The Kredietbank Judgement


A Victory for the Law – a compelling Call for Reform!


The severe verdict handed down by the Appeals Court blaming the Public Prosecutor in the Kreditbank case should comfort all who aspire to live under the rule of law.


The judgment insists on the paramount obligation to abide by the law and applies the concept with total impartiality to the Prosecution and Defendants alike. Thus, the Court disqualified the prosecution’s case because of procedural irregularities resulting in the automatic extinction of the suit, without expressing any judgment on the underlying facts.


Such a situation has dual consequences for the defendants: on the one hand their criminal record will remain untarnished, which is nothing less than normal; on the other, however, having avoided, with the help of the bar’s finest minds (not always available to the man in the street), a judgement which, in case of acquittal would have restored their honour, they remain under the shadow of an unresolved “presumption of innocence”. This presumption, defined in the dictionary as “an assumption based on reasonable grounds”, is meant to constitute a protection (often flouted) for the defendant prior to the verdict; in the absence of a judgement, a cynical and often cruel society tends to emphasize the remaining doubts with which he remains confronted.


If society as a whole and particularly defendants should applaud this judgment, it imposes nevertheless on politicians the obligation to draw all the lessons for the future.


Indeed, it would be totally irresponsible to ignore the massively negative psychological impact that this verdict will have, particularly on those who are confronted daily with the difficulties resulting from the financial crisis. It will be quasi impossible to avoid the cheap exploitation of the verdict by populists who will draw the attention (wrongly in this particular case) on the impunity of the powerful (financiers) and on the incidence on the budget deficit at a time when significant sacrifices are about to be imposed on the population (the forgone claims could have amounted to as much as 2.5% of the economies to be realised by 2015).


In the highly stressed Belgian political environment, one should not overlook the “political” consequences of the verdict which will not facilitate the current negotiations.


That is why it behoves the political class to make proposals so that, in the future (the principle of non retroactivity having to be fully respected), recourse to “inadmissible” procedures would be unnecessary as well as illegal.


In this context the State, in its role as guardian of the public interest, is not short of arguments. During the financial crisis in the autumn of 2008, the authorities rescued the financial system (and Kredietbank in particular) for the benefit of the population at large. They assumed, unilaterally, the guarantee of all bank deposits up to an amount of €100.000, aligning themselves on a norm decided unanimously at EU level (support of specific institutions was subject to conditionality imposed by the Government and the European Commission).


One should recall that it is this massive show of support of the financial system – at Belgian, EU and global level – that avoided a “systemic” crisis; the price to pay was the most severe recession since the 1930’s and an explosion of budgetary deficits and State indebtedness, the consequences of which are still being endured.


That is why it would seem entirely justified if, in exchange for its guarantee of deposits, the State demanded that any banking institution, benefitting from this protection, would accept to lift banking secrecy under conditions to be defined by legislation. In turn, the banks would obtain the prior agreement of the insured depositors.


To be effective, such a measure should be extended to cover the EU and preferably, all G20 countries. It would be far more credible in the fight against tax evasion than any “cooperation” agreements between States that are at the centre of current arrangements but whose efficiency is highly doubtful. 


The impact of such a measure is quite straight forward: which depositor would assume the risk of entrusting his account to an institution that was excluded from the deposit guarantee scheme? Which counterparty in the interbank market would assume the risk of lending to such a bank? Few banking institutions could survive without submitting to the rules.


This measure, which is very simple to implement, puts the responsibility of authorising the exchange of information where it belongs: the shoulders of the depositor. For the banks it eliminates conflicts of interest as well the risk of violating local legal and regulatory precepts.


If the Belgian legislator took the initiative of such a reform, it should gather the support of a large parliamentary majority which would allow its adoption even in a period of a government restricted to handle “current affairs”. In doing so, the Parliament would honour itself and at the same time offer to the population the constructive response it is expecting while simultaneously killing any attempt to make hay out of the recent court decision.


Finally, it would be appropriate for bankers to back the proposal, in particular for the beneficiaries of the strict and impartial application of the law referred to herein. By doing so, they would contribute to restore the image of trust and honour on which the sector relies and which was shamefully put into question by the excesses that lead to the current crisis.


Brussels, December 12th 2010


Paul N. Goldschmidt

Director, European Commission (ret); Member of the Thomas More Institute.










Tel: +32 (02) 6475310                                 +33 (04) 94732015                         Mob: +32 (0497) 549259

E-mail:                                            Web: