The latest case of an EU banking official taking a lobbying job in the financial sector underscores the need to uphold rules to prevent revolving doors, write Luis Garicano and Paul Tang.
Luis Garicano and Paul Tang are MEPs for Renew Europe and the Socialist and Democrat group
A key lesson of the Financial Crisis was that the “capture” of regulators by financial sector players costs taxpayers dearly. Prior to the crisis, banks were able to lobby governments to avoid necessary regulation. During and after the crisis, they were allowed to obtain bailouts which allowed later for juicy payoffs for their executives. This resulted in the one-sided-bets (heads, banks win, tails, taxpayers lose) so beloved by investors. That is why well delimited boundaries between the financial sector and its supervisors are crucial.
Regrettably, the lessons of the financial crisis on the risks of regulatory capture are rapidly being forgotten. A recent example is the move by the highest official in the EU’s main banking supervisor, from the European Banking Authority (EBA) to the financial sector’s most prominent lobbying group. By leaving the EBA for the Association for Financial Markets Europe (AFME), Mr Adam Farkas has violated the principles of transparent, fair and impartial governance the EU holds dear. With this move, the banking lobby gains privileged insight into EU decision-making and access, through the backdoor, to high-level staff.
The EU Staff Regulation forbids former officials from lobbying staff of their past institution for a period of one year. It also bans the same individuals from working on topics they dealt with in the three years immediately prior to them leaving. And the rules have “teeth”: if adherence to these restrictions cannot be sufficiently guaranteed, the EU can stop someone from taking up another job.
If we fail this crucial time to uphold these rules, we will turn them into one of those “dead letter laws” that fill the rule books of many states, laws that are no longer upheld, and slowly disappear from the public eye, until they serve as nothing but semi-fun stories at dinner parties —like the UK laws that forbid entering the Houses of Parliament in a suit of armour or the ones in France that forbid naming a pig Napoleon.
We cannot let this happen to the European rules on conflict of interest. That is why a cross-party coalition of Members of the European Parliament have taken an active stance against Mr Farkas’ move. We have questioned the European Commission and the EBA on their failure to uphold the rules and have summoned Commissioners to the Parliament. We have also voted – unanimously – for a resolution asking for the move to be blocked, denying Mr Farkas a European Parliament access badge and calling upon all Members of the house that represents the people of Europe, as well as EU officials more widely, not to meet him for a two-year period – if and when he takes up his new position.
Laws die when government and society stop defending them. For rules safeguarding the foundations of good governance, this is unacceptable. The European Parliament will boycott Mr Farkas for two years. But it is even better to stop him from stepping into the revolving door.