LEAKED: How the Biggest Banks Are Conspiring to Rip Up Financial Regulations around the World

WikiLeaks got its hands on part of the secret trade pact for services

By Don Quijones, Spain & Mexico, editor at WOLF STREET.

It’s almost impossible to keep anything secret these days – not even the core text of a hyper-secret trade deal, the Trade in Services Agreement (TiSA), which has spent the last two years taking shape behind the hermetically sealed doors of highly secure locations around the world.

According to the agreement’s provisional text, the document is supposed to remain confidential and concealed from public view for at least five years after being signed! But now, thanks to WikiLeaks, it has seeped to the surface.

The Really, Really Good Friends of Services

TiSA is arguably the most important – yet least well-known – of the new generation of global trade agreements. According to WikiLeaks, it “is the largest component of the United States’ strategic ‘trade’ treaty triumvirate,” which also includes the Trans Pacific Partnership (TPP) and the TransAtlantic Trade and Investment Pact (TTIP).

“Together, the three treaties form not only a new legal order shaped for transnational corporations, but a new economic ‘grand enclosure,’ which excludes China and all other BRICS countries” declared WikiLeaks publisher Julian Assange in a press statement. If allowed to take universal effect, this new enclosure system will impose on all our governments a rigid framework of international corporate law designed to exclusively protect the interests of corporations, relieving them of financial risk, and social and environmental responsibility.

Thanks to an innocuous-sounding provision called the Investor-State Dispute Settlement, every investment they make will effectively be backstopped by our governments (and by extension, you and me); it will be too-big-to-fail writ on an unimaginable scale.

Yet it is a system that is almost universally supported by our political leaders. In the case of TiSA, it involves more countries than TTIP and TPP combined: The United States and all 28 members of the European Union, Australia, Canada, Chile, Colombia, Costa Rica, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, South Korea, Switzerland, Taiwan and Turkey.

Together, these 52 nations form the charmingly named “Really Good Friends of Services” group, which represents almost 70% of all trade in services worldwide.

As WOLF STREET previously reported, one explicit goal of the TiSA negotiations is to overcome the exceptions in GATS that protect certain non-tariff trade barriers such as data protection. For example, the draft Financial Services Annex of TiSA, published by Wikileaks in June 2014, would allow financial institutions, such as banks, to transfer data freely, including personal data, from one country to another – in direct contravention of EU data protection laws.

But that is just the tip of the iceberg. According to the treaty’s Annex on Financial Services, we now know that TiSA would effectively strip signatory governments of all remaining ability to regulate the financial industry in the interest of depositors, small-time investors, or the public at large.

1. TiSA will restrict the ability of governments to limit systemic financial risks. TiSA’s sweeping market access rules conflict with commonsense financial regulations that apply equally to foreign and domestic firms. One of those rules means that any governments that seeks to place limits on the trading of derivative contracts — the largely unregulated weapons of mass financial destruction that helped trigger the 2007-08 Global Financial Crisis — could be dragged in front of corporate arbitration panels and forced to pay millions or billions in damages.

2. TiSA will force governments to “predict” all regulations that could at some point fall foul of TiSA. The leaked TISA text even prohibits policies that are “formally identical” for domestic and foreign firms if they inadvertently “modif[y] the conditions of competition” in favor of domestic firms:

For example, many governments require all banks to maintain a minimum amount of capital to guard against bank collapse. Even if the same minimum is required of domestic and foreign-owned banks alike, it could be construed as disproportionately impacting foreign-owned banks… This common financial protection could thus be challenged under TISA for “modifying the conditions of competition” in favor of domestic banks, despite governments’ prerogative to ensure the stability of foreign-owned banks operating in their territory.

3. TiSA will indefinitely bar new financial regulations that do not conform to deregulatory rules. Signatory governments will essentially agree not to apply new financial policy measures which in any way contradict the agreement’s emphasis on deregulatory measures.

