FNV, OR Speech, 30-11-13.doc/3 – 25.11.13 (17:03)
FNV Bondgenoten National Day of Action
30 November 2013
Background Note on Speech of UNI Europa Regional Secretary,
Oliver Roethig, to FNV Finance
24.11.2013
[FNV, OR Speech, 30-11-13.doc]
1UNI EUROPA priorities
1.1Defending the right of social partners as EU co-legislators
Over the last years, Europe has seen an unprecedented attack on workers. Austerity policies have driven down wages in many countries of Europe and undermined trade union rights. With its “Refit – fit for growth” policy, the European Commission is now bringing this approach to the European level. This policy is an open attack on the role of trade unions and the promotion of social dialogue in Europe. Social rights, such as the entire body of EU law on occupational health and safety, are classified as burdensome for business. They are seen as obstacles to profit making whatever the costs for workers or the public at large. It unmasks the European Commission’s intention to roll back social Europe, not least to placate euro-sceptics in some member states.
The first victim of this anti-social policy agenda is the agreement of the hairdressing social partners on occupational health and safety. By refusing to make it legally binding, the Barroso Commission set a political signal: It will disregard the autonomy and the rights of the social partners’ role as co-legislator guaranteed by the EU Treaty as well as ignore its legal obligation to promote social dialogue.
The EU Commission is clearly challenging trade unions to choose whether they are ready to fight for their rights or accept that they will be weakened further not only at national level but now also at European level.
UNI Europa decided to take up this challenge. Its main priority is to defend the role of trade unions in the EU Treaty and in particular ensuring that the hairdressing agreement is made legally binding. To this end, in close cooperation with the ETUC, UNI Europawill campaign politically at EU and national level for respect of social dialogue; it will look at legally challenging the Commission’s decision on the hairdressing agreement.
1.2UNI Europa Services Manifesto: Setting out an alternative approach for EU policies affecting services
The European services industry is by far the biggest economic sector in the EU economy, both in terms of output and employment. In view of current social and economic conditions, it is crucial to harness this industry’s full potential for the creation of quality employment and growth. EU leaders, however, place their hopes for economic recovery almost exclusively on export-oriented manufacturing sectors. This strategy pushes services into the role of low-cost inputs, deteriorates working conditions, and is at odds with a robust development of the services industry.
With the UNI Europa Manifesto for Services adopted in October 2013, we seek to present strategic options for an alternative: an innovative and quality-oriented services industry which, driven by fair competition in the single European market, creates sustainable growth and quality employment. Based on the Manifesto and in view of the 2014 European Elections, we will launch a campaign that seeks to commit policy-makers to working with us to achieve this goal over coming years.
The Manifesto is a first building block for launching a UNI Europa project on an EU services policy. The aim is to develop proposals for a viable long-term development of the European services industry. Two complementary networks of trade unionists and researchers will jointly prepare a series of workshops. These discussions will serve to formulate policy guidelines for EU policy and industrial relations for quality employment and sustainable growth in services.
1.3European trade unions push for European investment plan
UNI Europa strongly supports the ETUC initiative to change the direction of the EU’s economic policy from austerity to sustainable growth. This could create up to 11 million new jobs. The Executive Committee of the European Trade Union Confederation (ETUC) unanimously adopted“A new path for Europe: ETUC plan for investment, sustainable growth and quality jobs” on 7 November 2013. At its core is a bold recovery strategy based on investing an additional 2% of GDP per year over a decade to create new quality jobs and strengthen future areas of sustainable growth, thereby also increasing each country’s tax income. The underlying concept is to mobilise private capital for the real economy by providing long-term and reputable investment opportunities. It thus stops driving capital into speculation and out of Europe.
From the perspective of UNI Europa, one principle objective for investment must be developing a sustainable and modern services industry. This includes investing into “green” ICT, e-commerce and care facilities, but also into the training and education of people throughout their lives. For UNI Europa, the ETUC investment plan is a key plank in its strategy for developing a European services industry with quality jobs and quality services as expressed in its Manifesto for Services.
What is needed is the political will to move out off the crisis together and in solidarity. The ETUC’s investment plan shows the way. Together with the entire European trade union movement, UNI Europa will promote the plan as a key issue for the European Parliamentary elections, for securing Europe's future.
