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EU finacial regulator
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02-10-2008 2:27pm#1Sarkozy has floated the idea of any EU wide financial regulator.
http://www.irishtimes.com/newspaper/ireland/2008/1002/1222815461056.html
I'm open to the idea but would like to hear more arguments for and against before I will commit. What are your views on such a move?0
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In theory - yes.
In practice - do we need one?0 -
There are already plenty of regulators. They let the money and banking system fall apart and looked on approvingly. Generally they work for the banks, not us.
What do we need another of the ****ers for?0 -
There are already plenty of regulators. They let the money and banking system fall apart and looked on approvingly. Generally they work for the banks, not us.
What do we need another of the ****ers for?
Possibly, just possibly, because the problems we're seeing in the financial sector result from lack of regulation, not over-regulation.
cordially,
Scofflaw0 -
What we need is the current crop thrown out on their arses. We don't need to give them a blank cheque to sort it out, seeing as how they've already proved their imcompetence.
It's quite feasible we need an uber regulator who will look after citizens/consumers/customers etc.
Unfortunately I'm sceptical of these people and think any new regulator will become the banker's advocate, not their policeman.0 -
What we need is the current crop thrown out on their arses. We don't need to give them a blank cheque to sort it out, seeing as how they've already proved their imcompetence.
What's the point of blaming people for not regulating things they weren't asked to regulate?
Banks everywhere were de-regulated over the last decade, and allowed to engage in the various kinds of deals that are now coming back to haunt all of us.It's quite feasible we need an uber regulator who will look after citizens/consumers/customers etc.
Unfortunately I'm sceptical of these people and think any new regulator will become the banker's advocate, not their policeman.
Quelle surprise. Imagine you being sceptical like that.
shocked,
Scofflaw0 -
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Imagine indeed.0
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Sarkozy has floated the idea of any EU wide financial regulator.
http://www.irishtimes.com/newspaper/ireland/2008/1002/1222815461056.html
I'm open to the idea but would like to hear more arguments for and against before I will commit. What are your views on such a move?
It's often tempting to think more regulation is the answer.
The EU introduced two directives, the Capital Adequacy Directive 2006/48 and 2006/49. The effect of these directives are to force financial institutions to value their assets in a particular way and, at the time, the EU were warned by many, such as leading firm Ernst & Young, that these directives, coupled with falling stock markets or property markets, would make the 1920's recession look like a cake walk. The EU ignored such protests and ploughed ahead anyhow.
Mervyn King, the Governer of the bank of England, considers that if it were not for these directives, Northern Rock would not have been in fear of collapse.
Professor Tim Congdon, and others, consider these two directives have reduced our banking and lending system to paralysis, and consider that without them, most of the banks that have collapsed, such as Lehman Brothers, might have survived.
Curiously, there may be an argument here for greater powers in Brussels because, such is the speed at which it operates, it might take up to 18 months to draft legislation and get it through the machinery of Brussels to reverse these disasterous directives.
As we have seen in the last week, our Dail can whizz through legislation if its urgent, but the way the EU is structured that seems unlikely, and we are all set to live with these directives which are paralysing our banking system. This is incredibly serious and affects most of us and the whole economy.
More regulation? I'm afraid if this is the sort of regulation we can expect from "more regulation", then the answer must be a resounding "NO".0 -
It's often tempting to think more regulation is the answer.
The EU introduced two directives, the Capital Adequacy Directive 2006/48 and 2006/49. The effect of these directives are to force financial institutions to value their assets in a particular way and, at the time, the EU were warned by many, such as leading firm Ernst & Young, that these directives, coupled with falling stock markets or property markets, would make the 1920's recession look like a cake walk. The EU ignored such protests and ploughed ahead anyhow.
Mervyn King, the Governer of the bank of England, considers that if it were not for these directives, Northern Rock would not have been in fear of collapse.
Professor Tim Congdon, and others, consider these two directives have reduced our banking and lending system to paralysis, and consider that without them, most of the banks that have collapsed, such as Lehman Brothers, might have survived.
