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Brussels, 26th November 2001

Financial Services Policy Group discusses progress in implementing the Action Plan for Financial Services and the impact of the events in US on financial services policy

The 13th meeting of the Financial Services Policy Group, comprising personal representatives of EU Finance Ministers, took place on 22 November in Brussels under the chairmanship of Internal Market Commissioner Frits Bolkestein and Director General John Mogg. The Group concentrated on the Giovannini Report on clearing and settlement, a final report by the Belgian Council Presidency and an oral report by the forthcoming Spanish Presidency, the Fifth Progress Report on the Financial Services Action Plan, and the impact of 11 September on financial services policy.

The FSPG meets regularly to forge consensus between national ministries involved in financial services regulation and to review progress on the implementation of the Financial Services Action Plan (FSAP). The FSAP was endorsed by the Cologne European Council in June 1999 and at the Lisbon European Council in March 2000. The Stockholm European Council strongly reaffirmed the importance of implementing the Action Plan by 2005 and set the new deadline of 2003 for the full integration of the European Securities markets.

The Giovannini Report on Clearing and Settlement

Clearing and settlement of securities transactions is attracting ever more interest and has been discussed in recent FSPG meetings. The issue of competition in this field was raised in the report of the Wise Men chaired by Alexandre Lamfalussy and is being investigated by the Commission services. In parallel the Commission is considering how best to update the Investment Services Directive and ensure access to markets.

At this FSPG meeting Dr. Alberto Giovannini presented the main conclusions on the first report of the Giovannini Group on Cross-Border Clearing and Settlement Arrangements in the European Union (see also IP/01/1654). The objectives of the report are to assess the current arrangements for cross-border clearing and settlement and to identify the main sources of inefficiency.

The Report concludes that fragmentation in EU clearing and settlement complicates cross-border securities transactions. Complications arise because of the need to access many national systems, whereby differences in technical requirements/market practices, tax regimes and legal systems act as barriers. The efficiency could be significantly improved by market-led convergence in some of the technical requirements/market practices across national systems. On the other hand the Report notes that removal of barriers related to taxation and legal certainty is the responsibility of the public sector.

The extent of the inefficiency that is created by these barriers is reflected in higher costs to cross-border investments. FSPG discussed the conclusions.

The Commission will draw on the information in this Report in preparing its Communication on clearing and settlement, which will be issued early next year. A second report of the Giovannini Group, scheduled for mid 2002, will focus on policy aspects and examine some of the possible models to deliver more efficient clearing and settlement in the EU.

Reports by the Belgian Council Presidency and the incoming Spanish Presidency

The implementation of the Financial Services Action Plan has taken an important step forward under the Belgian Presidency.

The European Company Statute and the second Money Laundering Directive have been formally adopted. Adoption of the two UCITS and the Insurance Solvency Margin Directives is imminent. A political agreement has been reached in Council on the Distance Marketing Directive and political agreements in Council are within reach on Market Abuse, Collateral and Insurance Intermediaries. Good progress has been made on the proposed Directives on Financial Conglomerates and Prospectuses, and on the proposed Regulations on International Accounting Standards and on Reducing Bank Charges for Cross-Border Payments in euro.

This progress is a result of 50 meetings in Council working groups and 16 meetings with the European Parliament.

The Spanish Presidency will continue to seek rapid progress on all of the FSAP measures under discussion in the Council.

The Fifth Progress Report on the Financial Services Action Plan

The Fifth Progress Report on the Financial Services Action Plan will be presented by the Commission to the 14 December Council of Finance Ministers. The draft report argues that the case for an integrated financial market is stronger than ever. Structural reform to meet the Lisbon goal of integrated financial markets is thus needed to counter the economic slowdown and shield against financial instability. It is needed to strengthen the fight against money laundering and the financing of terrorism. And it is needed to enable EU citizens and businesses to reap the full benefits of the euro.

Important progress in the implementation of the Action Plan reflecting the encouraging report from the Belgian Council Presidency is being made. By mid December some 25 of 42 Action Plan measures will have been completed. But concerns remain on the pace of delivery in Council and the European Parliament. The extremely challenging agenda for next year under the Spanish and Danish Presidencies calls for the adoption of 10 legislative acts during 2002.

Impact of 11 September on financial services policy

The FSPG continued the discussions from the last meeting (20 September) on the consequences of the 11 September attacks for financial services policy.

FSPG discussed the general economic impact as well as the effects on the financial sub-sectors: banking, insurance and securities.

FSPG agreed that although uncertainty remains about the full impact of 11 September on the financial sector, overall the markets are withstanding the resulting strains well. Regulators, supervisors and policymakers have responded rapidly by addressing financial stability issues and the financing of terrorism. The political declarations of the European Council and the 16th October Finance/Justice Council (see MEMO/01/330) now need to be implemented in time.

FSPG underlined that continued attention must be paid to the developments in the insurance sector, in preventing money laundering and the financing of terrorism. FSPG expressed a desire to revert rapidly to market based solutions in aviation insurance, which is currently being partially publicly subsidised.

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