Labour MEPs fight to end abusive commodity speculation and protect consumers from mis-selling practices - 2012-09-26
In a key vote in the European Parliament's Economic & Monetary Affairs Committee today, Labour MEP Arlene McCarthy fought to ensure a higher level of investor protection and an end to abusive speculation in commodity markets.
On food speculation, Arlene McCarthy, Vice Chair of the Economic & Monetary Affairs Committee, said:
“Financial Markets have changed radically over recent years but the current law has not managed to curb their excesses. Speculation on commodity markets causes food price spikes which ultimately is putting the poorest people in the developing world at risk.
"These price spikes also put pressure on household budgets from the fuel in your petrol tank to the food in your shopping basket. According to the World Bank, food prices globally soared by 10% in July. In the face of intense lobbying by the industry we have voted in favour of mandatory position limits on speculation. We are committed to putting a brake on excessive food speculation and speculating giants profiting from hunger. We need to put an end to these practices which only serve the interests of profiteers. It is immoral that when there was a famine in the Horn of Africa in February, organisations like the World Food Programme paid £50 million from UN aid to Glencore for wheat funnelling vital food aid to commodity traders.
"It is a shame that the Tories could not back our amendments for tougher limits to end the situation where food aid is being paid to commodity traders, condemning the world's poorest to hunger and poverty.
"We must ensure that the full Parliament vote in October closes any potential loopholes covering speculative contracts to ensure this legislation effectively limits speculation on food prices.
On investor protection, Arlene said:
“The Economic and Monetary Affairs Committee did not back an EU-wide ban on all commissions from product providers to advisers despite the fact that the UK and the Netherlands already have a ban and other EU countries are considering banning this anti-consumer practice. We have however preserved the UK's national ban in order to ensure that UK consumers have access to real independent financial advice. Research conducted by the UK regulator, the FSA, shows that commission leads to sales, product and provider bias as well as numerous mis-selling cases. Not only will this benefit consumers as they will have better advice but the industry who will no longer have to pay out massive compensation claims which have amounted to 10 million in the recent PPI scandal.”
Notes for Editors:
The (revised) Markets in Financial Instruments Directive & Regulation, is the most wide-ranging EU law regulating trading venues and practices in the financial services sector.
The law provides harmonised regulation for investment services across the 30 member states of the European Economic Area (the 27 Member States of the European Union plus Iceland, Norway and Liechtenstein).
The main objectives of the revision are:
· More robust and efficient market structures.
· To take into account technological innovations.
· Increased transparency.
· Reinforced supervisory powers and a stricter framework for commodity derivatives markets.
· Stronger investor protection.
United Nations' figures estimate that investment in food commodities by banks and hedge funds has risen from $65bn to $126bn (£41bn to £79bn) in the past five years which has pushed prices to 30-year highs and caused sharp price fluctuations that have little to do with the actual supply of food. Speculative investment in agricultural commodities in 2011 was 20 times the amount spent by all countries on agricultural aid. Profits of large financial players have skyrocketed as a consequence with Goldman Sachs, the largest player in the agricultural commodities market, earned £600m from food speculation in 2009, and Barclays Capital, the world's third-largest player and largest British bank in this market, earned up to £340m in 2010 (Better Markets Report).
High prices for basic foodstuffs, combined with the global economic slump, have pushed 115 million more people into hunger and poverty since 2008, bringing the total number of hungry people in the world today to 925 million. In the last six months of 2010 alone, more than 44 million people were driven into extreme poverty as a result of rising food prices.
The full Parliament will vote on the text in October after this the Parliament will start negotiations with the Council.
For more information:
For more information please contact Suzanne Richards on 00 44 161 909 5107 / 000 44 7811 175617 or David Poyser on 00 32 479 790053