Curiously, there may be an argument here for greater powers in Brussels because, such is the speed at which it operates, it might take up to 18 months to draft legislation and get it through the machinery of Brussels to reverse these disasterous directives.
As we have seen in the last week, our Dail can whizz through legislation if its urgent, but the way the EU is structured that seems unlikely, and we are all set to live with these directives which are paralysing our banking system. This is incredibly serious and affects most of us and the whole economy.
More regulation? I'm afraid if this is the sort of regulation we can expect from "more regulation", then the answer must be a resounding "NO".
That appears to be a rewrite of this Telegraph article. What it refers to is a Directive which requires banks to mark their assets to 'market value'. In a falling market this means that banks can be visibly seen to be losing capital value.
Without the Directive there would seem to be no requirement on banks to make any statement of the true value of their assets. The banks would therefore possibly have the option to lie their way out of the crisis by pretending their assets were worth more than they actually are, or by saying absolutely nothing about their assets at all.
Christopher Booker (for it is he) therefore naturally ascribes a large proportion of the blame for the financial crisis to the EU, via this Directive.
However, first, the crisis is not one of falling assets, but of undefined risk. Banks are not lending to each other because they do not know how much toxic debt is being carried by other banks - a case not of excessive transparency, but insufficient transparency.
Second, and more importantly, this is like blaming knowledge of house prices for house price falls, and claiming everything would be alright if only nobody knew what was happening.
Now, funnily enough, we have an analogous situation to hand - the deflation of the Irish housing bubble. Hands up all those who think it's just great that we don't do what the UK does, and register all house sale prices with the Land Registry - who think it's good for the Irish housing market that nobody actually knows what's going on? That we'd be better served by a less transparent banking sector?
I suspect even auerillo doesn't, really - but eurobashing is eurobashing, and an opportunity to throw red herrings must never be passed up by the passionate eurosceptic. And that, in a nutshell, is euroscepticism - instead of seeking solutions to problems, every problem is simply an opportunity to pin some blame on the usual suspect - the EU - even if it requires the kind of stretching that is being done here. That, in turn, means the 'solutions' offered by eurosceptics are not solutions, and are not intended to be.
regards,
Scofflaw0 -
It's tempting to think that more accountability and more transparency must always be good things, and generally speaking I think many might agree.
However, It's now widely accepted that attempts to create transparency via directives 2006/48 and 2006/49 are contributing to, and making worse, the banking crices which we are currently experiencing. Indeed, some recognised the danger at the time of their implementation, but were ignored.
What we all have to ask ourselves is whether we'd prefer to have the sort of transparency which adds to, and makes worse, the current banking crices, or whether we'd rather have the sort of transparency we had before directives 2006/48 and 2006/49, and a more stable banking system.
The OP asked if yet anther regulator was a "good thing" and sometimes, as in this example, the answer is that it can be positively a "bad" thing.0 -
It's tempting to think that more accountability and more transparency must always be good things, and generally speaking I think many might agree.
However, It's now widely accepted that attempts to create transparency via directives 2006/48 and 2006/49 are contributing to, and making worse, the banking crices which we are currently experiencing. Indeed, some recognised the danger at the time of their implementation, but were ignored.
What we all have to ask ourselves is whether we'd prefer to have the sort of transparency which adds to, and makes worse, the current banking crices, or whether we'd rather have the sort of transparency we had before directives 2006/48 and 2006/49, and a more stable banking system.
The OP asked if yet anther regulator was a "good thing" and sometimes, as in this example, the answer is that it can be positively a "bad" thing.
Yes, that's what you said. By the way, what qualifies as "widely accepted"? A Telegraph article, repeated by distributors like yourself and the usual eurosceptic outlets?
Unfortunately, the original article fails to explain why greater transparency is either bad or even relevant in this case, and, alas, you haven't addressed that deficit. How about you have a crack at explaining how the greater transparency and regulation leads to instability?
