESAs, the major EU public interest organisations working on financial services stressed their disappointment with this proposal and formed an alliance to propose amendments aiming to reform the ESAs' mandate, governance and funding that – if taken on board - would truly deliver for the EU citizens.

We discussed the amendments in depth with several MEPS, including the co-rapporteurs, who seemed to agree on the need to enhance consumer and investor protection and to beef up supervisory authorities to underpin the Capital Markets Union, the EU's flagship project in the area of investments. Effective enforcement and an equally high level of consumer protection and redress everywhere across Europe are preconditions for a successful single retail financial market and a true Capital Markets Union.

However, the ECON committee did not include proposals to strengthen consumer protection or the supervisory convergence mandate. The only action taken by the ECON Report to improve consumer protection is an amendment proposing a balanced representation between the financial industry on the one side, and users and financial industry employees on the other side in the ESAs advisory Stakeholder Groups. Still, without adequate compensation for non-industry stakeholders, it will be very difficult to attract user-side experts and improve the heavily imbalanced composition of ESAs' Stakeholder Groups.

Guillaume Prache, Managing Director of BETTER FINANCE commented:

"The draft report is very disappointing. With plenty of evidence on the ongoing mis-selling of financial products[2] it is shocking to see that the co-rapporteurs of the two largest pro-European groups did not propose solutions that would truly deliver for European citizens. The low levels of consumer trust and continuous poor rankings of financial services market across Member States[3] will not be remedied without a stronger and more consistent supervision system!"

Benoît Lallemand, Secretary General of Finance Watch added:

"If European Parliamentarians wanted to ensure that the European financial system operates in a way that protects consumers, investors and taxpayers they would need to speak up for strong European supervisory authorities that are appropriately staffed, financed and given strong mandates. We believe it is as important to empower the ESAs to act in cases where consumers in the EU are at the risk of potential detriment as it is to allow them to act to protect financial stability[4]."

Monique Goyens, Director General of BEUC underlined:

"It is important to ensure that retail finance legislation is properly enforced across all Member States and all EU consumers are treated fairly by financial firms. Therefore, the ESAs must be empowered to achieve convergence of conduct supervision practices across Europe. There should not be two-speed Europe in terms of financial consumer protection".

[1] Including the European Banking Authority (EBA), the European Insurance and Occupational Pension Authority (EIOPA), the European Markets and Securities Authority (ESMA) and the European Systemic Risk Board (ESRB).

[2] Please see BETTER FINANCE's Briefing Paper on Mis-selling of financial products and BEUC's campaign "The price of bad advice" 

[3] In the European Commission's Consumer Markets Scoreboard "retail" financial services are constantly ranked as one of the worst consumer markets in the entire EU

[4] Please see the Finance Watch Blueprint "European System of Financial Supervision", February 2018