1.4For socially responsible and democratic EU economic governance
The new neo-liberal economic governance framework in the EU has severe effects on the autonomy of social partners and the integrity of collective bargaining on the national and sectoral levels. Calls to decentralise collective bargaining systems, to implement comprehensive labour market reforms that establish greater ‘flexibility’, and to liberalise various service sectors are regular outcomes EU economic governance. UNI Europa’s Executive Committee agreed to prioritise a counter-strategy: for socially responsible and democratic EU economic governance.
We are building an effective advocacy capacity within UNI Europa to ensure labour-friendly EU economic policy. A key element is the newly formed working group on EU policymaking. The particular aim is to establish coordination within the European trade union movement to develop common demands vis-à-vis the European institutions and national governments at key moments in the EU economic governance process. UNI Europa will therefore establish regular exchange between affiliates’ economic policy experts in order to pool resources and to prepare common UNI Europa positions. Simultaneously, UNI Europa will engage with fellow European Trade Union Federations and the European Trade Union Confederation in order to define a common approach, including working structure to coordinate demands and advocacy work at the European and national levels.
EU economic governance is closely linked with globalisation. UNI Europa will thus explore cooperation with unions from other regions, especially in the context of the G20.
1.5Building power with trade union alliances
Multinational companies have become the dominant players in many countries and sectors. Business policies are no longer decided at national level, but by a company’s top management for the entire European region and beyond. UNI Europa will target together with its sectors to set up an effective and working trade union alliance for one of the top multinational companies in each industry UNI Europa covers. The purpose is to be able to influence company’s cross-national decision making, through trade union action, EWCs and collective bargaining coordination. Trade union alliances moreover provide platforms for ensuring the right to organise and creating organising opportunities.
Working effectively together gives us the chance to identify worker’s rights abuses and misbehaviours of multinational companies quickly. It thus creates cross-border solidarity and synergies by connecting trade unions, European works councils, workers representatives and workers active in the same company. It also enables the national trade unions to coordinate their collective bargaining strategies and adapt them to the situation in other countries to achieve better results. In joint campaigns and approaches the power and membership of trade unions in multinational companies can be strengthened. The effect will be a positive influence on all workers in the same company inside and outside the European Union. The lack of trade union presence in some countries can be compensated by including also workers in the network.
1.6Organising for stronger unions
UNI Europa prioritises together with UNI SCOR to bring together unions to look at models to grow union membership. In the midst of the crisis many of our affiliates continue to adapt, invest in new capacity and grow. UNI Europa, working through the sectors, has undertaken a variety of UNI GROW initiatives in companies and countries. A main plank are regular Organising Forums. The objective is to examine best practice and share innovative ideas on effective organising and recruitment models. A key focus for the forums is the use of collective bargaining as an opportunity to build membership and the importance of engaging existing union members in the recruitment and organising processes. It reflects the fact that in many European countries at least rudimentary trade union and workers’ representative structures exist on which organising activities can build.
2UNI Europa Finance regulatory priorities
2.1Classifying banks according to “Real Banking”
Large banks such as HSBC or Deutsche Bank tend to utilise less than 20% of their capital to invest in the real economy, which means that their business plan, including their success, profits and losses, is heavily influenced by speculative investment banking. This must be changed!
Customers and society at large should be informed about the nature of the business carried out by each bank, and to what extent the bank is involved in speculative investment banking rather than Real Banking. To this end, each banking group should be categorised according to three categories, based on the ratio of capital used for Real Banking versus speculative investment banking:
For commercial banks: more than 75% (or 2/3) of capital used for “real” banking;
For universal bank: more than 50% of capital used for “real” banking (risky);
For investment bank: less than 50% (or 1/3) of capital used for “real” banking (highly risky);
Shadow banking system: no or little regulation (can be extremely risky).
The category should be clearly indicated in the banking group’s name so that general public can be aware of its risk profile. The capital requirements should include a risk surcharge for investment banks and a risk bonus for commercial banks, - the reasoning for this is not technical or economic but political. The political value lies in the fact that commercial banks to a larger extent supports the real economy.
There should be limitations for universal banks to deal with retail customers and a general prohibition for investment banks and shadow banks. It is important that all banks – commercial, universal as well as investment banks - are being regulated and supervised at the appropriate level. Commercial banks should be regulated at the EU and global levels. The Financial Transaction Tax supported by UNI Finance, could also be differentiated so that universal banks and investment banks are taxed higher according to the risk they take.