Tough spin for you here - I wish you all the best.
regards,
Scofflaw0 -
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Could you explain, with specific references to the relevant EU directives, how said directives are contributing to the current global economic downturn?However, It's now widely accepted that attempts to create transparency via directives 2006/48 and 2006/49 are contributing to, and making worse, the banking crices which we are currently experiencing.0 -
An EU wide rugulator, I would think, would make sense within the Eurozone, but ONLY is the regulator actually had a set of teeth. We have had a regulator here all through his mess but the question always was "who did he work for?".
He didn't work for the banks - they made huge profits quickly but now face collapse.
He didn't work for the people - they are so endebted no that there is nowhere to go and many good businesses have gone under due to lack of finance.
He did work for the government - they reaped the rewards of the bubble, telling all who would listen how great they were while maintaining a perceived distance from the mess.
So in short, an apolitical, unbiased regulator who's only job is to ensure absolute transparency and the longterm viability of the institutions would be a nice idea. Another might be to limit the market share of each individual bank and dtheir interdependence on eachother so that any bank failure would be "acceptable" and the irresponsible could be let go to the wall with no fear of bringing an economy with it.
I am a long way from an economist though so how or if this could be done is well beyond me.
Is it not better that your balance sheet is accurate than imaginary?? The only reason banks are suffering is because of the global bubble which has been brought about by excessively low interest rates coupled with kamikaze lending practices.Originally Posted by auerillo
However, It's now widely accepted that attempts to create transparency via directives 2006/48 and 2006/49 are contributing to, and making worse, the banking crices which we are currently experiencing.
Question: In the face of this, I imagine that low interest rates will not be viewed as a good way out of this crisis so is it possible that the era of low rates is dead and gone forever? Is it possible they could go up even further to a more historical average?
And what is the historical average for eurozone countries??0 -
Guess not so - .5% drop from all central banks today!Question: In the face of this, I imagine that low interest rates will not be viewed as a good way out of this crisis so is it possible that the era of low rates is dead and gone forever?0 -
Banks everywhere were de-regulated over the last decade, and allowed to engage in the various kinds of deals that are now coming back to haunt all of us.
This isnt the most accurate of statements.
In England and America under the reign of Thatcher and Regan, the proscriptive rules setting out what type of business financial institutions were able to write were dropped in favour of new capital requirements.
At the same time, the Bretton-Woods agreement was abandoned. The aim of this agreement was currency stability, but the result of abandoning it was a massive increase in the level of financial globalisation. Not everyone thought this was a good idea and thats why the European Monetary Union was established iirc.
Now there have been many stops along the way, and Glass-Steagll wasnt repealed until 1999, but Id just like to make it clear that deregulation didnt just happen in the last 10 years, and deregulation (because some people, not you, seem to be confused) does not mean that there is no regulation.0 -
I wouldnt agree that that they looked on approvingly, rather that they are ill-equipped to keep up with the banks.There are already plenty of regulators. They let the money and banking system fall apart and looked on approvingly. Generally they work for the banks, not us.
What do we need another of the ****ers for?
Large banks have teams dedicated to finding regulatory arbitrage (loop holes that reduce their capital requirements). There are a number of new consultancy practices in Ireland dedicated to helping firms comply in the most efficient manner with the financial regulator...Possibly, just possibly, because the problems we're seeing in the financial sector result from lack of regulation, not over-regulation.
cordially,
Scofflaw
Tbh Id disagree, as the rules get more complicated, the banks find more exotic loopholes. Part of the problem in the early days of the sub-prime crash is that nobody knew how they were exposed due to the complexity of CDOs
In 1975, the SEC updated its capital requirements, implementing a Uniform Net Capital Rule (UNCR). This wasn’t supposed to reduce banks capital requirements, but it wasn’t long before banks found ways to reduce their capital requirements via (perfectly legal) financial trickery.
The regulators tried to fix this with the 1988 Basel accord, but again the banks found ways around this. This time the financial trickery was even more complicated (but also perfectly legal).
This led to the second Basel accord which we implemented in the EU in 2006. It is ridiculously complicated. It can be argued that the second Basel accord rather than preventing the current crisis, exacerbated the problems facing banks once it began.
Lord Turner of Ecchinswell, who took over as chairman of the FSA (UK regulator) last month, said that the FSA had been "regulating on the cheap". He plans to expand the FSA, increase its budget, and keep up with banks.0 -
Professor Tim Congdon, and others, consider these two directives have reduced our banking and lending system to paralysis, and consider that without them, most of the banks that have collapsed, such as Lehman Brothers, might have survived.
To what extend were Lehman Brothers, a US investment bank, bound by this EU directive?
The rest of your post is quite good though. I too am quite impressed with the Irish Government's handling of the crisis.
With Northern Rock was it not the case that they were unable to shift MBSs and CDOs off their balance sheet and subsequently incurred a greater regulatory charge? This is what the CRD is designed to do, so I dont see it as a failing.Scofflaw wrote:Second, and more importantly, this is like blaming knowledge of house prices for house price falls, and claiming everything would be alright if only nobody knew what was happening.
I couldnt have put it any better.auerillo wrote:It's tempting to think that more accountability and more transparency must always be good things, and generally speaking I think many might agree.
However, It's now widely accepted that attempts to create transparency via directives 2006/48 and 2006/49 are contributing to, and making worse, the banking crices which we are currently experiencing. Indeed, some recognised the danger at the time of their implementation, but were ignored.
What we all have to ask ourselves is whether we'd prefer to have the sort of transparency which adds to, and makes worse, the current banking crices, or whether we'd rather have the sort of transparency we had before directives 2006/48 and 2006/49, and a more stable banking system.
The OP asked if yet anther regulator was a "good thing" and sometimes, as in this example, the answer is that it can be positively a "bad" thing.
You have to ask what is the point of these capital reserves. They are designed to value the banks as a going concern so that, should they fail they wont take the whole market down with them.
Well not really, technically they are the level of liquid capital that is necessary to cover their risks; (credit, market and operational), so that they dont go under.
Now should these risks have come to bear (as they have), capital needs to be liquid, so it makes sense that its market to market.
What you could say though, is that balance sheets shouldnt be mark2market, and lets be honest, thats what investors look at, I dont think investors can even see a banks COREP (CRD returns). Though I'm not sure how I feel on that tbh. There is no point m2m if you have no intention of selling these assets anytime soon. But at the same time, they will have to be realised eventually, and rather than one big shock I think continuous m2m is a good thing.djpbarry wrote:Could you explain, with specific references to the relevant EU directives, how said directives are contributing to the current global economic downturn?
The CRD is a very complicated directive. Some financial institutions have misunderstood it very badly. It would not be easy for me to walk you through, especially as there are many derogations and options open to countries and companies.
Basically a credit institutions (banks) and investment firms (stockbrokers, etc investment banks?) have 3 forms of risk.
Risk that counterparties to their trades will default - Credit Risk
Risk that interest rates will move - Market risk
Risk that their models are wrong - Operational risk
(Im simplifying this a lot btw).
Now the CRD has a couple of approaches for each of those risks. You choose one (with agreement from the regulator) plug in your banking book and trading book into the COREP returns and it comes up with your regulatory capital.
Firms must maintain a minimum capital adequacy ratio of 8%.
Capital / Risk Weighted Assets >= 0.08
A bank's capital* is the "cushion" for potential losses, which protect the bank's depositors or other lenders. So if a bank has an asset, with a risk weighted value of €100mm, the bank must hold capital of €8mm.
Assets are market to market, which means that their value is not what you paid for them, but what you will get today if you try to sell them. Without going through the specifics of all the various charges and options, under current conditions banks risk weighted assets are going up, so they have insufficient capital.
