Barroso claiming euro was 'victim' of our problems

Iwannahurl

It's also worth considering what we mean by "banking".

The fact of the matter is that a very large part of the financial sector, calculable in terms of trillions of Euro, is in what is called shadow banking. Before the crash shadow banking internationally was either lightly regulated or outside of the normal banking regulation framework. Agencies such as the ECB are only now trying to play catch-up.

Here's a quote from two ECB economists, contained in a report published earlier this year:

In the period since the beginning of the financial crisis, the issue of “shadow banking” has received a lot of attention. Shadow banking may be defined as “the system of credit intermediation that involves entities and activities outside the regular banking system”. Of particular importance from a financial stability perspective is where shadow banking intersects with regular banking – i.e. where banks are themselves using other financial intermediaries to carry out certain activities (because there are regulatory or other advantages in doing so), or where regular banks are exposed to the risks of the activities of shadow banking counterparties.

The prominence policy-makers have given to the issue of shadow banking is for two main reasons. First, shadow banking activities have played a distinct role in the crisis. Its genesis was in the US sub-prime mortgage market, whose risks were spread to various countries and sectors through the process of securitisation. The extent and complexity of financial intermediation which was happening outside of – but not entirely remote from – the traditional banking sector was an important element in the large credit growth during the boom period, and the loss of confidence between banks as the early stages of the crisis unfolded. Second, in a post-crisis environment of increasing oversight of the traditional banking sector, intermediation activities may instead move to lighter- or unregulated shadow banking entities.

Hence, regulations which are intended to mitigate systemic risks may lead to circumvention of oversight and therefore increased risks. This may manifest itself in regulatory arbitrage, where activities are carried out in those jurisdictions where the regulatory burden is lower.

The above excerpt is from an official report published by the Bank for International Settlements, which devotes an entire section to Ireland. However, it is clear that, while Ireland happily facilitated the shadow banking sector with its own style of "regulation", this country was and is not the only one with its snout in that particularly mucky trough.

Iwannahurl

More excerpts from the same paper (not all from the same authors/sections):

The euro area financial sector has grown considerably in the past two decades, and has become significantly more complex. Total assets of euro area Monetary Financial Institutions (MFIs) – i.e. central banks, credit institutions and money market funds (MMFs) – more than doubled between the beginning of 1999 and the end of 2011, to over € 38 trillion. At the same time, the total assets of euro area other financial intermediaries (OFIs) – which includes inter alia investment funds, Financial Vehicle Corporations engaged in securitisation (FVCs), non-securitisation financial vehicles, securities dealers, finance companies – almost tripled, from € 5.7 trillion in Q1 1999 to € 15.3 trillion in 2011 (one-quarter of the euro area financial sector).

There is an uneven geographical distribution of non-bank financial intermediaries in the euro area for historical, regulatory and other reasons. Of the € 16.3 trillion total assets of other non-bank financial intermediaries in the euro area, almost half is concentrated in Luxembourg and Netherlands, with France, Ireland and Germany making up a further 36% between them.

The OECD financial accounts, the financial balance sheets in particular, are very useful in comparing activities of financial corporations of OECD countries. By doing so, the importance of the financial sector as well as characteristics of its financial structure of OECD countries can be identified.

Among OECD countries, the United States has, in absolute terms, by far the largest financial assets and liabilities held by the Total economy, which is followed by Japan, United Kingdom, France and Germany. In relative terms, i.e., comparing the financial assets as a percent of GDP, Luxembourg has the biggest size of assets (138 times the GDP) followed by Ireland (30 times) and the United Kingdom (18 times). The United States accounts for 9 times.

All Irish resident [Financial Vehicle Corporations] and most [Money Market Funds] engage in shadow banking activity. ... [The] shadow banking sector in Ireland is significant, with predominantly non-domestic risk exposures. This underlines the international nature of shadow banking and the need to share information across borders.

Link: http://www.bis.org/ifc/publ/ifcb36.htm

KwackerJack

Euro or Yen the European union didn't force the Celtic tiger upon us.

