This week I am going to New Orleans for the International Association of Legal Methodology / Association Internationale de Méthodologie Juridique XIIth Congress / XIIème Congrès – 1-2 November 2012 / 1er et 2 Novembre 2012 which is focusing on the topic Transparency, A Governance Principle. I am going to be presenting a paper with the title Open Government, Transparency and Financial Regulation. Here is the abstract:
Governments and transnational standard-setters emphasize the importance of open government and transparency, and use consultation exercises to take account of the views of people and firms they characterize as stakeholders. But, although the stakeholder concept is intended to be inclusive, it necessarily excludes some members of the world’s population. Accountability to stakeholders is necessarily a limited form of accountability. Two characteristics of financial regulation interfere with the attainment of open government and transparency in this field. First, financial regulation is complex. Second, those who claim to, and do, understand the complexities of financial regulation are experts, rather than non-expert citizens.
The construction of the concept of the stakeholder in consultations is critical. Requests for comment and consultation documents frequently identify specific categories of stakeholder who may be affected by or interested in the questions raised by the consultation. Response forms and/or consultation documents may invite or require respondents to categorize themselves. But consultation documents and questionnaires do not explicitly address the issue of how they define, or why they do not define, the relevant stakeholders for a particular set of issues. This lack of explanation of definition constitutes a core lack of transparency in the consultation process.
haldane on fixing banking October 30, 2012Posted by Bradley in : financial regulation , add a comment
Andy Haldane gave a speech to Occupy Economics yesterday. He noted:
the crisis was… the story of a system with in-built incentives for self-harm: in its structure, its leverage, its governance, the level and form of its remuneration, its (lack of) competition. Avoiding those self-destructive tendencies means changing the incentives and culture of finance, root and branch. This requires a systematic approach, a structural approach, a financial reformation.
He identified five cs of the ongoing financial reformation: culture; capital; compensation; credit; and competition. And he described some of the regulatory changes under way which relate to these five cs. Cultural change was described as being about separating banking from investment banking, which is only a small part of the sort of change some would like to see. And implementing the separation is proving to be really complex. But in discussing competition he talked about Handelsbanken:
They may be the fastest-expanding bank in the UK at the moment… Their business model is fascinating, Quaker-even, in its orientation. They offer only basic banking services, mortgages and small business loans, to people in a tight, locally-defined catchment area.
All credit decisions are taken locally by people, not centrally by a computer. No bonuses are paid and no-one has a sales-target. When the whole firm out-performs, a contribution is made to a pooled fund which is invested on employees’ behalf. The fruits of success are distributed equally and gratification is deferred.
For banking, this is back to the future. If that sounds attractive, then it is down to us – not regulators, not politicians, you and I – to deliver it. If as bank customers we want to change the culture of banking, then we should start by supporting those banks who are delivering that change. Putting your money where your mouth is would deliver far greater and more durable change than any amount of banker-bashing.
gender and economic policy October 26, 2012Posted by Bradley in : eu, gender , add a comment
MEPs rejected Yves Mersch as a candidate for the ECB Executive Board on the basis that insufficient attention is being paid to the issue of gender (the decision is here). If Mersch is appointed to the Executive Board it will likely be all male at least until 2018.
Press reports suggest that the Parliament’s emphasis on the need for gender diversity at the ECB is a distraction from the serious issues of addressing the crisis, and make the EU look less credible. But this downplaying of the issue seems to me to be emblematic of the problem. Not working to take advantage of the talent of women as well as of men is short-sighted.
The World Economic Forum’s Gender Gap Report for 2012 which examines the gender gap in countries around the world states:
The correlation among competitiveness, income and development and gender gaps is evident… While correlation does not prove causality, it is consistent with the theory and mounting evidence that empowering women means a more efficient use of a nation’s human talent endowment and that reducing gender inequality enhances productivity and economic growth. Over time, therefore, a nation’s competitiveness depends, among other things, on whether and how it educates and utilizes its female talent.
cameron on the eu summit October 24, 2012Posted by Bradley in : eu , add a comment
Britain is not in the eurozone and we will not be joining the eurozone, but it is in our national interest for the uncertainty surrounding the eurozone to end. I have argued for some time that a working eurozone needs a working banking union. It is one of the features that a successful single currency needs. Obviously you do not need a banking union because you have a single market; you need it because you have a single currency—so Britain should not, and will not, be part of that banking union.
