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Brussels, 5th February 2002

Financial markets: Commission welcomes Parliament's agreement on Lamfalussy proposals for reform

The European Commission has warmly welcomed the European Parliament's agreement on the approach to the regulation of European financial markets. After hearing a formal declaration from Commission President Romano Prodi, the Parliament voted on 5 February to accept a Resolution proposed by Karl von Wogau MEP, paving the way for a more efficient system for EU institutions to prepare, adopt and implement new financial services legislation. European Heads of State and Government at the March 2001 Stockholm European Council had already endorsed the final report from the Committee of Wise Men on the Regulation of European Securities Markets, chaired by Alexandre Lamfalussy (see IP/01/215). The Lamfalussy Committee called for a four-level approach to European regulation to allow the EU to respond rapidly and flexibly to developments in financial markets in order to achieve greater market integration and improved competitiveness.

After the vote, President Prodi said: "This vote by the Parliament sends a very positive signal for the goal of making Europe the most competitive economy in the world by 2010 and for our institutional partnership with the Council and the European Parliament. I am looking forward to an acceleration of work in the run up to the Barcelona Summit next month. I congratulate the European Parliament, and Herr von Wogau and his colleagues in particular, on adopting such a positive Resolution."

Internal Market Commissioner Frits Bolkestein added: "This is a tremendous breakthrough for the creation of an integrated European financial market, and is one that financial markets, investors and regulators have been hoping for. I believe that we have now reached an honourable compromise between our institutions that will re-establish confidence in the efforts that are being made to develop an integrated European financial market by 2005 and an integrated securities and risk capital market by 2003. I am now much more optimistic that we will be able to do the job on time."

The European Parliament had expressed reservations about the levels of transparency and consultation under the new approach suggested by the Wise Men. In particular, the Parliament sought assurances that its powers would be equivalent to those of the Council of Ministers. These reservations were finally overcome following a formal declaration made by President Prodi on behalf of the Commission (see SPEECH/02/44). He assured the Parliament that the implementation of the Wise Men's recommendations would mean no loss of democratic control. He welcomed the close co-operation between the Community institutions and expressed his confidence in its harmonious development in the near future. He also emphasised the need for the utmost transparency and for early, systematic and broad consultation of the public throughout this new regulatory process.

Background - the Lamfalussy approach

The report of the Wise Men proposed a four-level approach to European securities regulation, based on two new committees, the European Securities Committee (ESC), and the Committee of European Securities Regulators (CESR). Both Committees were set up by the Commission in June 2001 (see IP/01/792 and MEMO/01/213).

The four-level approach is to work as follows:

  • Level 1 will consist of legislative acts, namely Directives or Regulations, proposed by the Commission following consultation with all interested parties and adopted under the "co-decision" procedure by the Council and the European Parliament, in accordance with the EC Treaty. In adopting each Directive or Regulation, the Council and the Parliament will agree, on the basis of a Commission proposal, on the nature and extent of detailed technical implementing measures to be decided at Level 2.

  • At Level 2, the European Securities Committee, the future regulatory committee, will assist the Commission in adopting the relevant implementing measures. Such measures will be used to ensure that technical provisions can be kept up to date with market developments.

  • Level 3 measures will have the objective of improving the common and uniform implementation of Level 1 and 2 acts in the Member States. The Committee of European Securities Regulators will have particular responsibility for this;

  • At Level 4, the Commission will strengthen the enforcement of Community law.

This four-level approach was fully endorsed by the European Council at Stockholm in March 2001. At that time, it was agreed that in those cases where implementing measures in the field of securities markets were acknowledged to be particularly sensitive, the Commission would avoid going against predominant views within the Council.

Since then, the four-level approach has been subject to in-depth discussions in the European Parliament, in particular in the Committee on Constitutional Affairs, the Committee on Economic and Monetary Affairs and the Committee on Legal Affairs and the Internal Market.

To assist these discussions, Commissioner Bolkestein sent a letter on 2 October 2001 to Christa Randzio-Plath MEP, the chair of Parliament's Committee on Economic and Monetary Affairs. As a result of this letter and the subsequent report by Karl von Wogau MEP, the Commission and Parliament have now agreed on important elements on how to implement the regulatory structure.

President Prodi was therefore able to announce that the Commission is now in a position:

  • to take note of Parliament's intention to limit the duration of the delegation of executive powers to the Commission to four years from the entry into force of each particular Directive, subject to an extension being proposed by the Commission and accepted by Parliament and the Council. The Commission could accept amendments adopted by Parliament to this end.

  • to ensure that Parliament is given a period of three months from the first transmission of draft implementing measures in which to examine them and to give its opinion. However, in urgent cases that are duly substantiated, this period may be shortened.

  • to ensure full transparency vis-à-vis Parliament throughout the entire procedure for the adoption of implementing measures. The Commission will also ensure that there is wide public consultation before draft implementing measures are drawn up.

  • to support Parliament's wish to see the establishment of a market participants group attached to the Committee of European Securities Regulators. The Commission strongly encourages its establishment in as short a time as possible.

  • to recall its political willingness to endeavour that the Parliament benefits from equivalent treatment and, in order to secure effective cooperation between the institutions and to reach a balanced solution, reaffirms its commitment to take the utmost account of the Parliament's position if it considers that the Commission has exceeded its implementing powers.

The full text of the Lamfalussy Report is available at:

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