*Capital has two forms:
Tier 1 (core) capital, the more important of the two, consists largely of shareholders' equity. Share capital and revenue reserves
Tier 2 (supplementary) capital is reserves.
Also note, this capital charge is only Pillar 1 of the CRD. Pillar 2 is an Internal Capital Adequacy Assessment Process where institutions assess their other risk and assign appropriate capital charges and pillar 3 involves disclosures in the institutions annual accounts0 -
In Ireland over the last number of years the financial regulator has done a relatively decent job IMO. All you need to do is ask the banks about Compliance and they'll tell you all about it!!!! You have to remember that there is a lot involved in the whole area of regulation and not everybody involved in the drafting and implementation have banking bankgrounds.
For example if there is legislation passed regarding how a bank may/may not store historical information on customers that will require the following:
1. Drafting the legislation and communicating it to the relevant parties
2. A period of "contemplation" or whatever you want to call it where the banks have a chance to assess the legislation and figure it out.
3. Inevitably there will be questions or grey areas, this is the nature of the beast. A period of Q&As will follow where the banks try to get clarity on exactly what the legislation means
4. Every bank in the country will then need to carry out a complete audit on all hard and soft copy of all data on all accounts and customers etc. This job is a massive task when you think about the pure volumes of data and the fact that in some banks (particularly the small ones) a sizable portion of that is not held online and so you're talking about a manual review of mountains of paper files.
5. The legislation could well mean technical changes to the way in which data is stored and so IT changes may be required, meaning a process of analysis, change implementation and testing to ensure its correct.
The Financial Regulator needs to give all of the banks enough time to allow all of this to happen. One piece of legislation could take months, if not years to fully implement.
In my experience the one area that the regulator is seriously lacking is knowledge of the industry. In a previous job I had direct dealings with them and I had to help clarify their requirements because they themselves didn't fully understand the business. This kind of thing I think will lessen over time and they will only get better, but they have done a lot of good work so far. Take the ban on automatic credit card limit increases and the ways in which banks are restricted in terms of how they sell their products. There have been a lot of smaller, less obvious changes. But they have proven to be a bit of a thorn in the banks sides over the last couple of years.
To bring it back on topic (and the above puts this into context) I do believe an EU wide regulator would be a good idea, but that regulator would need to have very rigid and limited responsibilities. It is still in each member states best interest to manage a lot of their own financial sectors, but when it comes to some of the higher level stuff (like how financial institutions advertise to their customers for example) then this could be a positive step. After all on the higher level stuff we don't have widely differing needs as customers and we can be sure with the same rules through-out the EU that we are getting in some way the same thing across the board.0 -
In Ireland over the last number of years the financial regulator has done a relatively decent job IMO. All you need to do is ask the banks about Compliance and they'll tell you all about it!!!! You have to remember that there is a lot involved in the whole area of regulation and not everybody involved in the drafting and implementation have banking bankgrounds.
Do you really think the financial regulator has done a good job, or has your opinion changed lately?0 -
bokspring71 wrote: »Do you really think the financial regulator has done a good job, or has your opinion changed lately?
No my opinion has not changed. I never said they did a good job, just that relatively speaking they did an alright one. Of course there were mistakes made, but overall there was a lot of regulatory work done over the last number of years. The emphasis on it wasn't there up until the last 5-10 years or so and in that time you were never going to regulate an industry like banking and financial services completely. In fact in a decade you'd only be scratching the surface. The big issue should be why the emphasis wasn't there earlier, not why didn't the regulator sort it all out practically overnight.0 -
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A thousand times yes! Part of our problem is everyone knows everyone at that level and we have an attitude of turning a blind eye for a friend.
I think an EU regulator that acts in the interest of the entire union would be a very good thing as long as it was free of influence from member states.0 -
A thousand times yes! Part of our problem is everyone knows everyone at that level and we have an attitude of turning a blind eye for a friend.
I think an EU regulator that acts in the interest of the entire union would be a very good thing as long as it was free of influence from member states.
