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Brussels, 2nd December 2002

Financial services: latest report highlights sustained progress in integrating EU capital markets

The European Commission's latest progress report on the Financial Services Action Plan (FSAP) highlights a string of recent successes but underlines that the momentum must be kept up, despite ailing financial markets and decreased investor confidence, if the 2005 deadline for implementation of the FSAP is to be met. The report shows that the case for an integrated European capital market remains as strong as ever, especially in the light of recent research predicting that EU-wide real GDP will increase by 1.1% and total employment by 0.5% as a result of such integration. At the Barcelona Council in March 2001 eight priority measures were identified to be approved in 2002. Almost all of these measures have now been adopted. The full text of the progress report is available at:

Internal Market Commissioner Frits Bolkestein said: "Benefits from further integrating financial markets in the EU are huge. It will increase confidence, create more economic growth, more jobs and sustained prosperity. It will make the EU economy more competitive, efficient, innovative and thus improve prospects of the EU meeting its target of becoming the most dynamic and competitive economy in the world by 2010. The FSAP is a motor for growth. This report shows we are making good progress. As we approach the target date, the Council, the European Parliament and the Commission need to continue to demonstrate the political will to work together and strike the necessary compromises, in a climate of confidence and trust."

Recent steps forward

The report sets out recent successes in moving the FSAP towards completion. In the last few weeks alone, the Commission has issued a proposal for an upgrade of the Investment Services Directive (see IP/02/1706 and MEMO/02/257) after an intensive two-year consultation process. It has started a dialogue with industry on a revised capital framework for banks and investment firms (IP/02/1693): a new EU framework should come into effect at the same time as the new Basel Capital Accord at the end of the year 2006.

On Clearing and Settlement (IP/02/797) it held a consultation ending in August and is now analysing the responses. In October, the Commission presented a revised proposal for a Directive on Take Over Bids (IP/02/1402, MEMO/02/201), taking into account the recommendations of the High Level Group of Company Law Experts.

In November, the Council reached political agreement on the proposal for a Directive on Prospectuses (IP/02/1607, IP/02/1209, MEMO/02/180) and a common position on the Pension Funds Directive (see IP/02/820).

Meanwhile, in mid-November the European Parliament adopted definitively the Financial Conglomerates Directive (IP/02/1712). The Market Abuse Directive (IP/02/1547) is expected to be adopted definitively by the Council of Economics and Finance Ministers on 3 December.

To strengthen the monitoring of the FSAP, EU Economics and Finance Ministers asked the Commission to develop a series of financial indicators. The results of this work are now available. The indicators will provide an important basis for discussion with policy makers on the focus, targets and effects of the FSAP. The overall objective for the ongoing research on indicators is to help prioritise financial policy initiatives, in order to pursue first those with the highest growth impact, in a way which will maximise the benefits.

Main conclusions

The latest progress report concludes that the FSAP is "well on the way to completion". It says that as the measures come into force, attention should now focus more on their correct and timely implementation, application and enforcement. To this end co-ordination between regulators and supervisors within the European Union should be strengthened. It also points to the desirability of progress on extending to all financial sectors the 'Lamfalussy' process (IP/02/195), aimed at allowing EU regulation to respond rapidly and flexibly to market developments.

The report stresses that increasing investor confidence is key for the FSAP: ''Recent corporate governance scandals have shown that even in a relatively well-developed financial market, lack of necessary protection can have serious negative effects''.

An important initiative to restore confidence was setting up the High Level Group of Company Law Experts, which devoted special attention to key corporate governance issues. The Group presented its recommendations on 4 November 2002 (IP/02/1600). The Council subsequently invited the Commission to develop, in close consultation with Member States and the European Parliament, an Action Plan for Company Law including Corporate Governance as soon as possible, and declared its intention to deal with this Action Plan as a matter of priority. The Commission is determined to follow-up quickly early in 2003.


The Commission launched the FSAP in May 1999. At the Lisbon summit in March 2000, Heads of State and Government set a target date of 2005 for the FSAP to be completed. The target for the securities and risk capital markets is the end of 2003.

New research recently conducted for the Commission predicted that the integration of EU financial markets will bring significant benefits to businesses, investors and consumers. The research predicts that EU-wide real GDP will increase by 1.1% - or €130 billion in 2002 prices over a decade or so. Total employment will increase by 0.5%. Businesses will be able to get cheaper finance: integration of EU equity markets will reduce the cost of equity capital by 0.5% and a 0.4% decrease in the cost of corporate bond finance is expected to follow. Investors will benefit from higher risk-adjusted returns on savings.

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