Farkas, Cross and the revolving door

Banking regulator scores another own goal

After letting its Director leave to head finance lobby group AFME, the European Banking Authority chose to nominate a successor who used to be a lobbyist for the same group. When the nominee Gerry Cross appeared before a Committee in the European Parliament, he failed to convince them to approve his appointment. A close look at his previous statements reveals that the defeat was well-deserved and should be upheld by the plenary vote.  

Pressure from the European Parliament is mounting on the European Banking Authority (EBA). Just before the Christmas break the parliament adopted a resolution asking the agency to ‘review’ its decision to allow its current Director, Adam Farkas, to go through the ‘revolving door’ on 1 February 2020 and take up the job as Chief Executive Officer of the Association for Financial Markets in Europe (AFME), the most significant finance lobby group at EU level.

Now, the person nominated by the EBA to replace Adam Farkas as Director is facing difficulties. Gerry Cross, a current member of the EBA Board of Supervisors who works for the Central Bank of Ireland, flunked at a hearing of the Economic and Monetary Affairs Committee (ECON) on 22 January. After more than an hour of questioning, a majority of 27 versus 24 MEPs rejected his candidacy. It is now up to the plenary of parliament to make the final decision.

Powerful lobby groups

It should come as no surprise to the EBA that their candidate was not easily approved. Gerry Cross has worked for two different lobby groups over the years before joining Ireland’s Central Bank: with the Institute of International Finance (IIF) from September 2008 to May 2011, and for AFME from June 2011 to March 2015. AFME is perhaps the most powerful lobby group in Brussels. As a voice of the biggest banks in the world it has the resources to be present at every stage of decision-making.  As far as the EBA is concerned, it is one of the most active players in the agency’s consultations. Of the 25 topics AFME has listed as political priorities, the EBA works on 23.

Hiring a Director who has spent years as the head of lobbying at AFME should in itself raise serious concerns, even if Cross left AFME in 2015. And considering the clear levels of revolving doors between AFME and the EBA, it seemed inevitable that MEPs would not be easily convinced and that they would have serious questions to ask. They did, and Cross failed to convince a majority of them. Moreover, comparing the statements he made during the hearing to publicly available information from his time as a lobbyist doesn’t bode well for his credibility. His claim to be merely producing helpful evidence when working as a lobbyist sounded hollow and misleading.  

Lobbying as mere advice

According to Cross, he understood his prime task as a lobbyist to be making sure that the financial sector picked a new style in their engagement with decision-makers. What was needed was for people like himself to step in and take on the task of redefining the engagement according to the slogans: “…we are facts based, we are evidence based, we are calm in our voice, we approach matters in terms of a helpful demeanour.” His role as a lobbyist, he said, was to “make the facts available, provide the evidence.”

However, the very organisation he worked from the days when Lehman Brothers collapsed in September 2008, the Institute of International Finance, became notorious shortly after for a campaign it staged to water down reform of international banking rules.


Despite its academic-sounding name, the Institute of International Finance (IIF) is in fact an alliance between the biggest banks in the world, and is the most powerful lobby group in the context of the international negotiations on banking, and the Basel rules which govern the sector. Perhaps the most famous recent lobby victory was in the summer of 2010, when central bankers were negotiating a new set of rules, supposed to correct some the weaknesses in the existing Basel II framework.

In particular, capital requirements – equity that banks have to absorb losses - were to be increased, and that prospect was not popular with the IIF. In response the group staged a scaremongering campaign. In a report, dated June 2010 they claimed that the proposed 2 percent hike in overall capital requirements would lead to an economic slump, with an estimated drop in GDP of  3.1 percent in the Eurozone, the US and Japan. 

The main document that helped soften negotiators’ positions was a report titled “Interim Report on the Cumulative Impact on the Global Economy of Proposed Changes in the Banking Regulatory Framework”.  This report was authored by Gerry Cross, amongst other authors, as he pursued his role of formulating the banks’ ‘global policy response’ at IIF.

Was this an example of serious information being provided to decision-makers? The analysts of the Bank of International Settlements (BIS) didn’t think so. In August the BIS issued a report that took issue with the IIF’s claim. They did acknowledge that GDP could drop, but estimated that drop to be of only 0.38 percent,  a figure that was almost ten times smaller than the IIF’s drastic prediction. Still, the scaremongering was effective, and the new rules that were agreed set requirements at a lower level than originally proposed.

Several analysts would lament the outcome soon after, including senior economists at the Bank of England:  “In retrospect, we believe a huge mistake was made in letting banks come to have much less equity funding . . . than was normal in earlier times,” they commented in 2011.

AFME: the megabank lobby group in Europe

After defending the interests of the IIF’s members at the global level, Cross went on to join AFME, an association set up in 2009 to influence the EU institutions. It was hardly an abrupt change of scene. At present, all but 2 of the 22 companies represented on AFME’s board are also members of the IIF.

