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The EU banking agency should have prevented its executive director from becoming the head of a lobby group that represents some of the world’s largest financial groups, according to an EU investigation.
The European Ombudsman, an independent authority responsible for examining complaints against the EU, said the European Banking Authority should have vetoed Adam Farkas’ decision to become director-general of the Association for Financial Statements this year. financial markets in Europe, which brings together banks such as JPMorgan, SociÃ©tÃ© GÃ©nÃ©rale and UBS.
“If this decision did not justify using the legal option, under EU law, of barring someone from occupying such a role, then no decision would do so,” the Minister said on Monday. mediator Emily O’Reilly in a statement accompanying the decision. âGovernments cannot afford to become proxy recruiters for the industries they regulate. “
The Ombudsman’s findings echo complaints from the European Parliament and civil society groups about Mr Farkas’ decision. MEPs passed a resolution this year urging the EBA to âreconsiderâ its decision to allow the change of job.
The parliament advised the EU institutions to refuse all contact with Mr Farkas for two years. MEPs also rejected EBA’s proposal that Gerry Cross, a Central Bank of Ireland official and former AFME employee, succeed Mr Farkas.
Mr Farkas’ switch is the latest example of revolving door controversy between the EU and the private sector. Other cases that have drawn public criticism include the decision of former European Commission President JosÃ© Manuel Barroso to move to Goldman Sachs in 2016, which prompted EU officials to launch a public petition in protest sign.
The committee toughened the EU code of conduct for senior executives in response to outrage over Mr Barroso’s appointment, but his handling of the case was in turn criticized by Ms O’Reilly.
The Change Finance Coalition, a civil society coalition that called on Ms O’Reilly to investigate Mr Farkas’ appointment, said the EU still had not put its house in order. He asked the committee “to develop clear rules on how the lobbying power of the financial sector can be minimized in all European institutions concerned with financial supervision and regulation”.
The fury over Mr Farkas is also another blow to the EBA, which has been criticized for its failings in the fight against money laundering. The agency was reprimanded in 2019 for filing an internal report on trade union rights violations that contributed to a money laundering scandal at Danske Bank.
Ms O’Reilly said Mr Farkas’ decision presented obvious conflicts of interest which the EBA had failed to resolve. The authority had imposed restrictions on Mr. Farkas’ activities that it could not hope to enforce in a rigorous manner, especially with regard to his potential use of EBA’s confidential information, she added.
âThe ombudsman believes that the EBA’s decision not to ban its executive director from becoming CEO of a financial industry lobby was maladministration. Banning the move would have been a necessary and proportionate measure in this particular case, âsays O’Reilly’s report.
The EBA is responsible for developing and implementing European financial regulations, as well as carrying out EU-wide banking stress tests. Mr. Farkas was executive director of the Paris group for nine years, a position that gave him responsibility for the day-to-day activities of the community. The ABE is directly contacted by the AFME on regulatory issues.
Ms O’Reilly said the EBA committed a second act of maladministration by being too slow to cut off Mr Farkas’ access to sensitive documents after formally tendering his resignation on August 2 last year. He ceased to have access to inside information on September 23.
The EBA said in a statement that it would take into account the ombudsman’s recommendations, which included that the agency should set criteria to ban job changes. âWe take note of and respect the ombudsman’s findings,â he said. “We are convinced that the restrictions we imposed on the former executive director to limit the conflict of interest were proportionate and proportionate.”
Among other things, these measures included placing Mr Farkas on paid leave, prohibiting contacting EBA staff for two years after his move and insisting that he refrain from assisting members of the EBA. AFME on topics directly related to his work during his last three years at EBA.
But the ombudsman’s report said: âEven assuming the best efforts of the former executive director, he cannot be made to forget the confidential information he is aware of, which must be assumed to be important.
AFME declined to comment.