All talk but no action against fraudulent bankers

Joint press conference by Viviane Reding, Vice-President of the EC, and Michel Barnier, Member of the EC, on the amended proposal for a Directive on Criminal Sanctions for Insider Dealing and Market Manipulation, (EC Audiovisual Services).

The European Commission plans to propose on Wednesday 18 September draft legislation against the fraudulent setting and use of financial benchmarks like Euribor, Libor and the Baltic Indices. This comes on top of investigations launched recently in London, New York even in Brussels, where bankers are being criminally prosecuted, and thirteen giant western investment banking groups and two support bodies are accused of having created a trust, setting prices in the over the counter trade of Credit Default Swaps and Derivatives. Libor, Euribor and CDSs are at the centre of financial transactions reaching hundreds of trillions.

Financial jungle

In this global financial jungle the EU Commission as a modern ‘Don Quijote de la Mancha’ prepares legislation to “set out new rules for the production and use of benchmarks referenced in financial instruments and financial contracts, in order to ensure their integrity by guaranteeing that they are not subject to conflicts of interest, reflect the economic reality that they are intended to measure and are used appropriately”. Is it Quixotism or something else? We will see about that in a while.

Of course all EU Commissioners are aware of the fact that Joaquín Almunia, Vice President of the European Commission responsible for Competition Policy has accused 13 major world banking groups of forming a global cartel to exploit the rest of the economy. Hopefully this new initiative to hold responsible a large number of global banking groups for fraudulently setting Libor, Euribor and the Baltic Indices along with other market benchmarks comes as a help to Almunia’s efforts to prove the CDSs market cartelisation. If the true political will to expose the wrongdoings of major financial groups is there, this won’t be difficult.

Already the British and the American prosecuting authorities have worked hard on the Libor and Euribor, cases while Almunia’s people have established reportedly beyond reasonable doubt the existence of a cartel, setting CDSs’ prices and terms. It is obvious that this new Commission’s initiative “doubting the accuracy and the integrity of financial benchmarks” is targeted against the same banking conglomerates.

Big stakes

At this point it has to be reminded that back in December 2012, many months after the Libor scandal broke out, the 27 EU justice ministers reached agreement on the Commission’s proposals for a Directive on insider dealings and market manipulation that will criminalise such behaviour. Now the Commission has done its homework and is ready to produce on 18 September a relevant proposal. Understandably this would come on top of the penal prosecution under member states’ law.

In all those cases the stakes are huge. Almunias’ investigations may lead to fines of up to 10% of total turnover of the thirteen major world banks and their two supportive groups {Bank of America-Merrill Lynch, Barclays, Bear Stearns (now part of JP Morgan), BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, UBS and the Royal Bank of Scotland as well as Markit, the financial information firm and the International Swaps and Derivatives Association}. Apart from the huge fines to banks there might be penal proceedings against bankers. If all that turn out to be true the world will be a better place. This is not revengeful thinking. The damage to the real economy and the working people is already done and it is immense, but if the culpable parties get away unpunished the tragedy will be staged again and again, with the same victims and victimizers.

Unfortunately there is a lot of talk but little is done to punish those who send the world to the 2008 credit crunch and then profited from it. Not one New York banker has been convicted, at least not yet. The same is true in Europe. EU citizens are always eager to see the fraudsters behind bars. The European Union has pompously announced all those ‘initiatives’ but still without tangible results. All that have discouraged the European Peoples and the rate of participation in the European election next year will show it for sure. The rise of extreme or grotesque political parties is a direct result of all that.