Does Standard & Poor’s represent civil society?

Oh dear. It’s all going wrong for the European Banking Authority (EBA), the new agency responsible for policing the EU’s banking sector. We noted some promising signs here a few months ago, but it’s been largely downhill since then. In July it carried out what it claimed was a comprehensive ‘stress test’ of European banks, assessing how well they would survive various economic shocks. All but 8 banks were given a clean bill of health. The only problem was that, following fierce political pressure, the tests did not assess the impact of a default by Greece or other EU member states. Just one month later, the share prices of some of Europe’s biggest banks have taken a nosedive as financial markets fret about their exposure to Greek debt. D’oh!

As if this wasn’t bad enough, last week consumer and investor organisations filed a complaint with the EU ombudsman about the composition of the EBA’s stakeholder groups, which are an important source of policy advice and expertise. The authority’s own regulations state that these groups should include employees representatives, consumer organisations and user groups “in balanced proportion”. Such measures are not just token-ism: experience from the fight against corruption has shown how strong civil society participation is a strong counterweight to the influence of private interests.   A glance at the list of representatives, however, shows how grudgingly EBA officials have met their obligations. The groups are dominated by the usual roll call of heavyweight financial corporations. The small smattering of civil society groups includes Slovenian and Bulgarian consumer organisations, which, with the best will in the world, are hardly a match for Deutsche Bank in terms of resources. Even more surprising, under “users of banking services” the EBA has included one of the ‘Big Four’ auditing firms and credit rating agency Standard and Poor’s. The idea that these giant global firms, whose role along with banks and investment firms in the making of the 2008 financial crisis is still being questioned, are somehow on a par with consumers and small investors suggests that European officials have still not absorbed the lessons of recent history.

The two issues are linked. If the EBA is to be a credible actor in the post-crisis regulatory landscape it needs to demonstrate that it has the broader public interest at heart. Rigging tests to avoid hard questions being asked of bank balance sheets, while weakening the hand of civil society in its own stakeholder groups, will only confirm the impression that the authority is there to serve a narrow range of private financial institutions.

Carl Dolan, Transparency International Liaison Office to the EU