4. TiSA will prohibit national governments from using capital controls to prevent or mitigate financial crises. As we are seeing in Greece right now, capital controls are terrible. But for a government facing the complete breakdown of the financial system, they serve as a last resort for restoring some semblance of order. Even the IMF, which urged countries to abandon capital controls in the Washington Consensus years of the 1990s, recently endorsed capital controls as a means of maintaining the stability of the financial system. But if TiSA is signed, the signatory governments will be prohibited from using them:

The leaked texts prohibit restrictions on financial inflows – used to prevent rapid currency appreciation, asset bubbles and other macroeconomic problems – and financial outflows, used to prevent sudden capital flight in times of crisis.

5. TiSA will require acceptance of financial products not yet invented. Despite the pivotal role that new, complex financial products played in the Financial Crisis, TISA would require governments to allow all new financial products and services, including ones not yet invented, to be sold within their territories.

6. TiSA will provide opportunities for financial firms to delay financial regulations. If signed, TISA will require governments to address financial firms’ criticism of a regulatory proposal when publishing a final version of the regulation. Even then, governments would be obliged to wait a “reasonable time” before allowing the new regulation to take effect. In the United States, such requirements have produced delays sometimes lasting years in the enactment of urgently needed financial and other safeguards. If the same process is applied across the globe, it would make it almost impossible for government to constrain the activities of the world’s largest banks.

What that would likely mean is that when (not if) a new global financial crisis takes place in the not-too-distant future, the banks will once again be on hand to lead efforts to clean up and rebuild with taxpayer money the very sector that they themselves have destroyed. Lather, rinse, repeat. Only this time, on an even grander scale. By Don Quijones, Raging Bull-Shit.

Global banking behemoth HSBC is not having a good 2015. Now, is it just in dire financial straits? Read…  Does HSBC Know Something Other Banks Don’t?

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  13 comments for “LEAKED: How the Biggest Banks Are Conspiring to Rip Up Financial Regulations around the World

  1. AC says:

    Wikileaks page for the TiSA: https://wikileaks.org/tisa-financial/

    TiSA pdf, on Wikileaks: https://wikileaks.org/tisa-financial/WikiLeaks-secret-tisa-financial-annex.pdf

    Analysis of the TiSA, on Wikileaks: https://wikileaks.org/tisa-financial/Analysis-of-secret-tisa-financial-annex.pdf

    When I see things like the TiSA, I always wonder why these people responsible for it are still breathing.

  2. poodlebear says:

    Thnx for the links. Indeed. I always wonder WHO are the people signing these documents ‘on behalf of’ their country? Couldn’t we say we had no knowledge of that person signing it nor did we give him explicit permission therefore the signature is void and does not represent our country? I’m always amazed at how this van be legal. Also as a sovereign state you could always say well we now decide to not honor this agreement. Suck it. What are you gonna do? Sure there could be a fine, but why pay it? It’s like your mother telling you to go to your room, until you get old enough and say well how about I dont..?!!

    To continue the analogy she would then say ok you won’t get food then. Your response is its alright I’ve got a job and saved some money, my friends are in the same situation so I’m moving out of the house, renting an apartment with them a we’ll have the best time of our lives. In the meantime she’s still grounding you and giving you fines, but like I said… you don’t care.‎

  3. Dan Romig says:

    China is not going to be excluded from a new economic ‘grand enclosure’. They are simply signing trade agreements with one country at a time.

    On Wednesday, 17 June of this year, the Guardian writes, ‘China and Australia Formally Sign Free Trade Agreement’. This agreement also has an investor-state dispute settlement, or ISDS.

    Thank you AC for putting up the links to the wikileaks sites, but the real question isn’t why those responsible for it are still breathing, but why are American voters stupidly keeping the two party status quo in power? There is really no difference between the Democrats and Republicans, but there’s Green, Independent and Libertarian candidates that will change the political landscape.

