May 16, 2021

The banking 'lobby' | Economy

The banking 'lobby' | Economy

The conclusions of the report on the financial crisis of the United States (The Financial Crisis Inquiry Report) of January 2011 highlight the important role played by the lobbies. The document notes that "the financial industry played a key role in weakening the regulatory restrictions of institutions, markets and products." Its editors add that "it did not surprise the commission that an industry with so much wealth and power could exert pressure on political and regulators." And most relevant, it states that "from 1999 to 2008, the financial sector allocated 2,700 million in expenses of activities of lobby at the federal level. " The banking sector also contributed one billion dollars to electoral campaigns.


Unlike the United States, in Spain we do not know anything about the money that the lobbies to influence regulation. But we do know that they carried out very substantial actions that were decisive in lowering the demand for credit provisions, which made the cost of the crisis more expensive.

Jesús Saurina, general director of Financial Stability at the Bank of Spain, and Carlos Trucharte, a prominent researcher at the same institution, analyzed the relevance of these actions in his book Countercyclical provisions of the Bank of Spain, 2000 – 2016. The authors explain how in 2000, under the impulse of Governor Luis Ángel Rojo, the Bank of Spain established so-called countercyclical provisions to cover possible future losses due to bad loans.

The purpose of these provisions, also called statistics, was to cover the expected average loss from the moment of granting the loan, in accordance with historical experience. The objective was for entities to maintain a level of insolvency provisions similar to those that occurred in the period 1986 -1998, which stood at 0.9% of the loan portfolio.

Saurina and Trucharte point out that the "banks opposed in a stubborn way, contrary perhaps to what might be expected of prudent bankers, concerned not only for the short-term benefit but also for the long-term survival of the entity." And they add that "the strong opposition of the Spanish banks, among other factors, could lead to a reduction of the proposed initial calibration, to an environment slightly higher than a 0.4% coverage of the loan portfolio".

Between 2000 and 2007, these provisions allowed the creation of a fund of 25,836 million euros. If the 0.9% proposed by the supervisor had been applied, some 60,000 million euros would have accumulated and the losses of public aid (48,000 million according to the European Union) would have been much lower.

To begin with, banks should recognize that they were wrong with their pressures. The accusations of ex-bankers in distress are pathetic, who now attribute to the supervisor the cause of their misfortunes.

That is why the proposal of Unidos Podemos in the Report of the Commission of Inquiry that makes it possible to establish mechanisms to "regulate and oversee the actions of lobbies financial. " There is a lot of talk about the capture of the regulator but it would be better to look at the regulator's captors.


Source link