Ethics and governance in the European Financial centers

In an interview one month ago, Serge Allegrezza analysed without kindness the Crisis. If the financial sector had, in the Eighties, taken over from the iron and steel industry, he cannot see any new sector.


In the Eighties Luxembourg had actually implemented what Spencer Johnson explained in his famous book “Who Moved My Cheese”. In the style of a parable, Spencer Johnson described what is to be done to face change.

The process is the following as described in the book:

1. Change Happens
They Keep Moving The Cheese
2. Anticipate Change
Get Ready For The Cheese To Move
3. Monitor Change
Smell The Cheese Often So You Know When It Is Getting Old
4. Adapt To Change Quickly
The Quicker You Let Go Of Old Cheese, The Sooner You Can Enjoy New Cheese
5. Change
Move With The Cheese
6. Enjoy Change!
Savor The Adventure And Enjoy The Taste Of New Cheese!
7. Be Ready To Change Quickly And Enjoy It Again & Again
They Keep Moving The Cheese.

This is exactly what Luxembourg did to replace the iron and steel industry.

Luxembourg imagined new activities, and became a great financial center.

Luxembourg has always had a taste for niche opportunities, in fact selling its sovereignty.
Examples:
RTL
SES
Cargolux
Shipping Register and of course the
Financial Center.

When in 1974-75 the steel crisis broke out, it made socially and economically good decisions: creating the DAC, Division Anti Crise, and the BED or Board of Economic Development. Two remarks though: DAC was needed because nobody had seen the Cheese moving, and BDE failed to diversify because the actors saw the easy Cheese in Finance.

As far as the financial center is concerned, the problem is that the actors defined the center with specific parameters that were their cheese for business success:
- banking secrecy (despite the fact that it was not a tradition in Luxembourg contrary to Switzerland)
- little control and little sanctions compared to other jurisdictions (it may be proven with ratios)
- a trend to hush up issues or dysfunctions with a press that does not really act as a watchdog
- specific pragmatism with the meaning of laxism
- no fear of international sanctions thanks to the memberships : FATF, OECD, European Union.
- …

Since 2004-2005 I called to make an aggiornamento because the world was visibly changing and the parameters of development of the Luxembourg financial center were dramatically overhanging: in other words their “cheese” was becoming dangerous for the jurisdiction.

In a book that was published in 2006, I noticed that professionals in Luxembourg were self-satisfied with a lack of positive pragmatism as they were unable to see that the reality of the world was changing.

The cabal against the OECD, the G20… while they are not questioning the dysfunctions of the jurisdiction, demonstrates that the Luxembourg authorities and professionals do not want to adapt the cheese to the reality of today’s world.