A quick summary of the financial corporations’ wish-list for TTIP.
Some examples from financial corporations’ wish-list.For an in depth analysis, see Corporate Europe Observatory.
Restricting “prudential measures” to be taken
The European Banking Federation (EBF) wants governmental ability to take “prudential measures” unaffected by TTIP clauses to be severely restricted and only to apply when the measures are closely related to financial stability, investor and/or client protection, and when there are “unsurmountable differences” in EU and US provisions that “cannot be bridged in the foreseeable future”. Such a restricted interpretation of governmental ability to legislate under the so-called prudential carve-out would mean that the dominant way of regulating would be the EU and US creating common rules; the two blocs would only be able to introduce financial reforms independently of one another after a long process by which it becomes clear that they cannot have common rules.
Undermine hedge funds and derivatives transparency
Regulations for “certain transactions” should not cover foreign investors, if for instance they deal with “sophisticated investors”. That means regulation on transparency of hedge funds in the EU would not apply to US funds, and US rules on derivatives reporting would not apply to European financial firms.
Drop ban on speculation
Banks in the US – including subsidiaries of European banks – are barred from making risky bets with federally insured money for their own profit (“swap desk pushout”). This has annoyed Deutsche Bank. Along with other German banks in the Association for German Banks, they complain that such a demand is discriminatory and an example of unilateral extraterritorial conduct.
Drop extra safety for megabanks
The US is considering extra capital requirements for foreign banks as well as national banks. This has created a stir in the European financial sector, which feels more comfortable with the lenient and slow approach of the EU. The lobby group the European Services Forum, which includes some of the biggest banks, believes it should not be possible for the US to declare a European bank so big that this extra capital is needed.
Drop safety rules for investment firms
Insurance Europe wants to do away with state-level rules in the US that are meant to keep insurance companies from conducting overly risky speculation (leverage rules).
Drop supervision of foreign banks
Deutsche Bank and Barclays are among the European banks who prefer not to operate under US rules in the US, and to be supervised by the European Central Bank, not the US authorities. However, the US has now closed the last loopholes and insists on its right to keep an eye on big foreign banks – some of which were major sources to financial instability in 2008.
As risky as Lehman Brothers
The US is on course to adopt rules on how much a big bank can borrow, compared to its capital – the so-called leverage ratio. The yardstick is to ensure that banks are not as risky as Lehman Brothers and have enough financial reserves in case of crisis. In the EU, on the other hand, at best, a similar ratio will be adopted, but most likely a ratio at the same level as Lehman Brothers had before it went under will be allowed. In the TTIP debate, the bank lobby group Eurofi, is among those who have voiced its concern over the US rules. European banks continue to fight hard to stave off the challenge of a restrictive leverage ratio in Europe.
Other reforms that could be undermined or complicated by a TTIP agreement on financial regulation due to huge differences between the EU and US include rules on banking structure to tackle too big to fail banks, rules on credit exposure to a single “counterparty”, money market reforms to tackle shadow banking, financial transaction tax, transparency on the derivatives markets, and liquidity of banks.
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