Mojmír Hampl (Global Financial Strategy News 4.1.2011)
Mojmir Hampl, vice-Governor of the Czech National Bank, analyses Michel Barnier's first year in office and finds it distinctly lacking.
Like many people in the world of finance, I sat up and took notice when Frenchman Michel Barnier became European Commissioner for Internal Market and Services in early 2010.
The internal market portfolio is important and influential in any circumstances.
But it is doubly so at times of financial crisis, because it is then that fundamental standards concerning the financial market and financial services in the EU are written.
Right now we racing to create regulations that will affect the EU financial market for many years to come. The unwise philosophical approach today may mean heavy costs in the future.
As someone who has had to deal constantly with the Barnier team's outputs at working level, I have to say that vigilance has been needed.
Rarely have I shaken my head in disagreement so often as when reading the ideas and legislative proposals of the Directorate General for Internal Market and Services. The word "market" appears in its name presumably only for reasons of inertia and perhaps by mistake.
In 2008, for example, it was agreed at EU level to gradually raise the deposit guarantee to the equivalent of €100,000 in the whole EU (which in terms of purchasing power is certainly not the same amount in Germany as it is, say, in the Czech Republic or in Poland) with the coverage of 100 per cent, ie. without any co-payments of depositors.
After a long discussion the deposit payout deadline was shortened to 20 working days and each country began - at no little expense - to prepare for the changeover to this new system.
However, even before these agreed rules have begun to apply in practice, Barnier's people have reopened this issue and want to go further.
In typical EU piecemeal fashion, they are pushing for a further costly shortening of the payout deadline to seven days (the state will in fact reimburse faster than market insurers in the case of standard insured accidents do) and of course for higher contributions by financial institutions to deposit-guarantee funds.
And it doesn't stop there. Besides mandatory deposit guarantees, their proposals include mandatory state guarantees for insurance claims and also increased state protection for investment firm clients.
The costs of this "do-gooding" will of course be borne also by end-customers. Most importantly, however, this idea of detaching end-customers from risk, from thinking for themselves, from bearing part of the losses and from taking personal responsibility, runs exactly counter to the principles that the same European Commission constantly claims to worship.
The Commission is calling for less moral hazard in financial markets and lower risks for public budgets and taxpayers at times of crisis.
Yet in reality the ideas emanating from DG Markt will increase both moral hazard and the risks for public budgets, which all the said deposit-guarantee schemes evidently guarantee to a greater or lesser extent.
The Barnier team's initiative, however, is much more wide-ranging. The team still thinks it would be a good idea to establish in the EU a "fundamental right" of every citizen to own a bank account - and therefore also, presumably, an overdraft - and an obligation on every financial institution to open an account for anyone.
It is also pushing ardently for a coordinated European banking tax or considering whether regulators (ie. the public sector) should cover companies' audit costs etc.
Some of these ideas would be amusing if the issue was not so serious. Individual member states have no influence over some of these regulations and simply have to implement them.
In other cases they can make comments, but there is no requirement to take those comments into account. For this reason, we need to give Commissioner Barnier's work the close attention it truly deserves.
Mojmír Hampl is vice-Governor of the Czech National Bank and a member of the EU's Economic and Financial Committee.