Unable to attend, Belgian MP John Crombez (Both a Member of the House of Representatives of the Belgian Federal Government and a Senator at the (regional) Flemish Parliament), currently the head of the Parliamentary Group of the Flemish Socialists (sp.a) submitted a written statement read as a contribution to the debate on the urgent need to overhaul the global financial system.
"Financial markets and banks are on a road to nowhere"
"Since the start of the financial crises of October 2008, the essential elements of the banking and finance landscape haven't changed. Despite of the whole lot of announcements and daring statements by European leaders, real change hasn't come. Some of the messages for a changing financial environment haven't led to much more than blurring the real necessary discussions. What brought us to the crisis? Why have the supervision authorities been blind or blindfolded for years and years? Why are the individuals that organized the crisis or the ones whose profession it was to put brakes on the leverage explosion, why are they still the decision makers? And last but certainly not the least, why were laws not adopted, that could lead to the avoidance of a new crisis. Recently, the Basel committee launched an idea to create a list of banks that are "too big to fail." What does that mean? Is that an official go to let them take all the risk they want? The answer would be that it is not the case, since more stringent ratios were adopted. That is nonsense. The risk measurements in the banks that are supposed to allow a monitoring of risks taken by the banks did not work, and it will not work. Picture an evaluation of the past five years, if somebody would write a book from a distance in say 2025. What will they see looking backward? They will see that banks accumulated risk on risk, without reasonable limitation. The explosion of banking activities, largely rescued by the tax payer's money, went along with 6 million job losses in the European region. Next a European Parliament that didn't decide to put restrictions on leverage, speculation or bonuses, but on the contrary only demands budgetary measures with large impacts on households. The latter [European Parliament] is guided by the same banks, again taking the same risks. (.)
Why weren't restrictions on speculation, leverage and bonuses imposed? Because the lobbying of the banking sector had more impact on European decision makers, than the population had. Let's say that these three subjects aren't tackled.
But even under these conditions there exists the possibility to impose a new environment.
One: impose "banking wills." Canada has done it. And Canada was one of the countries which suffered the least impact from the banking crises; Two: put a focus on consumer protection. Selling risky products with latent costs is still everywhere; And three: impose a transaction tax, settling a reserve to be activated when the next crises to come starts.
One of the reasons that is often given on a national level, explaining why governments refuse to take such measures on a national level, is to say that it is impossible to do it, as long as there is no international coherent model. That is, so to say, nonsense. I already mentioned the example of one of the safer banking countries, Canada. They did it, despite of the lack of an international agreement. Even more, adopting these laws on a national basis increases the possibility for coherent international measures.
In conclusion, three years after the crises, we are mainly in the same situation as at the time of the crises. Risks can be taken by the banks while losses are translated into the household budgets. Measures to avoid that system have NOT been taken, even if authorities as Mervyn King, and a lot of academics have clearly stated that the current situation is unacceptable. There is no plan for growth and jobs. There only is a road to nowhere, and that road, in the current political mentality can only potentially be stopped by the next crises.
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