World recession or not we still would have gone down hill due to our ridiculous building fiasco and massive over spending from the average Joe who could just about pay it back in the first place.

We did not cause the € mess but we didn't help it either.

micosoft

GCU Flexible Demeanour wrote: »

Can I repeat again, if people really want to adopt this strange position of denying the EU has had a supervisory regime for banks since at least 1992, the people they are arguing against are the European Commission, and not me.

You have failed to prove this. Furiously pedalling and lowering your burden of proof to suggest a tenuous link from the ECB to our regulatory regime does not impress either.

GCU Flexible Demeanour wrote: »

I know that's what he's tried to insinuate, although I notice he hasn't come back on the thread since I linked the Commission press release summarising the main features of the EU's banking regime.

Scofflaw has no need for anyone to defend him/her but the fact the discussion ended on Christmas eve may have something to do with it. I notice that you tend to do this with all of your opinions - take perfectly unexceptional matters and twist them to suit a specific anti-EU agenda. So Scofflaws lack of response is because he has no arguable case rather then the more likely - It's Christmas and he/she has better things to be doing.

GCU Flexible Demeanour wrote: »

But bear in mind the point at issue. Barroso makes the statement that the EU had no competence "at all" - he's saying none, nada. That means I only have to point to where some EU institution had a formal engagement with supervisory matters to prove him wrong. The point is not whether the Banking Supervision Committee of the ECB was a particularly strong institution. (It wasn't - it was a classic EU fudge, a partner to the fudge in the ECB Statute that allows Member States to delegate supervisory functions to the ECB.) The point is simply that its function was to facilitate formal interaction between the ECB and banking supervisors, so that the ECB could do its job properly. Its title reflected its (weak) mandate to formally engage with supervisory matters. I'm not fixating on the committee title. At the same time, it is plain delusional for folk to talk as if the ECB social club adopted the title "Banking Supervision Committee" for the bant.

The EU had no competence in the supervision of banks. Simple as. All the contortions of language in the world won't change that. Sticking the word weak on front of it won't do that.

GCU Flexible Demeanour wrote: »

Also, be very clear that all of those EU Directives are legally binding on Member States, and that the Commission is obliged to take legal action against any Member State that fails to implement those Directives.

Again, another diversionary tactic - obviously nobody debates what EU directives are but it is utterly irrelevant given there was no regulation specifying that the ECB or Commission were responsible for banking regulation in the Eurozone.

GCU Flexible Demeanour wrote: »

Those Directives didn't establish a single EU banking supervisor. What they did was (effectively) make every banking supervisor in every Member State of the EU/EEA an EU banking supervisor. When the Irish Central Bank issues a banking licence, the licence holder is legally entitled to provide those services anywhere in the EU. That's because the EU has a common banking supervisory regime, with legally binding minimum standards.

Finally we starting getting to the truth. And then your interpretation of same. First off - who are "they". Because it was the Government of the day in every country to appoint the chairperson of their central bank - the banking supervisor. Where was the EU ability to hire/fire or discipline the "EU banking supervisor"?

GCU Flexible Demeanour wrote: »

These are simply facts. Facts that I've verified by quoting material published by the European Commission and ECB.

No, these are your opinions based on some very tenuous interpretations of EU legislation in order to support your thesis that Barosso told a lie when he stated that the EU had no competence in banking regulation for Ireland and therefore it was unfair to blame the EU; when manifestly the fault lay with the Irish Regulatory regime and the State that implemented it i.e. the democratically elected Government of Ireland.

So I'll ask you one simple question - who could hire/fire or discipline the Governor of the Irish Central Bank?

GCU Flexible Demeanour

micosoft wrote: »

You have failed to prove this.

But, sure, I've nothing to prove. I've quoted material from the European Commission which plainly states that there is a EU supervisory and regulatory regime.

If you want to contest this, the burden is on you to demonstrate how the Commission are wrong in their understanding.

micosoft wrote: »

The EU had no competence in the supervision of banks. Simple as.