Britain’s banks will be supervised by the Bank of England, not by the European Central Bank, and British taxpayers will not be guaranteeing or rescuing eurozone banks, but we do need eurozone members to get on with forming a banking union. At the Council, I joined those who were arguing for progress to be made on the plan that had been announced in June. To put it simply, I believe that it is not enough to have a banking union that is stripped of the very elements—such as mutualised deposit guarantees, a common fiscal backstop and a framework for rescuing banks—that are needed to break the dangerous link in the eurozone between sovereign debt problems and the stability of eurozone banks. But because not all countries outside the eurozone—like Britain—will want to join such a banking union, it is also essential that the unity and integrity of the single market is fully respected. The organisation that currently ensures a level playing field for banking within the single market is the European Banking Authority. We need to make sure that it will continue to function properly, ensuring fair and effective decision making. This, again, is specifically recognised in the conclusions. More broadly, as eurozone countries take steps to deepen their economic and monetary union—as they will—it is important that we secure, as I did, an explicit commitment in the conclusions that the final report and road map in December will include “concrete proposals” to ensure that the integrity of the single market is respected.
In response to questions he said:
We want the eurozone banking to go ahead, but there are dangers, because if the ECB members voted en bloc in the European Banking Authority, they would automatically have qualified majority voting—that is the problem. That is why the conclusions of the summit include these words:
“An acceptable and balanced solution is needed regarding changes to voting modalities and decisions under the European Banking Authority…Regulation.”
That is very important conclusions language that we fought quite a battle to secure. My point is that I do not want to veto the banking union, but unless this problem is properly sorted—and Britain has a totally legitimate argument about why it needs to be sorted—we cannot allow it to go ahead.
deferred prosecution agreements for the uk October 23, 2012Posted by Bradley in : consultation , add a comment
The UK Ministry of Justice announced that it would be introducing Deferred Prosecution Agreements in the UK. The announcement follows a consultation initiated in May 2012. The Government’s response to this consultation was published today. The Government’s response lists those who replied to the consultation but mostly characterizes the responses rather than identifying particular views with particular respondents. The responses (which are not available from the consultation page but some of which can be found online) raised some serious issues. Commenters raised questions about whether DPAs would tend to benefit larger commercial organizations rather than smaller firms which might be “softer targets” for criminal prosecutions (e.g. the Law Society’s response). Transparency International noted:
our concern that DPAs may be introduced primarily to provide an incentive to powerful companies who are not as resource constrained as prosecution agencies to settle cases at an earlier stage.
The Law Society pointed out that “the use of internal investigation material in subsequent investigations” would have human rights implications. The City of London Law Society Corporate Crime and Corruption Committee worried that the introduction of DPAs would prejudice junior employees. The Criminal Bar Association and Law Reform Committee of the General Council of the Bar of England and Wales suggested that there was insufficient evidence to determine whether DPAs were a good idea:
A proper review of the current regimes for dealing with economic crime should be conducted, addressing the different tools available to the prosecuting authorities and the degree to which they are working effectively. It is only then that the need for DPAs can be properly assessed and correctly structured to produce the best outcomes. Further, the use of DPAs in the United States also needs to be properly considered both with regard to its success in fighting serious financial crime and in bringing those responsible to justice.
Comments suggested that the consultation should have considered areas where regulators entered into negotiations with those subject to regulation. Jones Day wrote that the OFT’s experience with its leniency policy was relevant.
The Government reacted to the various responses in this way:
All told, we believe, and the consultation responses confirm, that the DPA model is a sensible and pragmatic means of identifying and penalising more corporate offenders. DPAs will help protect the public by tackling economic crime that currently too often goes without remedy.