Perhaps the EU regulator migh begin with looking into why the accounts of the EU itself have never been signed off by their auditors?0 -
No need, since that is patently untrue, as has been repeatedly pointed out on this forum.bokspring71 wrote: »Perhaps the EU regulator migh begin with looking into why the accounts of the EU itself have never been signed off by their auditors?0 -
http://news.bbc.co.uk/1/hi/world/europe/7092102.stm
http://www.parliament.the-stationery-office.com/pa/ld200506/ldselect/ldeucom/270/6061302.htm
http://www.europeanvoice.com/article/imported/kallas-admits-failure-to-get-positive-verdict-on-accounts/62218.aspx
http://www.independent.co.uk/news/business/news/minister-slates-eu-for-12th-failure-to-balance-its-books-425089.html
http://209.85.229.132/search?q=cache:yhEA5xW3Ao8J:people.lett.unitn.it/riley/Word%2520and%2520sound%2520Files/SIS%2520II%2520Worksheets/EU%2520accounts%2520still%2520riddled%2520with%2520fraud%2520and%2520errors.doc+eu+audited+accounts+failure&cd=6&hl=en&ct=clnk
http://democracymovementblog.blogspot.com/2008/09/eu-heading-for-14th-successive-audit.html
These articles appear to disagree. I'm not an expert, but examples such as "Siim Kallas, the EU Commissioner for "Audit and Anti-Fraud", has pre-empted the forthcoming verdict of the European Court of Auditors (ECA) and revealed that the Court will once again refuse to give their approval to the EU's accounts. The ECA report into the 2007 figures, due 10 November, will make it 14 years in a row in which the EU has failed to have its spending cleared by auditors." and "
Europe's failure to produce proper accounts is an "annual embarrassment", the Treasury minister Ed Balls is to say today, in a harsh verdict on the Commission's bean-counters.
The Economic Secretary to the Treasury is condemning the failure of the EU's accounts to gain approval from its own auditors for the 12th year in a row. He is to tell MPs today that Britain will take the lead in reforming the management of the EU Budget." etc seem to indicate otherwise.0 -
bokspring71 wrote: »http://news.bbc.co.uk/1/hi/world/europe/7092102.stm
http://www.parliament.the-stationery-office.com/pa/ld200506/ldselect/ldeucom/270/6061302.htm
http://www.europeanvoice.com/article/imported/kallas-admits-failure-to-get-positive-verdict-on-accounts/62218.aspx
http://www.independent.co.uk/news/business/news/minister-slates-eu-for-12th-failure-to-balance-its-books-425089.html
http://209.85.229.132/search?q=cache:yhEA5xW3Ao8J:people.lett.unitn.it/riley/Word%2520and%2520sound%2520Files/SIS%2520II%2520Worksheets/EU%2520accounts%2520still%2520riddled%2520with%2520fraud%2520and%2520errors.doc+eu+audited+accounts+failure&cd=6&hl=en&ct=clnk
http://democracymovementblog.blogspot.com/2008/09/eu-heading-for-14th-successive-audit.html
These articles appear to disagree. I'm not an expert, but examples such as "Siim Kallas, the EU Commissioner for "Audit and Anti-Fraud", has pre-empted the forthcoming verdict of the European Court of Auditors (ECA) and revealed that the Court will once again refuse to give their approval to the EU's accounts. The ECA report into the 2007 figures, due 10 November, will make it 14 years in a row in which the EU has failed to have its spending cleared by auditors." and "
Europe's failure to produce proper accounts is an "annual embarrassment", the Treasury minister Ed Balls is to say today, in a harsh verdict on the Commission's bean-counters.
The Economic Secretary to the Treasury is condemning the failure of the EU's accounts to gain approval from its own auditors for the 12th year in a row. He is to tell MPs today that Britain will take the lead in reforming the management of the EU Budget." etc seem to indicate otherwise.
