Financial services: Commission calls for quantum leap towards rapid implementation of Action Plan

IP/00/1269

Brussels, 8 November 2000

Financial services: Commission calls for quantum leap towards rapid implementation of Action Plan

The European Commission has called for a quantum leap towards rapid implementation of the Financial Services Action Plan (FSAP) so as to ensure that the 2005 deadline set by Heads of State and Government at the Lisbon European Council will be reached and that financial markets therefore contribute fully to economic growth and job creation. In its latest FSAP Progress Report, the Commission has suggested a set of critical priorities for the coming six months for the Commission, the EU's Council of Ministers and the European Parliament. The Report also suggests possible benchmarks for indicating trends and developments in market integration. The FSAP lists a series of measures necessary to create a single wholesale market for financial services, open and secure retail markets, state-of-the-art prudential rules and wider conditions for an optimal single financial market across the EU (see IP 99/327, IP/00/556).

Internal Market Commissioner Frits Bolkestein commented "A single financial market is an essential complement to the single currency. Without a single financial market, consumers and businesses will continue to pay over the odds and Europe's financial services cannot realise their full potential. Implementation of the Financial Services Action Plan is crucial to this goal. While I am pleased to note progress in many sectors, there are still logjams that must be cleared. For its part, the Commission must of course ensure that it presents FSAP initiatives on time. But this is not sufficient in itself - the European Parliament and the Council must also respect strict timetables for agreeing these proposals. Moreover, the Member States must agree and respect tight deadlines for speedy implementation. We must act faster if we are serious about helping the European economy grow faster, perform better and create more jobs."

Ten Commission priorities for the next six months:

Single EU wholesale market:

• Proposals to upgrade the two Directives on Prospectuses;

• Proposal for legislation to follow-up the EU Accounting Strategy Communication;

• Proposal for Directive on Cross-Border Use of Collateral;

• Commission Communication on the Upgrading of the Investment Services Directive (ISD);

•  Commission Communication on the Application of Conduct of Business Rules Under Article 11 of the ISD;

•  Proposal for Directive on Market Manipulation.

Open, secure retail markets:

•  Commission Communication on an e-commerce policy for financial services.

Sound prudential rules:

•  Proposal for the creation of a Securities Committee;

•  Proposal for a Directive on Prudential Rules for Financial Conglomerates;

•  Proposal for a Directive Governing the Capital Framework for Banks and Investment Firms.

Ten proposed priorities for the Council and European Parliament for the next six months:

Single EU wholesale market:

•  Directive on the Prudential Supervision of Supplementary Pension Funds;

•  The two harmonised investment funds (UCITS) Directives;

•  European Company Statute (long outstanding);

•  Directive on Take Over Bids (long outstanding).

Open, secure retail markets:

•  Directive on Distance Marketing of Financial Services.

Sound prudential rules:

•  Directive on the Re-organisation and Liquidation of Insurance Undertakings (long outstanding);

•  Directive on the Winding-up and Reorganisation of Banks (long outstanding);

•  Amendments to the Money Laundering Directive.

Wider conditions:

•  Directive on Savings Tax;

•  Implementing the December 1997 Code of Conduct on business taxation.

Tracking a critical path to implementation

The July 2000 Council of Finance Ministers asked the Commission to chart a critical path to speed adoption of these priority measures. The Commission has therefore developed a detailed procedural timetable that must be followed if the deadlines are to be met. This involves dates for Commission proposals, consideration periods for the European Parliament and Council, and final implementation dates for Member States. To achieve these deadlines the Commission has created an informal grouping the 2005 Group comprising representatives from Council and the European Parliament. The Group meets regularly to align working schedules, and identify problems upstream to avoid delays and speed up formal procedures.

In order to monitor trends and developments in market integration the Finance Council also asked the Commission to look at ways of benchmarking certain indicators. This progress report therefore includes a non-exhaustive list for consideration at a future Council:

• Trends in the admission/capitalisation of new companies to EU stock exchanges;

• Trends in foreign investment in the EU;

• Developments in the use of cross-border collateral in the EU financial markets;

• Mergers and acquisitions in the EU financial services sector, trends towards consolidation in the market;

• The development of funded pension schemes in EU Member States;

• Ue of IAS and US-GAAP accounting principles by EU listed companies;

• Member State comparison of financing costs (debt, equity), asset management costs (acquisition, sale of shares), and of standard financial products costs, and

• On-line provision, penetration and transaction costs of financial services in the EU, in particular in the retail sector.

If the Council agrees, the Commission will develop and present in mid-2001 a methodology for building such a set of indicators.

General Progress

Consumer and retail issues: Work to enhance consumer confidence is accelerating with proposals on insurance intermediaries (see IP/00/1048), distance marketing and an upcoming Communication on an e-commerce policy for financial services. Concrete efforts are progressing to agree on measures underpinning effective out-of-court redress with the establishment of a network of national bodies to deal with consumer complaints. Cross-border payments are still too costly and the Commission is working closely with banks to make cross-border settlement easier (see IP/00/1258 and IP/00/108). An action plan on combating fraud and counterfeiting of cash-less payments will be published shortly.

Wholesale issues: The Commission has published a Communication on the future accounting strategy (see IP/00/606) to be followed before the year end by a legislative proposal for listed companies to report financial statements according to international standards. The proposal on supplementary pensions was presented in October 2000 (see IP/00/1141). Communications on the distinction between professional and retail investors (as regards application of conduct of business rules by host countries) and on upgrading the Investment Services Directive are due shortly alongside proposals for Directives on market manipulation and on the cross-border use of collateral. Political agreement was reached at the 17 October Finance Council on the proposal to extend the range of investments that could be included in a harmonised investment fund (UCITS).

Prudential issues: Progress has been steady. The electronic money Directive and a Directive on the exchange of supervisory information with third countries have been adopted. The Council has reached political agreement on the proposed Directives on the winding-up and reorganisation of credit institutions and of insurance undertakings and on money laundering. The Commission has proposed a Directive for new insurance solvency requirements (see IP/00/1233) and adopted its Recommendation on the Disclosure of Financial Instruments (see IP/00/828). Proposals for Directives on bank capital and financial conglomerates are due next year.

Further efforts are required: There is a noticeable lack of progress in three key areas:

• Despite successive political commitments at the most senior level, there is little progress on the European Company Statute. This has had implications for two other company law initiatives (proposed 10^th Company Law Directive on cross-border mergers and the forthcoming proposal for a 14^th Company Law Directive on transfers of company headquarters);

• The Commission Communication on Fraud and Counterfeiting in Payment Systems will be presented before the end of the year;

• France, Italy and Luxembourg are late in implementing the Settlement Finality Directive and are urged to adopt the necessary measures as soon as possible. The Commission has opened infringement procedures against these three Member States.

The full text of the third FSAP progress report is available on the Europa Website: http://ec.europa.eu/internal_market