International

On October 2nd a working group under the leadership of Erki Liikanen, Governor of the Bank of Finland, completed its report on the banking sector. The group advocates, amongst other things, a more thoroughgoing division between banking activities involving risk and ordinary banking activities, and also wants to see real limits put on bonuses. In the SP’s view these proposals might have gone much further, but at least the report goes in the right direction. Dutch bankers have once more protested, not having yet learnt their lesson. The report should, however, be obligatory reading for Prime Minister Mark Rutte and his potential coalition partner, Labour leader Diederik Samsom, who could incorporate the proposals into their plans for government. Then we’d really see whose pulling the strings when it comes to this accord. Labour - who even wanted to see a national public bank – or, via the Liberals, the bankers who reject even the mildest proposals?

Erki Liikanen (Source:WikiCommons)

For the most part, EU expert groups are assembled in a one-sided fashion and produce advice notes favourable to major corporations and financial institutions. European Commissioner Michel Barnier does appear, however, to be taking seriously the task of tackling the speculators and has already presented a number of legislative proposals. Now we have the Liikanen report, which goes much further than was expected, proposing the separation of banking activities, with speculative transactions which the banks perform on their own account divided from more routine banking. The report is not completely watertight. There is a high threshold, so that only big banks and those whose speculative activities count for more than 15-25% of their assets are covered. In addition, an exception is made for transactions which benefit business. This was the principal argument which Finance Minister Jan Kees de Jager used against splitting the banks, that the Dutch banking sector would no longer be attractive to multinationals, because big corporations require frequent speculative transactions. Given the proviso about advantages to business, this argument cannot be used against the Liikanen recommendations. This makes it even more remarkable that the Dutch Union of Banks (NVB) rejected even this mild proposal.

Perhaps the attitude of the Dutch bankers has to do with the fact that the working group wants to further address the issue of the bonuses, placing both relative and absolute limits on them. The bonus may not exceed 50% of the basic salary and the total value of bonuses may not be greater than the total of dividends paid out. Bonuses must be the first thing to go in the face of losses. This could also have been stronger, for example through a ban on bonuses at banks which receive state aid, but it is good that the working group has at least given its attention to this matter. It is also remarkable how the group recommends the introduction of regular ‘fitness tests’ for those in positions of leadership. Evidently there remain amongst bankers too many people who don’t understand their own products.

In Brussels, Commissioner Barnier must now decide whether he will adopt these proposals and put forward concrete legislative proposals. But Rutte and Samsom have no need to wait for this. They can institute the splitting of the banks, the limiting of bonuses and the performance of quality controls, all in a single chapter of their coalition agreement. Addressing this would deserve respect; failure to do so would mean that we would know that the chair of the NVB and the political right have been calling and the Labour Party is once more buckling under pressure. And we would also know for certain that a successful coalition agreement will mean that the Netherlands will become not more social, but more neo-liberal.