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The text of the Commission's Communication on European Financial Supervision (COM(2009) 252, 27.5.2009) with further information can be found here: "http://ec.europa.eu/internal_market/finances/committees/index_en.htm"



Oliver Roethig, Head of UNI Finance, said: “In its Communication, the European Commission has moved too timidly. The financial crisis is not a little, one-off accident. We need a total overhaul of the system itself. Key is that all stakeholders are fully involved.”



“For the trade unions a major omission in the proposals is that the central role played by employees in the finance industry is not taken into account sufficiently. Their experience and knowledge is essential to prevent a recurrence of a similar crisis effectively. They are best acquainted with internal operating systems and actual practices at all levels as well as with the impact of these on the broader risk situation in a company and the sector as a whole.”



Finance employees should therefore have the opportunity to provide supervisory authorities at national, European and global level with information and assessments of risk-sensitive practices and thereby contribute to an effective early warning system; this applies to both the macro and micro level.



In the Commission’s own impact assessment for this Communication as well as in recent proposals, the role of employees, but also of consumers, has been much more pronounced. EU legislation on consumer protection (MIFID) and money-laundering show the important role finance employees can play as the interface between customers and company.



“For an effective and risk-conscious finance system, we need a comprehensive regime of oversight – an indispensable element is the complementary bottom-up approach,” stresses Roethig. “As customers have the right to good advice, so finance workers have the right to give good advice. We call upon the Commission, Council and European Parliament to ensure both and fully integrate this bottom-up approach into the forthcoming legislation.”



As the Commission outlined, its proposal addresses an integrated framework for financial supervision at both the macro- and micro-prudential level. The former will be covered by the European Systemic Risk Council (ESRC) centring on central banks. Its objective is to monitor and assess risks to the stability of the financial system as a whole. The ESRC will provide early warning of systemic risks that may be building up and, where necessary, recommendations for action to deal with these risks. The creation of the ESRC would address one of the fundamental weaknesses highlighted by this crisis: the exposure of the financial system to interconnected, complex, sectoral and cross-sectoral systemic risks.



The other element – micro-prudential supervision – is based on a European System of Financial Supervisors (ESFS) for the supervision of individual financial institutions. This consists of a robust network of national financial supervisors working in tandem with new European Supervisory Authorities, created by the transformation of existing Committees for the banking securities and insurance and occupational pensions sectors. The ESFS aims to foster harmonised rules and coherent supervisory practice and enforcement. This network should be based on the principles of partnership, flexibility and subsidiarity. It should aim to enhance trust between national supervisors by ensuring that host supervisors have an appropriate say in setting financial stability and investor protection policies so that cross-border risks can be addressed more effectively. Part of this is colleges of supervisors that are being introduced to effectively supervise all cross-border financial companies.



With an integration of the bottom-up approach, such a structure of financial supervision as proposed by the Commission would address key concerns of the trade unions at both the macro and micro levels. UNI Finance welcomes the comprehensive and integrated architecture envisaged. We need a strong European level framework that at the same time respects subsidiarity. In particular, attention must be paid to the role of multinational banks and insurance companies with their substantial impact on different countries. The functioning of colleges of supervisors is essential.



A European Systemic Risk Council built around the expertise of the European System of Central Banks, not least of their employees, promises an effective approach to macro-prudential supervision.



“In the end, what is missing in the Commission’s initiative is more elaboration on how the structured dialogue with stakeholders is to be organised both in terms of macro- and micro-prudential supervision. This needs to be addressed thoroughly in the upcoming legislative process,” concluded Roethig.



UNI Finance will make a detailed assessment of the Commission's proposals against the background of its policies.



Key demands of UNI Finance’s submission on financial supervision are:



1. Internal operating procedures and practices should be transparent. 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 address operating procedures, work practices affecting companies’ risk management and the stability of the financial system



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.





For the text of the submission, see "Related Articles.



Further contributions to the EU include:

• remuneration in the financial services sector
• directors' remuneration
• retail investment products

UNI Finance's statement and key issues paper on financial reform as well as submissions can be found here:

"http://www.uniglobalunion.org/Apps/iportal.nsf/pages/20090324_flp3En"