Brussels, 11 May 1999
Financial services: Commission outlines Action Plan for single financial market
A series of policy objectives and specific measures to improve the Single Market for financial services over the next five years have been outlined in an Action Plan just adopted by the European Commission. The Action Plan suggests indicative priorities and time-scales for legislative and other measures to tackle three strategic objectives, namely ensuring a Single Market for wholesale financial services, open and secure retail markets and state-of-the-art prudential rules and supervision. The Action Plan also calls for the adoption before the end of 1999 by the Council of Ministers and the European Parliament of proposed Directives on collective investment undertakings (see IP/98/673), distance selling of financial services (see IP/98/891) and electronic money (see IP/98/727). It has been presented in response to urgent requests from the European Council, the current Presidency of the Council of Ministers and two European Parliament Committees (Legal Affairs and Economic and Monetary). It builds upon the Framework for Action presented by the Commission in October 1998 (see IP/98/941) and the deliberations of the Financial Services Policy Group (personal representatives of Finance Ministers who met under the chairmanship of Financial Services Commissioner Mario Monti from January to March 1999).
"It is crucial that the Single Market for financial services delivers its full potential for consumers, in terms of a broad range of safe, competitive products, and for industry, in terms inter alia of easier access to a single deep and liquid market for investment capital, as well as for financial service operators themselves", commented Financial Services Commissioner Mario Monti. "I am confident that implementation of this Action Plan will be accorded the highest political priority because of a new awareness of the huge potential benefits the single financial market offers. This awareness stems notably from the introduction of the euro, the gathering pace of restructuring in the financial services sector and greater understanding of the need to take account of consumers' concerns."
Completing a single wholesale market
Market-driven modernisation of securities and derivatives markets of the European Union (EU) (such as closer relationships between different exchanges and improve payment and securities settlement systems), spurred by the introduction of the euro, are already making it easier to issue and trade securities across the EU.
This brings the potential to generate significant benefits in terms of liquidity, risk-spreading and the emergence of viable risk-capital markets (as an attractive alternative to debt-financing for SMEs). Carefully targeted EU regulatory measures can encourage and facilitate these market-driven improvements. EU action envisaged would focus on:
Developing open and secure markets for retail financial services
Consumers wishing to shop around for basic financial services, particularly with the spread of electronic commerce and other methods of distance selling, are likely to be frustrated by an array of legal, administrative and private law obstacles which hamper the cross-border purchasing or provision of these services (e.g. single bank account, mortgage credit). The Communication identifies a number of pragmatic steps that could be undertaken to realise this objective. These steps would focus on:- promoting enhanced information, transparency and security for cross-border provision of retail financial services (inter alia proposed Directive on distance selling of financial services, Recommendation on mortgage credit information, proposed Directive on insurance intermediaries, Action Plan to prevent counterfeiting and fraud in payment systems)
Ensuring the continued stability of EU financial markets
EU regulatory safeguards need to keep pace with new sources of financial risk and state-of the-art supervisory practice in order to contain systemic or institutional risk (e.g. capital adequacy, solvency margins for insurance) and take account of changing market realities (where institutions are organised on a pan-European, cross-sectoral basis). Suggested measures include:
Eliminating tax obstacles to financial market integration
The Action Plan also addresses broader issues concerning an optimal single financial market, including the elimination of tax obstacles and distortions. The Commission considers that it would be technically unbalanced and politically difficult to boost the full realisation of a Single Market for financial services unless the parallel process of tax-coordination currently under way delivers the expected results. The Action Plan therefore underlines the need for adoption of the proposed Directive on minimum effective taxation of cross-border income from savings and implementation of the December 1997 Code of Conduct on business taxation. The Commission will also present a proposal for a Directive to coordinate tax arrangements governing supplementary pensions and will further examine with the Member States (within the Taxation Policy Group) ways to eliminate tax distortions on cross-border financial products (insurance and pension funds).
The full text of the Communication is available for downloading from the Europa Internet site: http://ec.europa.eu/dg15