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UNI-Europa Finance Statement on the Financial Crisis adopted by the UNI-Europa Finance Conference, Brussels, Belgium 18-20 September 2007

UNI Finance demands better regulation and supervision of financial institutions and rating agencies, whose activities and carelessness have plunged the world’s financial markets into crisis and will cost tens of thousands of finance jobs.

At the origin lie mistakes by management and investors who pushed for untenable profit margins without regard to the real potential of companies. The role of business has been transformed first and foremost into financial speculation. The result has been a global pyramid scheme of gigantic proportion.

Banks have designed financial products that are so complex that not even they themselves understand them. Rating agencies have approved them (for a fee). Investors have bought them without a market being in place. Governments have given tax incentives to promote them. And regulators have simply ignored them.

The financial system has become non-transparent, driven by unrealistic profit expectations and by lack of regulation. Market participants no longer trust each other, probably based on the knowledge of what they themselves are hiding.

All too often, the pawns being pushed around are the ordinary workers in the finance industry. While they lose their jobs, most of the fat cats who gambled with other people’s money will walk away from the wreckage.

UNI Finance demands a re-think of the world’s financial system. Transparency must be ensured in product design and market functioning. Regulators must keep in step with financial innovation. Investors, especially pension funds but also financial institutions, must live up to their fiduciary duty not to risk their existence through speculation.

First of all, however, financial institutions, central banks, governments and investors have to work together to stabilise the financial system and ensure that ordinary people in the industry and beyond do not lose their livelihoods.

UNI-Europa Finance therefore insists that:

• The security of employment and the livelihood of finance employees are of paramount importance in the response to the crisis.
• There must be a higher degree of transparency of the finance sector, especially on obligations companies have entered into. All financial institutions should be transparent explaining their exposure to conduits and structured finance.
• Adaptable and far-sighted regulatory frameworks are required, taking into account the innovativeness of the actors on the financial market and its global nature. The regulatory system must cover all types of financial institutions, not only banks and insurance companies. The system must also ensure that, where credit is given to unregulated financial institutions, capital reserve requirements are higher than for regulated companies.
• Hands-on global system of supervision is necessary. Since a large and ever-growing part of financial business is conducted cross-border, cross-border supervision must be in place to safeguard the interests of all actors on the market at regional and world level.
• A system must be put in place where rating agencies are rated themselves. We need a body to monitor the monitors, to ensure the compliance with financial trends. This could be done through the introduction of independent/public rating agencies (eg the ESCB).
• Pension funds must take on a long-term perspective rather than aiming for short-term profits. Their role is foremost to ensure the profitability of their policies over the next decades for those covered who need to finance their retirement. All investors have a fiduciary duty to look at s