Well, yes, you'll get that impression if you don't bother to read round and find out what's actually happening. There's a yearly festival of this kind of headline and trash talk all across the eurosceptic press, and it remains an annual embarrassment simply because most people can't be bothered to learn anything beyond the headlines.
What happens every year is that the auditors sign off on the EU accounts in the normal way with the statement that the accounts are a "true and fair view" of what actually happens to the money. Fraud levels are extremely low in the accounts (about 0.1%) and most of that is recovered subsequently. So much is standard for any business or government.
However, the EU has set itself another target, which most people regard as impossible to achieve - that all payments were on time, that all paperwork was filled out correctly, and that not only was there no serious fraud, but that even the possibility of fraud had been eliminated. The EU has never quite achieved this.
It's unlikely the EU will ever achieve its target, because the EU doesn't handle most of the paperwork that the irregularities arise in - 95% of the problem lies with the national civil services that handle the detailed end of things. If our Department of Agriculture doesn't pay some CAP payments on time, or lets some farmer away with a less than perfectly filled out REPS claim, they're contributing to the 95% of irregular paperwork that prevents the EU reaching its goal of completely regular paperwork.
You can read all about it here, or here, if you'd like to find out what's actually happening rather than just repeating the stuff the newspapers like to fart out.
cordially,
Scofflaw0 -
Thanks for the two links. I've looked through both and am unsure who has published either. The second link looks as if it has been produced by the EU Commission itself! Is it likely that a document produced by the EU, about its own accounts, is likely to be fair and impartial?
However, hard as I might look I can't find anywhere whether or not the accounts have actually been signed off. Perhaps my phrase was unfortunate, and perhaps what is more compelling is how accountable the institution is when spending our money.
I love the pejorative use of the phrase "repeating the stuff the newspapers like to fart out."
One of the articles I saw was the BBC ( "In response to the report, the Vice-President of the European Commission, Siim Kallas, says he's "glad to see the Court now gives its green light to over 40% of total payments". He points out that around a third of the budget was approved last year and only 6% three years ago.)" and another was a Memorandum by Ashley Mote MEP, European Parliament, who says "...Marta Andreasen, the European Commission's former chief accountant who was dismissed by vice-president, Neil Kinnock, for whistle-blow!ng on financial mismanagement within the commission itself..." and "My office is now stocked with many files of original documentation. This includes numerous reports by commission officials and others (some leaked), and several lengthy submissions to the Serious Fraud Office in London. I also hold much correspondence with the president of the commission, Jose Manuel Barroso; the commissioner responsible for the fight against fraud and corruption Siim Kallas of Estonia; Dalia Grybauskaite from Lithuania who is the budget commissioner; Hebert Weber, the president, and other members of the EU's Court of Auditors; the president of OLAF, Dr F-H Bruner; Douglas Alexander MP and his predecessor as minister for Europe Denis McShane MP; the CEO and senior staff at the National Audit Office in London; and Stephen Timms MP, junior minister at the Treasury who answers for the Chancellor on these matters...The Court of Auditors (CoA) admits that 80 per cent of all taxpayers money is never properly accounted for. Some estimates put the figure as high as 95 per cent, based on the CoA's admission that only administrative expenses (5 per cent of the total) are fully audited and signed off. One CoA member freely admitted—in answer to my direct question—that the EU was already too big ever to be audited properly."
You'll understand that it's hard to make a decision based on what appears to be conflicting evidence, although where there seems to be agreement is that it is improving.0 -
bokspring71 wrote: »Thanks for the two links. I've looked through both and am unsure who has published either. The second link looks as if it has been produced by the EU Commission itself! Is it likely that a document produced by the EU, about its own accounts, is likely to be fair and impartial?
However, hard as I might look I can't find anywhere whether or not the accounts have actually been signed off. Perhaps my phrase was unfortunate, and perhaps what is more compelling is how accountable the institution is when spending our money.
I love the pejorative use of the phrase "repeating the stuff the newspapers like to fart out."
