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27 Jan 2023


EU: Parliamentary committees vote in favour of mandatory due diligence rules for financial sector

"EU due diligence rules should include finance, Commissioner says", 27 Jan 2023

Commissioner for Justice Didier Reynders said the EU executive’s goal is to include the financial sector under the EU rules on corporate accountability after it was carved out from mandatory due diligence by member states in their common negotiating position...

According to the original proposal, companies with more than 500 employees and €150 million turnover would have to identify, mitigate and remediate risks and violations along their value chains. 

The rules would also apply to companies with over 250 employees and €40 million turnover in high-risk sectors, such as the textile industry, while the financial sector, including banks and financial institutions, would be required to carry out due diligence checks at the inception of contracts...

However, member states opted to carve out financial services from mandatory due diligence in their common position agreed upon in December. The decision was reached under the pressure of the French government and has been widely criticised, as the financial industry is seen to have a large influence on companies’ behaviour and would thus have a lever to put pressure on them.

Member states agreed to replace the notion of “value chain” with “chain of activities” including only a very restricted section of the downstream part of the value chain, which would make due diligence requirements negligible for banks in practice.

Commenting on this decision, Reynders said “if it’s possible to find another wording, but reach the same goal [of the Commission] to touch all the sectors, fine”.

However, he added: “I’m not sure that with the actual wording coming from the Council this will be the case. If [the goal] is just to put the financial sector out of the scope, we’ll have new discussions.”

Before negotiating with member states, the EU executive will have to wait for the Parliament’s final position on the directive, which will be voted on in the May plenary session.

Earlier this week, several parliamentary committees, including the committee of economic affairs (ECON), voted in favour of including mandatory due diligence rules for the financial sector in their opinions, which will then feed into the final Parliament’s report on the file.

The votes pleased NGOs and activists who have been pushing for stricter due diligence requirements for financial services.

“The inclusion of financial services is hugely critical,” Hannah Storey, Amnesty policy advisor, told EURACTIV after the votes, adding that the results show “MEPs are willing to improve on the Commission and Council positions”...

[M]ost MEPs are pushing to extend the rules to smaller companies. On Tuesday (24 January), the economic affairs committee voted to include companies with more than 250 employees and a €50 million turnover or 50 employees and a €10 million turnover in high-risk sectors...