MEPs and transparency groups have strongly condemned the director of the European Banking Authority (EBA) for moving to “one of the most powerful finance lobby groups in Europe.”
Adam Farkas is due to start his functions as chief executive of the Association for Financial Markets in Europe (AFME) on 1 February.
The row coincides with the approval of a parliamentary resolution on “institutions and bodies of the Economic and Monetary Union: preventing post-public employment conflicts of interest”. MEPs adopted the resolution at the plenary in Strasbourg on Thursday.
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The resolution had already been adopted unanimously by the Parliament's Economic and Monetary Affairs Committee and is the institution’s reaction to the appointment of Farkas at AFME.
The text is unusually strong and stipulates that MEPs should avoid meeting Farkas and says that the 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. The Commission is also asked to revise and harmonise the rules for switching between politics and industry.
"The decision to allow Farkas to move to a major financial lobby is a blow to EBA's credibility. If regulators don't take themselves seriously, how can they expect citizens to do so?" MEP José Gusmão (PT, GUE/NGL)
AFME, the body he is set to join next month and described as a coalition of “megabanks” such as Goldman Sachs, JPMorgan, Deutsche Bank and BNP Paribas, includes lobbying of the EU institutions among its activities.
AFME was set up to be “in close dialogue with regulators to ensure that the industry’s perspective is understood and carries weight”, and to use what they call their “market expertise” to “assist formulation of EU and national legislation”.
José Gusmão, a Portuguese MEP, condemned Farkas’ move to AFME, telling The Parliament Magazine, “The case of Farkas is another symptom of the complacency of the regulators towards the issues of independent regulation and credibility.”
He added, “The decision to allow Farkas to move to a major financial lobby is a blow to EBA's credibility. If regulators don't take themselves seriously, how can they expect citizens to do so?”
Further criticism came from German Greens MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group, who told us, “The revolving door between EU authorities and lobby associations must be stopped. The EBA should veto the move from Farkas to the banking lobby at the last minute.”
"The European Parliament's call must not simply be ignored by the banking supervisory authority. Should Farkas take up his new post at AFME, Parliament will not grant him a lobby badge. We MEPs should not have meetings with the lobbyist Farkas" MEP Sven Giegold (DE, Greens/EFA)
“The European Parliament's call must not simply be ignored by the banking supervisory authority. Should Farkas take up his new post at AFME, Parliament will not grant him a lobby badge. We MEPs should not have meetings with the lobbyist Farkas.”
His comments were echoed by Kenneth Haar, a researcher with the Brussels-based campaign group, Corporate Europe Observatory, who told The Parliament Magazine, “Our investigation indicates the EBA has not taken this seriously enough. Apparently, they didn’t pay much attention to the outcry that followed when a former top banking lobbyist was selected as EBA-chairperson earlier last year. There is clearly something wrong with the governance of this important institution and we need the European Parliament and the Ombudsman to help us fix it.”
The EBA’s Board of Supervisors (BoS) has reportedly assessed the potential conflict of interests arising from Farkas’ new role and decided that he will no longer participate in the EBA’s policy supervisory work and will focus exclusively on operational matters.
It is believed that he cannot engage in lobbying or advocacy of the EBA, or have professional contacts with EBA staff, for 24 months after leaving the authority.
Commenting further, Haar said, “This is an egregious revolving doors case. It is unacceptable that a top banking regulator is allowed to go straight to a job as head of a powerful finance lobby group. CEO has - along with other groups in the Change Finance coalition - fought for months to stop it. This case has revealed a flawed approach to ethics in the EBA.” The Change Finance coalition, a campaign group, has filed a complaint to European Ombudsman Emily O’Reilly which has been accepted.
"There is clearly something wrong with the governance of this important institution and we need the European Parliament and the Ombudsman to help us fix it" Kenneth Haar, Corporate Europe Observatory
He adds, “The Board of Supervisors has indeed discussed the conflicts of interest involved, but their approach doesn't command respect. I have had the chance to go through internal EBA documents on the matter and it would be more correct to say that, while they realise there is a serious conflict between the director's new job and the interests of the EBA, they haven't taken the steps necessary to prevent that.”
“Instead, they have imposed restrictions they know they cannot enforce. Once Adam Farkas is in his new position, the EBA has few if any possibilities to ensure he doesn't cross the line.”
Haar said, “Considering this comes on top of the EBA's hiring of a former bank lobbyist as chairman, an image of lax ethics at the EBA is emerging. The present chair, for instance, has been allowed to retain shares with Santander, his former employer, even though this appears to go against the rules.”
On Friday, an EBA spokesman told this magazine, “We welcome the resolution by the European Parliament to prevent post-public employment conflicts of interest in light of Adam Farkas’ decision to step down as EBA Executive Director.”
“We take the resolution very seriously as it rightly touches on the issues that the EBA itself debated when the BoS took a decision about Adam Farkas’ intention to resign as Executive Director and to join AFME, namely how best to ensure the uniform application of rules across the EU to prevent post-public employment conflicts of interest.”
"As to the BoS decision on Adam Farkas, we are confident it was taken in line with the current framework and that the conflict of interest rules were properly applied" EBA spokesperson
She continued, “As to the BoS decision on Adam Farkas, we are confident it was taken in line with the current framework and that the conflict of interest rules were properly applied. In addition, the resolution does not raise any new elements that the EBA failed to consider in its decision.”
“We are committed to ensuring transparency of our decision and to monitoring its enforcement. In that respect, we will continue to cooperate with the European Commission and the European Parliament to ensure that any weak links in the framework can be properly addressed in the future. In particular, we are happy that the resolution pointed to the need to strengthen the current enforcement mechanism.”
A spokesman for the AFME told this website, “We don’t have any comment on this.”
Mr Farkas was not immediately available for a comment.