The Bailout Business. Who Profits?

Wolfgang Schauble

The Bail Out Business, a new report published by the Transnational Institute (TNI), reveals how rescue packages for EU banks have become a business benefiting a small group of audit and financial consultancy firms. According to EU data, bail out packages have led to losses of more than 200 billion euro up to 2017.

TNI claims this is the most comprehensive report at the European level since the crisis of 2008 which assesses who has been in charge of designing and implementing rescue programs in the EU. The report observes that The Big Four audit firms (EY, Deloitte, KPMG and PWC), which operate as a de facto oligopoly, together with a small coterie of financial advisory firms, have designed the most important rescue packages. 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, the problem of “revolving door” appointments in the EU, where former top finance executives hold leading positions in EU institutions and vice versa, could be the cause of this situation.

“Another possibility is that the increasing complexity of finance in recent decades and the gradual outsourcing of the management of financial affairs to the private sector left governments and EU institutions unarmed when trouble arrived.”

“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.”

The hidden cost of the bail outs for tax payers

“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”. For Susan George, President of TNI, “this report will help 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 influence of the group of companies that constitute the Bail Out Business, keeps growing.

“Dependency on a finance sector dominated by private companies and interests must be addressed, and public, democratic alternatives should be created to replace, or at least function alongside the private oligopolies of audit companies” says Susan George, and recommends that “Public banking can be a first step towards the strengthening of public institutions to manage finance and banking affairs and their capacity to respond to new crisis.”

Read the Report

See the Video: “The Bail Out Business”