2.2Ring-fencing speculative investment banking
UNI Finance is not in favour of prohibiting speculative investment banking and real banking taking place under the same roof. However, ring-fencing should be introduced with the aim of ensuring that the liabilities caused by speculative investment do not undermine the well-functioning of Real Banking activities of the same banking group. If need be, there must be a liquidation of the speculative investment side in order to save the banking system. This is what was done in Iceland in 2009, and what we call the “salamander defence” strategy, which means cutting off the speculative tail to rescue the main body of the banking system.
The banks should also be responsible for keeping all their own liabilities in their own bank account, which is what happened in Italy under the auspices of the Central Bank, rather than externalizing their risks by putting them into some Special Purpose Vehicles (SPV).
The systemically relevant role of banks as financial intermediaries needs to be ring-fenced and safeguarded. Commercial and retail operations should be insulated from high-risk speculative activities and investment banking, in particular in terms of covering the liabilities arising from those. For each category of banks, a separate deposit guarantee scheme should be set up, ensuring that collapses in investment banking does not undermine the real economy. The stand-alone capability of systemically important banks as financial intermediaries within a country should be ensured.
2.3Limiting the representation of investment bankers on the board of commercial and universal banks
The major global banks are universal banks and over the years top management has been more and more dominated by a culture of investment banking. The result has been banking becoming more and more influenced by the mindset and culture of investment banking. This trend must be reversed and more openness about the recruitment process of board members is needed.
A legal provision must be introduced that requires a cooling off period for executive directors of investment banks (management board members) to become executive directors of a universal bank, commercial bank or holding company that covers the latter two. The exception is if the executive director of an investment bank sits on the board of his parent company in that function; however such a director may not exercise functions outside its investment subsidiary, in particular functions that are usually exercised by the chief executive officer, chief operation officer, chief finance officer or chief risk officer.
The US Glass Steagal Act had a prohibition of investment bankers sitting on the board of commercial banks. In the utilities sectors, there is an EU legislation also prohibiting executive directors from certain parts of a company group being executive directors in some other parts.
2.4Building effective bank crisis management
In building a new system of bank crisis management that lives up to society’s expectations, we believe that employees must play a key role and that their voices must be heard. It is essential that the trade union movement’s positions are included in future discussions. At the EU level, we believe that there is an urgent need to increase the resources available to EBA and to the national supervisory authorities as well as in the new banking union combining it with the European Central Bank.
2.5Providing quality “Sales & Advice” to customers
Bank employees have suffered from the effects of the crisis with hundreds of thousands of jobs in the financial services sector being lost. A further consequence is that many customers have lost faith in their banks, when a trust-based relationship with the customers is absolutely essential for banks and their employees. Sound, trusting and sustainable relationship between employees and consumers in the financial sectors is vital to the well-functioning of the financial market on all levels. Aggressive sales targets and merit rating systems that are counterproductive to customer protection and qualified advice must be avoided in the financial sectors.
The focus on short-term and excessive profit targets has been instrumental in uncoupling financial markets from the real economy. This focus has put a lot of pressure on employees to meet performance targets and to sell; transforming bank employees from advisors to sellers. To regain the customers’ trust and for a sustainable, customer-oriented finance sector, sales of products need to be customer lead and always accompanied by proper advice. Customers have the right to good advice and finance employees have the right to give good advice.
Products sold by financial institutions must contain a declaration that stipulates a rating of the product’s complexity and risk. A description of the type of customer to whom the product primarily is aimed should also be included. It is important that such a declaration is objective and unquestionable and does not have a marketing purpose.
Transparent product prices must be introduced in the financial sectors. Customers should have access to the information related to the agreements that the financial institution has reached regarding product sales – including, for example, commission and other types of sales-related remuneration.
Training and education of both finance sector employees and of consumers is also crucial. The complexity of financial products is increasing and at the same time the individual is forced to take greater responsibility for pension savings. UNI Finance believes that consumers need to be educated primarily in the situation where they actually set out to buy services and are looking for the best deal. This means that finance sector employees have an important role to play and will be major providers of consumer training. Financial education for customers is important from the trade union perspective, since it renders more competent customers. Competent customers, in turn, leads to more advanced work for financial advisors, which can be satisfying for the employees provided that their competence is continuously updated.