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Mr Frits Bolkestein
Member of the European Commission in charge of the Internal Market and Taxation
"The Financial Services Action Plan"
Press conference with Romano Prodi, President of the European Commission
Brussels, 3rd June 2002
As the President said, financial integration is central to European economic reform.
So I am delighted that the latest progress report on the Action Plan concludes that there has been "real and tangible progress". But, as it also says, "significant challenges" remain. This is a marathon, not a sprint.
Integrating financial markets and breaking down barriers means new opportunities. It means a single set of rules where once there were 15. It means the chance for financial service providers to expand their markets. The chance for business to raise cheaper finance. For consumers to get better value in home loans and pensions.
But the single set of rules must be as watertight as we can make it. We will not tolerate investors being taken for a ride by those who enjoy being reckless with other people's money.
The Financial Services Action Plan is about setting free respectable market operators. And reining back the less scrupulous and the incompetent.
In the last three weeks alone, the Commission has brought forward four important new financial initiatives. Separate press releases are available outside.
First, we are launching a new consultation on clearing and settlement: the key infrastructure, the nuts and bolts of securities markets. Depending on the results, we may bring forward further proposals to oil the wheels of cross-border securities transactions.
What is all this about? Eliminating legal barriers, defining standards for clearing and settlement and ensuring fair competition. And in the end, reducing the costs of trading securities, improving market efficiency and boosting investment and growth. We cannot continue to tolerate a situation where cross-border clearing and settlement in the EU costs many times more than finalising similar transactions in the US.
The second initiative I want to mention is our proposal to amend the First Company Law Directive. This will allow companies to file statutory documents electronically. It will improve public access to company information. All this is part of our drive for modern, better, simpler regulation. So is our existing proposal to simplify the Life Assurance Directives. The Council has just adopted a common position on that.
The third and fourth recent initiatives I want to mention are about tightening rules to improve protection against fraud and malpractice.
The third one, the Recommendation on Auditor Independence aims to prevent the sort of conflicts of interest prominent in the Enron affair. I have already spoken about it in the pressroom.
The fourth proposal is for Amendments to the Accounting Directives. These are needed so that even for companies where International Accounting Standards IAS - do not apply, Member States can move towards similar, high quality financial reporting. If small companies can use IAS, they will find it much easier to get access to stock markets should they decide to become listed.
IAS are the best standards that exist. I am delighted that the Council is due to adopt this week, in a single reading, the Regulation requiring all listed companies to use them from 2005. The IAS regulation would have been adopted tomorrow, but there is now a slight delay. We can wait a couple of days for the IAS Regulation - it is after all a major breakthrough for the Union.
These accounting and auditing measures were already in preparation long before the Enron affair broke. But they are part of making sure Enron cannot happen here. By making sure accounts are reliable. Through more transparency. By requiring fuller disclosure for investors.
That leads me on to sterling work done by the Spanish Presidency on the proposed Directive on pension funds. I am delighted that there are good prospects for progress at tomorrow's Council. The Directive will reinforce protection for pensioners' and ultimately bring them better returns. Provision for old age is vital for all our citizens. It is also one of the most challenging long term economic issues Europe faces.
The Pension Funds Directive is one of the eight Action Plan measures the Barcelona European Council wanted to see completed this year. The progress report shows strong grounds for optimism on most of them.
But not everything in the garden is rosy. Prospectuses remain problematic. I fervently hope that the Spanish Presidency's efforts will lay the foundations for an agreement before the end of the year. European companies want to raise capital and have access to investors across the Union without having to comply with 15 different sets of legislation.
As well as making sure we meet the Barcelona deadlines, we will need a renewed effort on Take-over Bids. The Commission will bring forward a new proposal, taking into account recommendations from our High Level Group of Company Law Experts, within the next month or so. I look forward to the press conference on this one.
All this is not just about adopting legislation on time. It is about good legislation. We want to work with the flow of the markets, and with regulators and consumers. That is why we undertake extensive consultation on all our proposals.
For example, our second major consultation on possible revisions to the Investment Services Directive finished last week. A proposal for a Directive will follow before the end of this year. This new culture of open consultation is already resulting in better policy making.
Romano Prodi referred to the importance of the financial sector for the EU's international role. During my visit to the US last week my message to the US administration and to the Financial Services industry was that the EU is determined to deliver on the Action Plan and that it will lead to an open, liberal and non-discriminatory market for financial services. The potential benefits of this for the EU and the US are huge: a transatlantic securities market of 700 million people. This is a win-win situation: both the EU and the US have everything to gain from a healthy EU capital market.
The US supports our efforts and there is a good deal of common ground. I met Deputy Treasury Secretary Kenneth Dam, SEC Chairman Harvey Pitt and Vice-Chairman and Governor of the Federal Reserve Board, Roger Ferguson. We agreed that we should pursue our discussions on financial services regulatory issues so that the EU and the US can indeed seize the prize of a transatlantic securities market.
Before I finish, a brief mention of a financial measure the Commission will be adopting in the next few days. Our proposal for a Fifth Motor Insurance Directive will directly affect millions of Europeans. It will make it easier to insure vehicles for a temporary stay in another Member State.
Easier to buy a car in another Member State. Easier to change insurance provider, creating more competition. And it will ensure better protection for pedestrians and cyclists.
Let me conclude by saying again that there is a new sense of urgency on the Financial Services Action Plan. As the President has said, more and more people are behind us in our firm belief that the best way to ensure market confidence and boost our economy is to deliver quickly on our commitment to structural reform and on the Lisbon agenda.
To use a topical analogy, we are still a long way from lifting the cup. But more than ever, everyone involved, at political level and beyond is playing as a team and we are putting together a run of good results. You might say we are in the quarterfinals.