The EU is keen to negotiate with the US over financial regulation in the framework of the transatlantic trade and investment partnership (TTIP). No, not to make big banks more safe. Quite the opposite, the EU is taking its cues from European banks, which have a rather long shopping list of rules they’d like to do away with, some of which were actually introduced to avoid another financial crisis. These banks are unhappy with US finance rules, and see TTIP as an opportunity to have their subsidiaries in New York operate under the generally weaker EU ones.
And European banks have found the commission a willing accomplice. Over the past few years, the commission has investigated thoroughly what European corporations want them to do. The ensuing corporate wish-list is essentially the basis for what the EU is asking for under TTIP, give or take 10 per cent. So too for the financial sector. As British financial lobby group, TheCityUK, said of one of the latest proposals from the commission, it "reflected so closely the approach of TheCityUK that a bystander would have thought it came straight out of our brochure on TTIP”.
If there was any doubt that the commission would stick to that line, it disappeared with the recent leak of a document tabled by the EU at the negotiations in March. The commission wants to agree with the US on procedures in the future that would make the two sides “avoid introducing rules affecting market operators and the jurisdiction of the other side”, to quote the leaked document. Few rules on financial markets will meet the narrow criteria proposed; even rules adopted to avoid a cataclysmic meltdown of the financial system, known as “prudential rules”, in order to pass will be scrutinised by the other side, have to be proven not “too burdensome” to the private sector, and their merits convincingly documented.
"What the EU is proposing is a barrier to financial regulation, a move which, not surprisingly, has strong support not only from European banks, but from the most important Wall Street lobby groups as well"
What the EU is proposing is a barrier to financial regulation, a move which, not surprisingly, has strong support not only from European banks, but from the most important Wall Street lobby groups as well. They see a trade deal on financial regulation as another opportunity to attack domestic regulation, and possibly European rules as well.
But in the US administration, reception has been rather cold. It’s not that the US has shown amazing resolve or that it has is in any way turned its back on Wall Street – the financial sector in the US has been almost as successful as its twin in Europe in watering down regulation – but on some points, more headway has been made, and more respect has been shown for the costly experiences of 2008.
For that reason, US treasury secretary Jack Lew, has said the US would “not allow these agreements to serve as an opportunity to water down domestic financial regulatory standards”, or “dilute the impact of the steps that we've taken to safeguard the US economy”.
"We cannot trust the US to protect us from the risk-taking of the financial sector"
But what would happen if the EU were to offer major concessions in other areas? It could be that the EU would concede more rights to US companies in the EU – for example in agriculture – and this would make it easier for the US trade negotiators to swallow what is today considered a bitter pill.
In other words, we cannot trust the US to protect us from the risk-taking of the financial sector. The European public has a clear interest in stopping the EU from watering down financial regulation to please a few banks.