One of the articles I saw was the BBC ( "In response to the report, the Vice-President of the European Commission, Siim Kallas, says he's "glad to see the Court now gives its green light to over 40% of total payments". He points out that around a third of the budget was approved last year and only 6% three years ago.)" and another was a Memorandum by Ashley Mote MEP, European Parliament, who says "...Marta Andreasen, the European Commission's former chief accountant who was dismissed by vice-president, Neil Kinnock, for whistle-blow!ng on financial mismanagement within the commission itself..." and "My office is now stocked with many files of original documentation. This includes numerous reports by commission officials and others (some leaked), and several lengthy submissions to the Serious Fraud Office in London. I also hold much correspondence with the president of the commission, Jose Manuel Barroso; the commissioner responsible for the fight against fraud and corruption Siim Kallas of Estonia; Dalia Grybauskaite from Lithuania who is the budget commissioner; Hebert Weber, the president, and other members of the EU's Court of Auditors; the president of OLAF, Dr F-H Bruner; Douglas Alexander MP and his predecessor as minister for Europe Denis McShane MP; the CEO and senior staff at the National Audit Office in London; and Stephen Timms MP, junior minister at the Treasury who answers for the Chancellor on these matters...The Court of Auditors (CoA) admits that 80 per cent of all taxpayers money is never properly accounted for. Some estimates put the figure as high as 95 per cent, based on the CoA's admission that only administrative expenses (5 per cent of the total) are fully audited and signed off. One CoA member freely admitted—in answer to my direct question—that the EU was already too big ever to be audited properly."
You'll understand that it's hard to make a decision based on what appears to be conflicting evidence, although where there seems to be agreement is that it is improving.
Well, since every single one of those articles and comments is based off the opinion offered by the Court of Auditors, you should probably read their opinion:o The Court's audit opinions on the EU accounts and the transactions underlying these accounts are similar to previous years. The estimated error rates in some spending, notably that previously covered under the headings "internal policies" and "external actions", have fallen - however not enough to affect the overall picture.
o The accounts in general give a fair presentation, in all material respects, of the EU's financial position and results. The qualifications expressed in last year's annual report on the 2006 accounts are, due to the improvements that have taken place, no longer necessary for 2007.
o The Court gives unqualified (clean) opinions on the legality and regularity in certain areas, such as the Union's administration. However, for most spending areas the Court cannot provide a clean opinion. Although most of the payments the Court checks are made in compliance with the rules, the Court still finds that payments made to final beneficiaries, such as farmers and project promoters running EU-funded projects, have a too high level of error. Except for cohesion policies, the level of error in these policy area groups is in between 2 % and 5%.
o The result does not imply that cases of non-compliance are the result of fraud, nor that most transactions in these areas are illegal and/or irregular.
Now, given that what most of the articles either say or imply is that the EU accounts are "riddled with fraud according to their own auditors", when that is something that those auditors have not, in fact said - and indeed, as you see from the last bit, are at pains to point out that they're not saying - then perhaps you can see why I am less than impressed by all the newspaper articles and political grandstanding.
You can also see from the table of error rates that the areas that cause the qualification are not those under the direct control of the EU - the administration, revenue collection, and financial affairs. Instead, the error rate increases in direct proportion to the involvement of national civil services - hardly a surprise when you consider that includes Romania and the rest of the accession states.
Again, there is no suggestion or acknowledgement of that fact (and it's hardly a mere detail) in the newspapers - the finger is pointed firmly at "the EU". Still, I suppose the headline "our civil servants again fail to account properly for the EU money they handle" is not something any UK politician or paper is going to touch when they can aim at the big and handy target of the EU.
It is possible, of course, that "the EU" is indeed to big to be successfully audited - but again, what is implied there is false. The EU itself is much smaller than our civil service - even including absolutely everyone who can be counted, it's barely larger than our health service (c 130,000 compared to c 110,000). What is large is the system of EU payments, and I'm not sure anyone is actually proposing to reduce them.
cordially,
Scofflaw0
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