In that setting, Gerry Cross was part of an effort to influence the implementation of the Basel Rules in the European Union such that they were as close to the interest of the banks as possible, frequently via policy pamphlets bearing his own name. AFME would often come in the spotlight when an issue became politically contentious – for example when it sought to deflect regulation of hedge funds, or when it fought proposals on bank structure. When the Commission published a report in 2012 on how to insert a 'firewall' between trading and credit - to protect customers from risky bank adventures and to enhance financial stability - AFME was a main oppponent, literally from day one and all the way till in the end the project was shelved

AFME would often go up against popular demands with no hesitation, as when it fought the introduction of a Financial Transaction Tax. In that case, Gerry Cross was directly involved in the public debate. In May 2013 he stated that “I must point out that the Financial Transaction tax is, in our view, a flawed initiative, which will not achieve its stated objectives, but will be counter-productive to the EU’s growth agenda”.  

Also, when civil society groups pushed for action against speculation on food through the imposition of limits to investments, AFME and Cross in particular, worked behind the scenes to undermine the effort. His direct involvement in conveying AFME’s message on the topic can be seen from documents which record a meeting Cross attended at the Commission on 22 May 2012: an AFME delegation, headed by Cross, pleaded with the Commission to allow for ‘alternative arrangements’ that would enable the City of London, for example, to sidestep fixed limits. AFME was, at the time, part of a concerted effort supported by the UK government to fight attempts to introduce ‘position limits’. This approach was condemned by food safety campaigners as undermining attempts to avoid dangerous food price hikes. Gerry Cross was thus a strong and active opponent of progressive positions adopted by the European Parliament, including on the FTT and on food speculation.

Lobbyist incognito in parliament

Cross, however, insists that he was always merely a provider of facts-based evidence. The justification he offered at the hearing to back up his claim that he was never a typical lobbyist was the fact that he ”didn’t even carry a badge to the European Parliament.” This seems odd considering that Cross was ‘Managing Director for Advocacy’ and ‘Head of the Brussels Office’. And it doesn’t present a correct picture of how lobbying in the Parliament works..

It is not a requirement for lobbyists to carry a badge when they enter the European Parliament. It makes entrance swift and easy, but if you don’t mind waiting for a few minutes, there is no need for a badge. The question, then, is whether Cross was really just an analyst or if he sought to influence MEPs at meetings.

While no official register of such meetings was kept in the European Parliament at that time, one political party, the British Conservatives, maintained a register of their own. From this we can see that during the time when Cross worked for AFME, he attended at least 5 bilateral meetings with MEPs from just that one particular party. To this must undoubtedly be added many other meetings with other parties - meetings of which no record exists, as well as meetings with decision-makers in other institutions.

It seems clear that Cross was an active financial sector lobbyist; not having an access pass is no barrier to lobbying. Moreover, the fact that Cross never carried a badge, then, could actually be seen as rather dubious. Lobbyists with a badge make their presence in the corridors of the European Parliament public. For whatever reason, Gerry Cross chose not to do this.

Sticks to the EBA smokescreen

On the question of revolving doors – the very issue that has put the EBA in a bad light since it hired a new Chairman from the ranks of the banking lobbyists in February 2019 – Gerry Cross shows no sign of having looked thoroughly into the legal basis of decisions on ‘revolving doors’.

When queried on how he voted when the EBA accepted Adam Farkas’ new position, he admitted having supported the decision. But he insisted that he, and the EBA, has learned from events and that the pressure on the EBA from the European Parliament is bound to be ‘transformative’. Still, there is no indication his review has led to a thorough read through of even the basic rules in place. He arguedthe rules left the EBA no option other than to accept Farkas’ move, albeit with some conditions in place,  because the EU Staff Regulations require the agency to consider the right to employment. But EU Staff Regulations contain no such requirement. The legal foundation for a rejection of Farkas’ move is there, had the EBA chosen to use it.   

While Cross fought hard to win the trust of MEPs on the back of the Farkas case, vowing to sign an agreement on the type of employment he could take when leaving the EBA after his term, his performance seemed weak when he spoke about the issues that made his nomination controversial.

Can a former lobbyist govern future lobbyists?     

The plenary of the European Parliament is now to vote on whether Cross is the right person for the job. Judging by his merits and his performance at the hearing, it would be a mistake to approve his candidacy. He spent almost six years as a lobbyist for the biggest banks in the world at one of the most crucial times in the history of banking regulation, and the four years he has spent with the Central Bank of Ireland since he left AFME is not enough to dispel concerns.

Nothing suggests that Cross’ record as a lobbyist made him different from other finance lobbyists. That is bound to have implications for the way he understands and interacts with current-day lobbyists from AFME and elsewhere. It could even be argued that the very attempt to convince MEPs about the benign nature of his own work could boomerang back at him. If Cross really believes that his work as a lobbyist was merely about providing decision-makers with high quality information, is he then the right person to ask to supervise some of the biggest banks in Europe, who also happen to have one of the most effective organisations at hand – AFME, Cross’s own former employer – to promote their interests?


Click here to read the letter from the Change Finance coalition to MEPs, calling on them to reject Gerry Cross as EBA Director.

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