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Brussels, 14th March 2002

Financial services: Commission welcomes significant progress in European Parliament on Financial Services Action Plan

The European Commission has welcomed the positive opinions adopted, on the eve of the Barcelona European Council, by the European Parliament's plenary session in Strasbourg on proposals concerning market abuse, financial conglomerates and International Accounting Standards. These are three key initiatives from the Financial Services Action Plan (FSAP - see IP/00/1269), a crucial element of the EU's strategy for becoming the most competitive economy in the world by 2010. The Opinions adopted on 14th March concerning proposals for Directives on market abuse and on financial conglomerates will considerably facilitate their rapid adoption. The Parliament's 12th March Opinion concerning the proposed Regulation on the application of International Accounting Standards opens the way to "fast-track" adoption of the proposal by the EU's Council of Ministers with a just a single reading.

Internal Market Commissioner Frits Bolkestein said: "The climate is changing in the field of financial services. And this is happening just at the right time. What we need now is for European leaders at the Barcelona Summit to take the bull by the horns and call for significant progress on the different financial services measures still under negotiation, such as the proposals on pension funds and prospectuses. This will contribute towards maintaining the sense of the momentum on financial services we have seen emerge over the last few weeks and help convince citizens, businesses and markets that we really can deliver our goal of making Europe the world's most dynamic and competitive economy by 2010."

International Accounting Standards

The Commission has welcomed the European Parliament's vote on 12 March to approve the proposal for a Regulation on the application of International Accounting Standards (IAS) for all listed companies in the EU from 2005 onwards (see IP/01/200 and MEMO/01/40). Member States would have the option to extend this requirement to unlisted companies and to the production of individual accounts. The Regulation would help eliminate barriers to cross-border trading in securities by ensuring that company accounts throughout the EU are more transparent and can be more easily compared. This would in turn increase market efficiency and reduce the cost of raising capital for companies. The Commission supported the Parliament's amendments, which leave the way open for the Council to adopt the Regulation in a single reading in May.

Mr Bolkestein said: "This crucial vote gives a strong political signal not only that the European Union is serious about achieving an integrated capital market by 2005, but also that it is ready to lead the development and acceptance of International Accounting Standards. EU publicly-traded companies must start preparing for IAS in earnest. I hope the United States will now work with us towards full convergence of our accounting standards. Recent events, especially the Enron affair, mean there has never been a more appropriate time."

Financial conglomerates

The European Parliament adopted on 14th March a report supporting the broad thrust of the proposed Directive on financial conglomerates - (cross-sectoral financial groups with activities in both the banking/investment services and insurance sectors - see IP/01/609). The Directive would introduce group-wide supervision of financial conglomerates and require closer co-operation and information sharing among supervisory authorities across sectors. It would also introduce initial steps to align the rules for financial conglomerates with those for homogeneous financial groups (dealing in a single financial sector, such as banking) so as to ensure equivalence of treatment and a level playing-field.

Mr Bolkestein, said: " We need to make sure that regulation catches up with realities in the market and ensures effective supervision of risks arising in conglomerates operating across more than one financial sector. The proposed regulatory framework would benefit consumers, depositors and investors in the European Union by stimulating financial market efficiency and increasing competition."

The proposed Directive would introduce specific legislation for the prudential supervision of financial conglomerates. The three main objectives are:

  • to ensure that the financial conglomerate has adequate capital.

  • to introduce methods for calculating a conglomerate's overall solvency position and

  • to deal with the issues of intra-group transactions, exposure to risk and the suitability and professionalism of management in financial conglomerates.

The proposal on financial conglomerates will now be considered by the EU's Council of Ministers. The aim should be the adoption of a Common Position under the co-decision procedure by June 2002, after which the proposal will return to the Parliament for a second reading.

Market abuse

The Commission has also welcomed the European Parliament's report on the proposed Directive on insider dealing and market manipulation (market abuse). The Commission hopes that the Directive can now be adopted soon, which would be a major achievement for the integration of European financial markets. The proposed Directive would increase standards for market integrity in the securities field and contribute to the harmonisation of the rules for market abuse throughout Europe. It would represent a strong commitment to transparency and equal treatment of market participants. The proposed Directive would require closer co-operation and a higher degree of exchange of information between national competent authorities. Therefore, it would ensure the same framework for allocation of responsibilities, enforcement and co-operation throughout the EU and reduce potential inconsistencies, confusion and loopholes. The Directive would increase market integrity and public confidence in European markets, making them more attractive for investors.

Mr Bolkestein said: "Europe has no truck with greedy financial cheats. Scandals like Enron show clearly the need for rules to ensure markets remain free of abuse or fraud. The smooth functioning of financial markets and public confidence in them are the conditions for sustained economic growth and wealth."

A general orientation in view of a political agreement on the market abuse proposal was already reached at the December 13th Council of Finance Ministers (see MEMO/01/439). The aim is now that the Council adopts a formal Common Position on the proposal by the end of June 2002, after which it will be subject to a second parliamentary reading.

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