No, it's not that simple. Again, I quote from the ECB publication (handily entitled FACTS)

http://www.centralbank.ie/about-us/documents/ecb_facts_presentation.pdf

EUROSYSTEM/ESCB COMMITTEES

The Committees assist the work of the decision-making bodies of the ECB, which can request them to provide any information in their fields of expertise in order to facilitate the decision-making process and the implementation of decisions.

Participation is usually restricted to experts of the Eurosystem central banks. However, the NCBs of the EU Member States which have not yet adopted the euro take part in the meetings of a Committee whenever appropriate. Moreover, representatives of other competent bodies may also be invited, such as national supervisory authorities in the case of the Banking Supervisory Committee. <...>The Banking Supervision Committee (BSC) assists regarding the contribution to prudential supervision of credit institutions and the stability of the financial system.

As I've said, the function of the BSC is to assist the ECB with respect to its contribution to banking supervision. That's not some wild statement that I'm making. It's what the ECB themselves say, in plain black and white.

Can I also point out that the above quote also demonstrates the fact that the ECB operates on the assumption that all EU Member States will join the euro; as far as the EU is concerned, there are Eurozone members and "EU Member States which have not yet adopted the euro". I can't understand why some posters on this and other recent threads struggle with this basic fact.

Dannyboy83

Not that I would have been paying any attention in those days anyway, but the only real instance I recall of a non-indigenous person/organisation sounding alarm bells during the boom was the German Ambassador, Christian Pauls.

Obviously they were ignored if they were issued, but I'm just wondering if there is an example of any of these bodies warning the government? (did a google search but didn't find anything relevant)

JacquesDeLad

The people who've benefitted most from our misery are sitting smugly next door calling us a tax haven while providing an unregulated financial fraud hub themselves.

GCU Flexible Demeanour

Dannyboy83 wrote: »

Obviously they were ignored if they were issued, but I'm just wondering if there is an example of any of these bodies warning the government? (did a google search but didn't find anything relevant)

I don't know if any particular warnings were communicated to Ireland, but if you read the ECB Annual Report for 2007 (IMHO) you find a more open analysis of financial conditions in the Eurozone - with a consciousness of differing conditions in different Member States - that would be found in our Central Bank's commentary. The ECB were also more openly critical of the need to strengthen the EU's supervisory and regulatory framework.

Scofflaw

micosoft wrote:

Scofflaw has no need for anyone to defend him/her but the fact the discussion ended on Christmas eve may have something to do with it. I notice that you tend to do this with all of your opinions - take perfectly unexceptional matters and twist them to suit a specific anti-EU agenda. So Scofflaws lack of response is because he has no arguable case rather then the more likely - It's Christmas and he/she has better things to be doing.

Family and so forth - it occasionally distracts from the vital business of the Boards World Council!

To be honest, though, I can't see much point in chewing the marrow of this one. GCU has settled matters to his own satisfaction but nobody else's by standing on a point of semantics, and that's a well-traveled road to nowhere with terribly dull scenery.

Since the discussion won't go any further, I'll reiterate the point, which is that the existence of some cooperation structures with a coffee-table discussion remit is not a supervisory regime in any sense other than the purely semantic one GCU is satisfying himself with. Under no circumstances is it a regulatory regime, since it rather lacks the defining capability of issuing regulations.

Otherwise, one would have to consider the "best practice" junkets county councillors are traditionally fond of as a 'regulatory regime', which is something of a strain on the English language.

cordially,
Scofflaw

GCU Flexible Demeanour

Scofflaw wrote: »

To be honest, though, I can't see much point in chewing the marrow of this one. GCU has settled matters to his own satisfaction but nobody else's by standing on a point of semantics, and that's a well-traveled road to nowhere with terribly dull scenery.

I'm sorry, but there's no semantics involved. Again, if you want to persist in this strange denial of reality, your argument is with the European Commission and the ECB, both of which give ample descriptions of the involvement of the EU in supervisory and regulatory matters.