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Brussels, 8th May 2003

Financial Markets: Inter-institutional Monitoring Group for securities markets publishes first report

The Inter-institutional Monitoring Group (IIMG) has published its first report on the "Lamfalussy Process" (see IP/02/195) which aims to create a more efficient system for regulating securities markets in Europe. This report follows up a mandate which the European Parliament, the EU's Council of Finance Ministers and the European Commission gave the IIMG last year (see IP/02/1452). The Group, which is composed of six independent experts, two nominated by each Institution, has been asked to assess the progress made on implementing the Lamfalussy Process. The Group reports that evidence given by the Institutions and market participants suggests that good progress has been made, while recognising that at this stage the Process is in a "learning by doing phase" and that further improvements can still be made.

In addition, the Group sees two issues as especially important: First, those legislative initiatives on securities markets which are still pending should be completed by April 2004, before the European Parliament elections, as recently requested by the European Council. Otherwise, uncompleted legislation may be significantly delayed. Second, the European Convention's current discussions on the conditions under which a new Constitutional Treaty would allow the Commission to adopt implementing measures on technical details are a key to the future of the Lamfalussy Process. The report invites interested parties to send in their views by 7 July 2003 to

These will be taken into account in preparing the Group's next interim report, which will be published this autumn.

The Inter-institutional Monitoring Group was set up by the European Parliament, the Council of Finance Ministers and the European Commission in October 2002. The three Institutions invited this Group to assess the progress made on implementing the Lamfalussy Process, so as to secure a more effective regulatory system for securities markets and identify any possible emerging bottlenecks. To this end, the Group will report twice a year to the Institutions until 2004. It will publish its reports on the Internet.

The members of the group are: Michel Prada (Chairman of the Group, former President of the Commission des Opérations de Bourse, France), Graham Bishop (Rapporteur, consultant for securities markets, United Kingdom), Mario Draghi (Goldman Sachs, former Head of the Italian Treasury), Kari Lotsberg (consultant, former State Secretary in the Swedish Ministry of Finance), Walter Van Gerven (former Advocate General at the Court of Justice and Honorary President of the Belgian Banking Commission), and Norbert Walter (Deutsche Bank, former member of the Committee of Wise Men, chaired by Alexandre Lamfalussy, whose recommendations led to the Lamfalussy process being put in place).

In its first interim report, the Group describes the Lamfalussy Process as it is currently being implemented and sets out criteria for assessing it in the future. It also makes initial observations on progress achieved so far.

The Group would welcome increased use of Regulations, which apply directly in national law, instead of Directives, which must be implemented via national legislation. It also calls in the Report for the European Parliament and the Council to make more use of fast-track procedures allowing adoption of a Commission proposal after a single reading in the European Parliament.

The Report notes concerns about the degree of detail in new EU legislation; but also acknowledges that consultation of the financial markets by the Commission and the Committee of European Securities Regulators (CESR) is improving. With regard to the CESR, the Group recognises the need for better communication in practice, but also recognises the CESR's current heavy workload and the resource implications in this context.

The Group highlights two particular challenges for the immediate future:

  • meeting the deadline of April 2004 set by the European Council for completing new securities markets legislation, such as the Directives on Investment Services (see IP/02/1706 and MEMO/02/257) and on transparency requirements for listed companies (see IP/03/436 and MEMO/03/68). This should be possible if the current momentum is maintained, but it is also essential, since uncompleted initiatives may be lost or delayed due to the European Parliament elections due in 2004;

  • addressing Comitology powers (i.e. powers devolved to the European Commission for adopting implementing measures, which then need to be agreed with the European Securities Committee in which Member States are represented), more particularly the European Parliament´s wish for equivalent so-called 'call-back' powers on an equal footing with the Council a position the Commission supports. A satisfactory solution is a key for the future of the Lamfalussy Process, according to the Group. This will need to be addressed in the ongoing preparation of the Constitutional Treaty by the Convention on the Future of Europe and in the subsequent Inter-governmental Conference.

With a view to its next report scheduled for autumn 2003, the Group invites the public to send comments, in particular on issues such as public consultation, the scope of delegation of implementing measures to be laid down by the Council and by the European Parliament, the use of Regulations or Directives as legal instruments, possible bottlenecks, or any other topics of interest.

Those comments should be sent to


by 7 July 2003 at the latest.


The Lamfalussy Process is centred around 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). This approach aims to allow the EU to respond rapidly and flexibly to developments in financial markets in order to achieve greater market integration and improved competitiveness. The two committees were set up by the European Commission in June 2001 (see IP/01/792 and MEMO/01/213).

The four-level approach works as follows:

  • level 1 consists 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.

  • at level 2, the ESC assists the Commission in adopting detailed technical implementing measures, the nature and extent of which should be decided by Level 1 legislation. The CESR provides technical advice to the Commission on these implementing measures, following a Commission mandate.

  • level 3 measures aim to improve the implementation of EU legislation (Level 1 and 2 acts) in the Member States. The CESR will have particular responsibility for this.

  • at level 4, the Commission will strengthen the enforcement of Community law.

The Monitoring Group's executive summary and its full interim report is available at:

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