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To avoid a mere return “to business as usual”, a profound reform and strengthening of the regulatory and supervisory system at European and world level is urgently needed. UNI Europa Finance welcomes the European Commission’s initiative to comprehensively reform the financial regulatory and supervisory system in Europe. It considers the structures and principles outlined in the Communication of 27 May 2009 as a good base for this work. However, we believe both the current process for financial reform and the substance of proposals fall short. The impression is that the finance industry continues to dominate discussions and its interests take precedence while other stakeholders are given a marginal role. This must be changed fundamentally.

The principle cause for the breakdown of the financial system has been a financial industry that essentially pursued a business model based on short-term profits and lack of regulation. The system was not checked by either financial regulators and supervisors nor by governments and investors. Indeed, the system has been based on sidelining other important stakeholders and the public interest at large.

A complementary factor to the problems in the industry has been that regulation and supervision has remained ultimately national while the financial system and finance industry is now global. This is true particularly in the European Union with its internal market. The result has been a quest to find the least stringent regulatory regime. The interests of the finance industry has been put above those of politics, society and the economy at large as well as consumers, investors and employees.

This cartel of finance companies over the financial system must be broken.

For an industry which is at the core of the economic system and provides essential services to keep the “real” economy going, all stakeholders need to be involved and play a significant role in shaping the system, including on regulation and supervision. This financial crisis and its evolution is a case in point.

For UNI Europa Finance, as the European organisation representing finance workers, our primary concern is that there is an effective social and employment dimension in financial regulation and supervision. An essential means to achieve this is to involve finance workers and their unions. Employees are the face of the company to its customers. They are responsible for creating trust and delivering satisfaction to customers and thereby instrumental for re-establishing confidence in the financial sector as a whole. Their experiences and knowledge of internal business practices and the impact of these on the broader risk situation in the sector are essential to prevent the recurrence of a similar crisis.

There is a tendency to look at companies from an abstract and top-down perspective when operating, supervising and regulating financial institutions. UNI Europa Finance suggests a complementary bottom-up approach to supervision to provide the supervisory authorities with information and assessments from the people who are closest to company practices, the employees. In its proposal, the Commission does not recognise the importance of this in the work of supervisors. There has not been a single reference to the role of employees in the Communication.

UNI Europa Finance stresses that the guiding principles for financial market supervision must include a bottom-up approach:

1. Internal operating procedures and practices should be transparent and be taken account of by supervisors. The way employees are motivated and constrained in performing their jobs must be clear (remuneration, incentives, skills, and working conditions).

2. Structured dialogue should be established between unions representing financial workers and financial supervisory agencies at all levels to ensure that operating procedures, work practices affecting companies’ risk management and the stability of the financial system are addressed properly.

3. Charters on responsible sale of financial products should be developed by each financial institution and to be agreed between management, unions and other stakeholders.

Consumers have the right to good advice; finance workers have the right to give good advice.

UNI Europa Finance set out its position on financial market supervision in more general terms in its contribution to the previous consultation of the European Commission (annexed). Here, the focus is on the suggested architecture for a new European financial supervisory framework.