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Brussels, 2nd June 2003

Financial services: latest report highlights need to boost EU capital market integration in next nine months

The European Commission has published the eighth and latest progress report on the Financial Services Action Plan (FSAP). The report concludes that the overall financial outlook strengthens the political case for integrating financial services within the EU. Progress towards adopting the necessary legislative measures to create an integrated market remains on the right track. Now that the finishing line is in sight, it is crucially important to complete all the legislative measures and to round off the implementation of the FSAP by 2005. The final cut-off date for the adoption of legislative measures is April 2004, given the European Parliament elections in June 2004 and enlargement. That means a final sustained effort by the Commission, the European Parliament and the Member States' institutions is necessary to reach compromise on the remaining measures. The full text of the Commission's progress report is available at :

Internal Market Commissioner Frits Bolkestein said: "The clock is ticking. We have nine months to deliver the remaining parts of the Financial Services Action Plan. Most of the Commission proposals are on the table: it is now up to the European Parliament and the Member States to ensure that European businesses and consumers can reap the benefits of financial integration. There is a huge economic prize out there estimated at a direct windfall gain of at least 130 billion euros for the financial services sector, not to mention the knock on effects of cheaper capital for Europe's businesses. The end result will be renewed confidence, more economic growth and more jobs. We must not let that slip. "

Main Conclusions of the Eighth Progress Report

Tangible political progress has been made under the Greek Presidency. With 34 of the 42 original measures finalised, Europe is now close to creating a comprehensive framework based on effective single market freedoms and common objectives, implemented using principles-based rules. Some of the vital foundation stones will be put in place in the coming months.

Despite these positive developments, the report also warns of the need to keep up the momentum to implement the FSAP effectively by 2005.

Heads of State and Government at the March European Council (20th and 21st March 2003) set the final cut-off date for the adoption of the legislative proposals of the FSAP as April 2004. This is needed to allow 18 months for Member States to implement the measures. Furthermore, the current European Parliament will complete its final session in April 2004. Legislation which has not been finally adopted by then could be significantly delayed.

Company Law, Corporate Governance and Statutory Audit

Public confidence in financial markets world-wide has deteriorated, resulting in a severe correction in stock market valuations since 2000. The Commission is determined to play an active role in the necessary restoration of public confidence in European financial markets.

This was reflected, in particular, in the adoption of two Communications on 21 May:

  • an Action Plan on Company Law and Corporate Governance (see IP/03/716 and MEMO/03/112) and

  • a set of ten priorities for reinforcing statutory audit (IP/03/715).

These initiatives aim at reinforcing shareholder rights, audit quality and auditor independence. They represent an "extension" of the original FSAP. A work programme over the short, medium and long term is part of this package of proposals, which mix legislative and non-legislative initiatives.

In presenting the statutory audit priorities, Mr Bolkestein made clear that the Commission, with the full support of Member States, would continue its intense regulatory dialogue with the US authorities over the extra-territorial effects on EU audit firms of the US Sarbanes-Oxley Act. Solutions must be found which avoid imposing double regulation on business already adequately regulated in the EU.

Recent steps forward

The Report sets out recent successes in moving the FSAP towards completion. In December 2002, the Market Abuse Directive was adopted (see IP/02/1789), followed in May 2003 by adoption of the Pension Funds Directive (see IP/03/669) and the amended 4th and 7th Company Law Directives (see IP/03/638).

Meanwhile, in January, political agreement was reached in the Council on the Directive on Taxation of Savings Income (as part of a broader tax-package) (see MEMO/03/13). In March the Council reached a common position on the Prospectus Directive, following its political agreement in November 2002 (see IP02/1607).

The Commission presented in March 2003 a proposal for a Directive on transparency for listed companies (see IP/03/436 and MEMO/03/68). The proposed Directive would increase the frequency and content of interim reporting (in particular quarterly reporting) by listed companies, without imposing excessive administrative burdens.

Looking ahead

In the coming months, the Commission will present the remaining measures of the FSAP. The Council and European Parliament are strongly urged to speedily adopt the proposals already issued on prospectuses, the taxation of savings income, takeover bids, transparency of listed companies and on the revision of the Investment Services Directive. The case for completing the FSAP remains as strong as ever:

  • the FSAP will reinforce financial stability and market integrity;

  • it is paving the way for a framework for the implementation and enforcement of common EU financial legislation;

  • it must ensure that the new additional markets after enlargement will be absorbed smoothly into the EU regulatory system.

Therefore, at present, the emphasis must remain firmly on delivering and implementing all agreed measures.

The Commission does not intend to come forward with a complete new programme of measures in the area of financial services in the short term, but is working on two broad policy goals, where over the coming years more work is needed:

  • common implementation and enforcement, inter alia by developing networks of financial regulators and supervisors;

  • the global dimension of the European financial market, in particular relations with the United States.


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.

Research conducted for the Commission (see IP/02/1649) predicted that the integration of EU financial markets will bring significant benefits to businesses, investors and consumers. Conservative estimates from the research predict that EU-wide real GDP will directly 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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