But the comments that are readily available on line do not really seem to bear this out – they certainly do not establish conclusively that DPAs for the UK are the product of evidence-based policy-making. Moreover, the idea that transparency is identified as a critical component of the arrangements for DPAs in the context of a consultation which is not a model of transparency itself is a bit odd.
commission wants to distinguish between good and bad gambling October 23, 2012Posted by Bradley in : gambling , add a comment
In today’s Communication on a comprehensive European framework for online gambling the Commission states:
While fully respecting each Member State’s right to determine the regulatory framework for gambling services, the Commission sees significant benefits in the development of a range of authorised gambling opportunities in order to effectively dissuade consumers from using other gambling offers. It is important for authorised operators to be able to offer sufficiently attractive products, because in the absence of credible and sustainable offers consumers will continue to turn to unregulated gambling websites, with the ensuing potentially harmful effects.
what single market (commission proposes enhanced co-operation with respect to financial transaction tax)? October 23, 2012Posted by Bradley in : eu , add a comment
Despite industry opposition, the Commission has published a proposal for a Council Decision approving enhanced co-operation with respect to a financial transaction tax after it became clear that the EU as a whole would not adopt such a tax because of “fundamental and un-bridgeable differences amongst Member States” which meant that unanimous agreement (required for tax measures) could not be achieved. But the document recognises that the original proposal for an EU ftt was based on the idea that different approaches in different Member States would distort competition and fragment the market. Harmonized rules for a subset of EU states also risk distorting competition and fragmenting the market. The Commission says:
Risks of fragmentation of the internal market and of a distortion of competition will first of all be reduced and/or avoided within the scope of the FTT jurisdiction covered by enhanced cooperation. Compared to a situation without such cooperation, the functioning of the internal market, at the level of the 27 Member States, would be improved rather than undermined.
Enhanced co-operation must not “undermine the internal market or economic, social and territorial cohesion. It shall not constitute a barrier to or discrimination in trade between Member States, nor shall it distort competition between them” and Art 329 TFEU states that “[a]uthorisation to proceed with enhanced cooperation shall be granted by a decision of the Council acting unanimously.” So it isn’t obvious that this will happen. But alongside the uncertainties about the banking union/SSM the proposal raises new questions about whether the EU will in fact have a single market in financial services any time soon.
is meaningful citizen participation in government possible? October 23, 2012Posted by Bradley in : governance , add a comment
After the Presidential debates – endless reiterations of the same rather meaningless and often misleading slogans – where the viewers of the debates are encouraged to make their voting decisions on the basis of who performed better in the debate it’s complicated to think about the idea of citizen participation in government. But there’s lots of information available about the Presidential candidates, even if it’s hard to slog through the sludge of representation and misrepresentation. Making decisions about the downballot is even more complicated.
This isn’t the only election happening right now:
In the UK there’s an experiment going on to have elected Police and Crime Commissioners to hold Chief Constables and police forces to account(under the Police Reform and Social Responsibility Act 2011). Elections are to be held on November 15th and there’s some rather scary advertising going on with posters for bus shelters suggesting that criminals want voters to stay home on November 15th. And video ads with the same message:
This is a bit odd- as if the police will just stop fighting crime if people don’t show up to vote. Especially as funding cuts are a larger problem for the police than any lack of citizen participation in voting could be. Presumably the ads are about emphasizing the idea that it is important to be tough on crime. And they suggest the crimes it is important to be tough on are scary ones such as vandalism, burglary, and mugging. Not financial crimes such as fare dodging and fraud.
And making people aware of the fact of the elections doesn’t help them to decide who to vote for. There’s a website which will have information about the candidates as of October 26th. But you can see the list of candidates elsewhere, for example at the website of the Association of Police and Crime Commissioners.
