Banking

#Bailout: Who profited from bail-out of Europe's banks?

Published

9 years ago

February 28, 2017

The Bail-Out Business, published by the Transnational Institute (TNI), reveals how rescue packages for EU banks benefitted a small group of audit and financial consultancy firms. The bail-out packages have led to losses of more than €200 billion.

TNI argue that the ‘Big Four’ audit firms (EY, Deloitte, KPMG and PWC) and a small coterie of financial advisory firms, gained the most from the bank rescue packages. TNI say these firms have been rewarded with new business, despite the fact that many gave poor advice and failed to raise the alarm about inconsistent business models and risky practices.

According to Sol Trumbo Vila, co-author and coordinator of this publication, dependency on the private sector left governments and EU institutions unarmed when trouble arrived.

Trumbo says, "Europeans have the right to know that a small group of companies have made millions of euro in different countries advising banks, and that despite providing poor recommendations, they continue to be rewarded with huge contracts advising governments on how to rescue their former clients from bankruptcy. This happens all over the EU, which confirms the systematic nature of this pattern."

Susan George, President of TNI, said: "European citizens have grown accustomed to the idea that public money can be used to rescue financial institutions from bankruptcy. However they know little about the details of how banks are saved and who benefits in the process, this report will help the public to understand who is who, and how the Bail Out Business works".

Despite the fact that new EU legislation includes positive measures to curtail the worst conflicts of interest, the researchers claim that the Big Four still carry too much influence. They suggest that enhanced public banking, who’s first obligation is to the citizen, can be a first step towards the strengthening of public institutions to manage finance and banking affairs and their capacity to respond to any future crisis.

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