EU Parliament: Deposit guarantee and trading platform transparency sought

European Parliament; Committee for Economic and monetary affairs hearing on "The Implementation of Financial Assistance from the EU Budget in Greece". (EU Parliament photographic library. 28/05/2013).

European Parliament; Committee for Economic and monetary affairs hearing on “The Implementation of Financial Assistance from the EU Budget in Greece”. (EU Parliament photographic library. 28/05/2013).

Thank God the European Parliament is there. Today 12 June the Plenary Session of the Parliamentary Committee for Economic and monetary affairs will ask the Commission and the member states, through the European Council, to explain why they are dragging their feet on crucial financial sector reform legislation, in a debate starting at 8.30 this morning. The ‘inquisition’ of Commission and Council dignitaries will include questions by MEPs on the pending draft rules to protect small savers, which have been blocked by Council for well over a year.

Legislators will also ask about the Commission’s sleeping proposal on trading platforms in securities, which was supposed to be presented in 2010. A resolution clearly identifying the various cases in which the Commission or the Council have been blocking progress with legislation, will be voted tomorrow Thursday 13 June.

Unquestionably the European Parliament cares more than any other EU body about the completion of the Economic and Monetary Union of the EU, with the aim to safeguard the single European money, restore confidence and eliminate fragmentation in Eurozone’s financial markets. This is the only way for the EU’s financial system to start again servicing adequately the real economy and more so the SMEs, which constitute the backbone of the Union’s economy and offer 85% of new jobs.

The Parliament is there

On the other side of the fence the Commission and the Council are hampered by the vested interests of ‘systemic’ market players. Consequently on many fronts those two key decisive EU bodies seem quite impotent to think out of the box and propose breakthrough legislation. At this point the Parliament steps in and pushes things to the direction that helps the many.

To this effect the Parliament has been working tirelessly to accomplish the EU’s Economic Monetary Union for the benefit of the people. On 16 April 2013 the Parliament approved with a debilitating majority two crucial pieces of legislation, the Capital Requirements Regulation and the Capital Requirements Directive, the so-called CRD IV package. The CRR was approved by 595 votes to 40, with 76 abstentions and the CRD IV by 608 votes to 33, with 67 abstentions.

One month later on 04-06-2013 the Parliament set the path to push ahead the needed legislation for the creation of the Banking Union. To this effect it published a text defining the steps towards this aim. The relevant passage goes like that, “Establishing a banking union, more efficient oversight of member states’ budgets, stricter rules governing not only the trade in different financial instruments but also traders’ bonuses: these are just a few of the issues that MEPs are working on at the moment that will reshape the way Europe’s economic union will look like in the future”.

Small depositors

Obviously the protection of the small depositors with less than €100,000 in bank accounts was a prime work field for the Parliament. After the ‘Théâtre du Grand-Guignol’ played around the life savings of the Cypriot people, the Parliament couldn’t rest. Sharon Bowles, chair of the EP’s economic committee said “she worried about the precedent it sets for other small countries, which is why better rules and better oversight are needed”.

In order to promote this issue the economic committee decided on 20 May that deposits under €100,000 should not be used to prop up failing banks. Instead, the Parliament ordered that shareholders should bear the losses, followed by bondholders and only as a last resort, large depositors. This report was adopted by legislators in reaction to a proposal by the European Commission, on how to support struggling banks, which also sets out strict rules for using tax payers’ money.

No guarantee

The dreadful reality is however that this €100,000 per depositor holding a bank account, is not at all guaranteed. There are various national systems of bank deposit guarantees. On Eurozone level however what really exist is only…words of guarantee, reluctantly spelled out by politicians, like the Dutch minister of Finance and President of the Eurogroup, Jeroen Dijsselbloem.

What trading platforms?

Apart from the bank deposit guarantee, there is also another crucial matter pending, particularly weighing on the long-term Eurozone’s financial health; the rules for safer trading platforms. On this front there are still missing not only the rules, but also the platforms themselves. Michel Barnier, the EU Commissioner for internal market and services sector tried once to start a discussion, about the creation of an official platform for transactions in derivatives. That was all. The whole affair was quickly wiped out from all Commission and Council agendas. Only the Parliament keeps the issue alive.

In view of all that the Parliamentarians will tell today to the representatives of the Commission and the Council that, “to date the Council has failed to engage in talks with Parliament on rules to guarantee deposits up to €100 000 or adopt a negotiating position on crucial rules for safer trading platforms (review of markets in financial instruments directive). Parliament has been ready to negotiate since February 2012 and October 2012 respectively”.

There is no doubt that financial vested interests of unimaginable magnitude are at stake here and the play is not for amateurs. The Parliamentarians however do not seem ready to also forget this burning issue. Today there will be a test day for the financial trading platforms in Eurozone. Undoubtedly they do exist, but there are well hidden in the computers of the big banks.

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