  4. Chris Rofot says:

    Good summary Don. These three treaties are very difficult to break down to people as they purposely are interwoven together, which is why I described them a month ago as the TPP TiSA TTIP Triumvirate – it seems that WikiLeaks has appropriated that moniker. In any event… good work on continuing to post on this topic as many people are confused and are under the impression that the TPP fight is over, confusing it with TPA.

  5. Julian the Apostate says:

    the 2 party system has so rigged the game that a third party has no chance of crashing the gates. at the same time they are dumbing down the young people via the government schools. the internet while a wonderful tool offers a sanitized, homogenized revision of history that forces any eager researcher to form conclusions based on false premises. while i am heartened by the occasional youngster who comes across websites like this and enjoy proper discussion of issues, the time is late.

  6. sam says:

    I’m actually working inside a systemically important bank helping implement the Basel III rules. TISA may be real, but at the moment the regulators are turning the screws on banks tighter and tighter.

    • Wolf Richter says:

      So long as banks are shadowy hedge funds that are so huge and take so many risks that they can take down the global economy when they collapse and that are then bailed out by taxpayers and central banks to where the guilty execs and risk takers at the banks get record bonuses (as they did in 2009), regulators can’t turn the screw tight enough.

      • John says:

        “regulators can’t turn the screw tight enough.”

        Exactly. If they were tightening the screws the Too Big Too Jail would be prosecuted.

  7. toejam says:

    These so-called secret trade agreements exist for one reason.
    Lawyers! Lawyers write the “rules”. Lawyers posing as representatives of their respective peoples make them under color of Law without reading them, and a lawyer signs these color of laws. These secret trade “agreements” (did you or I agree to them?) are the erection like a giant phallus to screw the average person and lock in place a vast matrix just so the psychopathic banking elite and their inbreed progeny can live in clover while the rest of us 99.9%, that is those still breathing, will exist in a vast radioactive dystopia.

  8. bob says:

    We in the U.S. should just arrest all these corrupt banksters like Iceland did and rebuild our economy from the ground up.

  9. chris says:

    why do we have to rely on wikileaks to tell us all this?

    why do we have elected parliaments in the us/uk/eu etc?

    and what use is the main stream media (newsopapers/tv etc) nowadays?

    no wonder i have stopped reading newspapers ( and relying on the bbc )
    for some time now

  10. Bradster says:

    Sorry folks, but we have no one to blame but ourselves. The names of the corrupt and self-serving leaders who are supporting this — from the President all the way down the line — are public knowledge. That we put these criminals in office in the first place, let alone the likelihood they will remain in office next year, shows how little concern or comprehension the average American voter has for such issues.

    Granted the whole triumvirate is highly complex, deliberately so, but could be framed in such a way as to make it accessible to the masses. But who would take the time to read it? Who cares?

    The left-wingers cry about wealth disparity yet the Democrats are the ones pushing the TPP sell-out. What do you suppose the end result will be for the average American worker five years down the road if this passes? Doesn’t look very good to me.

    Meanwhile the right-wingers are overcome with grief and rage now that two dudes can now marry in all 50 states instead of just 37, and embittered that they still can’t get rid of Obamacare. Yet these same “true” conservatives are getting in line behind the very man they claim to hate so much and pushing for TPP along side.

    The culture war contrivance is the most brilliant misdirection ever assembled. We are a nation of goldfish, easily distracted by shiny new objects or manufactured crises.

    We get the government we deserve because we chose those who are running it. And we will chose them again. Woe is U.S.

    • John says:

      “We get the government we deserve because we chose those who are running it.”

      We The People do not pick who wins, the corrupt electronic voting machines do that.

      Every time they were tested, they were easily hackable.

      This can all be laid at the feet of the 535 politicians & presidents along with their favorite corporations, wall street & the banksters (The Too Big Too Jail) that make all the rules & laws

      Afterall, Christ called the Politicians, Religious Leaders, & Scribe Lawyers VIPERS.

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