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Charlie McCREEVY

European Commissioner for Internal Market and Services

The Commission Policy on Mortgage Credit

Keynote speech at Public Hearing on Mortgage Credit hosted by the European Commission
Brussels, 7 December 2005

Good afternoon ladies and gentlemen

It falls to me now to deliver the closing address at this public Hearing on Mortgage Credit, hosted by my services.

I would like to start by thanking you all for attending the Hearing. As my Director General has said already at the launch this morning, we are delighted to see here today so many stakeholders representing a wide variety of interests in the mortgage credit market, from throughout the EU and even further afield.

Today is a landmark in the development of Commission policy on mortgage credit.

We have travelled a long way since the Commission demonstrated its awareness of the central role of the EU mortgage markets by initiating and facilitating the dialogue between lender and consumer representative bodies, which led to the adoption of the Voluntary Code of Conduct on Pre-Contractual Information on Home Loans back in 2001.

Further opening up and integration of Europe's financial markets will reinvigorate the European economy. This places the single market project at the heart of the EU's drive for increased growth and prosperity under the Lisbon agenda. Our work in the wholesale sector is advanced thanks to the achievements of the Financial Services Action Plan. It is with this in mind that we have turned our attention to retail financial services markets. As we have signalled in our White Paper on our Financial Services Policy for 2005-2010 published just this week, retail financial services are the next frontier in the single market project. And our consideration of the EU mortgage credit market is a flagship in the retail financial services agenda.

This does not mean that we are unaware of the challenges that we face in any action to integrate retail financial services markets. Product characteristics, distribution systems, differences in consumption culture and indeed other economic and structural realities, play a much more prominent role in the retail sector than in the wholesale sector.

Our role must be to identify in a targeted and considered way where those challenges should be faced head-on, that is, to identify where action to integrate EU retail financial services markets promises to deliver clear benefits to EU consumers, EU industry, and to the EU economy as a whole.

That is the background against which we have been carrying out our assessment of the case for Commission intervention in the EU mortgage credit market. And that is why our assessment is designed to address the central question - Is the Internal Market functioning well here, or is there scope for Commission action to make the EU mortgage market more competitive and to increase choice and value for consumers?

We have launched an extensive consultation to help us to answer this question. This consultation has been on-going, wide-ranging and transparent, epitomising our approach to considering potential new initiatives to integrate retail financial services markets.

Now that we have reached the end of this phase of our consultation process, it falls to us, the Commission, to carefully review all input we have received in order to decide if we should propose initiatives in the EU mortgage credit market and what form those initiatives should take.

As it is only a matter of days since the conclusion of the consultation on the Green Paper, it is too early in our review to draw any firm conclusions. However, certain themes have emerged already.

  • Many of the consultation responses have focussed on the importance of more pan-European mortgage funding activity. In the Green Paper, we announced our intention to create an expert market participants group to advise us on the promotion of a pan-European mortgage funding market. We intend to establish this group as soon as we have had the opportunity to review all input received during the consultation on this initiative.
  • The consultation responses demonstrate also that the Commission has a valuable role to play ensuring that there is a level playing field between domestic lenders and foreign lenders. Thus we are asked to improve access of lenders to information held in other countries on potential borrowers’ credit histories, on property valuations and on land registers.
  • Consumer protection issues have attracted much attention in the consultation responses. It is clear that European standards in the areas of consumer information, early repayment fees and the calculation of the annual percentage rate of charge applicable to mortgage loans, are regarded by many as necessary to ensure transparency and comparability for consumers shopping around for the best mortgage deal. How such standards should be introduced and respected, are matters on which there is some disagreement.
  • This can be seen in the differing views that we have received on the future of the Code of Conduct on Pre-Contractual Information on Home Loans. What is clear as regards the Code of Conduct, is that now, almost five years after it was adopted, the time is ripe to review its content and compliance mechanisms.

I have given you a flavour of some of the themes emerging from the many and varied responses we have received to our Green Paper. Rest assured that we will study carefully each and every individual response, before coming to any conclusions on Commission action. We are well aware that the EU mortgage credit market is a complex market, involving many varied areas of law and policy. As such, any initiatives we propose could take many forms, not necessarily legislative, and we will certainly explore all options open to us. Equally, we are well aware given the many areas in which initiatives could eventually be proposed, that we will have to ensure that any forthcoming work in this area is carefully focussed and prioritised, in order to achieve maximum benefits for all stakeholders, with the minimum level of burden on business.

This is fully in line with the Better Regulation agenda, to which, as you know, I have a strong personal commitment. Our recent White Paper on Financial Services Policy makes it clear beyond doubt that while we remain firmly committed to the single market project, this does not entail pursuing integration for its own sake. Any action to be taken must promise clear benefits for all stakeholders, over and above any regulatory burden. In addition, our consideration of potential new initiatives will continue to be underpinned by transparent consultation, cost/benefit analysis and rigorous impact assessments.

Moving forward, any initiatives we propose will be in a White Paper to be issued by the middle of next year. And I can assure you today, that we will make no proposals unless I am convinced that they will have the effect of increasing competition, efficiency and choice in the EU mortgage credit market, thereby supporting our endeavours to achieve the objectives of the Lisbon agenda, and, ultimately, to increase the global competitiveness of the EU.

In conclusion, I congratulate you on the quality of the discussions today. You have, without doubt, made full use of the opportunity presented by today's Hearing to make an invaluable contribution to the development of Commission policy on action in the EU mortgage credit market.

Thank you for your attention.

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