In Humberside John Prescott is a candidate. But there are a number of other candidates: Godfrey Bloom (UKIP), Simone Butterworth (Liberal Democrat), Paul Davison (Independent) (“I retired this year after 30 years with Humberside Police as a Chief Superintendent in charge of policing the East Riding”), Neil Eyre (Independent) (“Most people don’t want politics and policing in the same melting pot”), Matthew Grove (Conservative) and Walter Sweeney (Independent). Matthew Grove says that Gordon Wasserman, the Goverment’s advisor on policing and criminal justice, says he is the “ideal person” to be the PCC. But that’s because they are both conservatives. So how can citizens decide whom to support?
eu summit and banking union October 19, 2012Posted by Bradley in : eu, financial regulation , add a comment
The process towards deeper economic and monetary union should build on the EU’s institutional and legal framework and be characterised by openness and transparency towards Member States which do not use the single currency and by respect for the integrity of the Single Market.
The draft had the objective but not the concrete proposals idea. There’s also some redrafting of the timetable- the SSM legislative framework is to be agreed by the new year and operational implementation will follow. The language about the accountability of the ECB changed. Now:
There is a need to ensure a clear separation between ECB monetary policy and supervision functions, and the equitable treatment and representation of both euro and non-euro area Member States participating in the SSM. Accountability takes place at the level at which decisions are taken and implemented. The SSM will be based on the highest standards for bank supervision and the ECB will be able, in a differentiated way, to carry out direct supervision. It will also be in a position to use the effective powers conferred on it by the legislation as soon as it comes into force. In addition, it is of paramount importance to establish a single rulebook underpinning the centralised supervision.
This is still not a model of clarity. And they kick the can down the road on voting in the EBA:
It is important to ensure a level playing field between those Member States which take part in the SSM and those which do not, in full respect of the integrity of the single market in financial services. An acceptable and balanced solution is needed regarding changes to voting modalities and decisions under the European Banking Authority (EBA) Regulation, taking account of possible evolutions in the participation in the SSM, that ensures nondiscriminatory and effective decision-making within the Single Market. On this basis, the EBA should retain its existing powers and responsibilities.
The conclusions state that within the euro area “Strong mechanisms for democratic legitimacy and accountability are necessary”. But whereas the draft conclusions suggested that the EU should explore the idea of enhancing the role of the social partners, this language does not appear in the final conclusions.
The EESC is pleased to learn that, even though belated, a European banking union will come to life. It is crucial that the Member State governments have the breadth of vision to create more Europe, handing over some powers and ensuring that they can be applied, in order to achieve effective European governance that is socially useful and economically efficient. New and stricter rules will offer security to people and markets.
english-only consultations are maladministration in the eu October 18, 2012Posted by Bradley in : consultation , add a comment
I noted the other day that the Commission’s consultation on “the lists of product and service markets within the electronic communications sector susceptible to ex ante regulation” involved a questionnaire that was published only in English. The consultation was initiated only days after the Ombudsman decided that English-only consultations in the EU involved maladministration:
The Commission should ensure that all European citizens are able to understand its public consultations, which should, as a matter of principle, be published in all the official languages. Its failure to do so is an instance of maladministration.
The Ombudman wrote:
The Ombudsman agrees with the Commission that the publication of legislative proposals in all languages is necessary to enable citizens to exercise their “right to participate in the democratic life of the Union” (Article 10 (3) TEU). However, the Ombudsman cannot accept that such publication is sufficient to guarantee that right. On the contrary, it is at the preceding stage, that is, when the Commission’s mind has not yet been made up and its proposals have not yet been adopted as such, that citizens should be called upon to participate and to express their view(s) concerning future legislation and, in so doing, have an impact on decision making in the EU. EU law and the rights it grants to EU citizens are not meant to remain a dead letter. It is hard to imagine how citizens could actually enjoy a right guaranteed by the Treaty and have a direct say in the Union’s affairs, if they are only aware of the Commission’s position once it has been established and the formal legislative process has begun. This may be possible, to some extent, for well-resourced lobbying organisations representing specific interest groups, but not for the vast majority of ordinary citizens.
Will the Commission do what the Ombudsman says it should do? Or not?