The European Banking Authority (EBA) will now have to go back to the drawing board in its protracted search for an executive director.
The controversy over his appointment mirrors the ongoing row about Adam Farkas, the EBA’s former executive director who was allowed to join the Association for Financial Markets in Europe, which has been described as a “coalition of megabanks” such as Goldman Sachs, JPMorgan, Deutsche Bank and BNP Paribas.
Farkas started his functions as chief executive of the Association for Financial Markets in Europe (AFME) on 1 February. MEPs have adopted a resolution condemning his move, saying Parliament should not provide him with the badge necessary to enter the Parliament’s premises.
It also calls on the EBA's Board of Supervisors to reconsider the decision on Farkas' move.
Cross, currently in a senior post at the Central Bank of Ireland, was described by campaigners as a former lobbyist for AFME, a “very similar bank lobby group.”
He was also rejected by the ECON committee earlier this year, albeit by a narrow margin, 27 to 24, after outlining his credentials for the job to committee members.
Kenneth Haar, a researcher at Corporate Europe Observatory, welcomed the outcome of the parliamentary vote and said, “There had been lots of talk about Member State lobbying to have him approved. I had - for instance - heard about Danish MEPs being lobbied by the Danish government and I know others did the same.”
“A former banking lobbyist as head of banking supervision would have done serious damage to the reputation of the EU authority. Such conflicts of interest undermine confidence in EU authorities” Sven Giegold MEP
“Apparently, the Danish government had been happy with his work on the Board of Supervisors. And I can think of one incident where he was seen as helpful from a Danish perspective - at least from the Financial Services Authority's view.”
“Last spring, perhaps the biggest financial scandal in Europe was about Danske Bank's role in money laundering through its Estonian subsidiary. A staggering amount of money was funnelled through that bank and the Danish FSA had done a poor job in supervising the bank. Several warnings were ignored.”
“At the EBA staff had prepared a report that concluded the Danish FSA and other FSAs had acted in breach of EU law. The report was voted down, including by Gerry Cross.”
Haar says he hopes the EBA will “now learn the lessons” from the doomed Cross appointment and the Farkas “affair,” saying, “Hopefully, they will see the writing on the wall. It has been there for months. They need to change their approach to banking lobbyists.”
He added, “The nomination of Gerry Cross shows lack of judgment at the EBA. They have just allowed the director to join the main lobby group for big banks, AFME, and they prepared to hire a person who has worked for the very same organisation.”
“It seems none in the EBA leadership bothers about the risky symbiosis between bank lobbyists and supervisors.”
He thinks the EBA will now suffer a hit to its reputation, saying, “I think we will see the EBA struggle with its reputation for a long time. They don't seem to pay attention to what the concerns over conflicts of interest are about - including what the EU rules are supposed to achieve.”
“Hopefully, they [the EBA] will see the writing on the wall. It has been there for months. They need to change their approach to banking lobbyists” Kenneth Haar, Corporate Europe Observatory
“On top of the Farkas case, they have a chair that came straight from Santander and who still has shares in that company. And they wanted to hire a new director who has gone through the revolving door himself. It doesn't bode well for the future of ethics at the EBA.”
German Greens MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group, commented, “The rejection of Cross is a strong signal against the powerful influence of the banking lobby in Brussels. A former banking lobbyist as head of banking supervision would have done serious damage to the reputation of the EU authority. Such conflicts of interest undermine confidence in EU authorities.”
“The nomination of Cross was unnecessary and incomprehensible, as candidates with less of a lobbying background were available. The Commission must submit a proposal for a European ethics authority as soon as possible and tighten the rules for changes between public authorities and lobby organisations.”