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Member of the European Commission, responsible for Internal Market and Services
European financial regulation: time for delivery
Conference on Financial Regulation and the Dynamics of Saving and Investment Markets
Cumberland Lodge, London - 4 November 2011
Ladies and gentlemen,
I am very pleased to be with you today. And I would like to thank you for inviting me.
These are difficult times.
As our global leaders meet in Cannes, we are all acutely aware of how big and deep the crisis we are facing still is. And its multiple facets. Which are all interdependent.
Like you, I hope today’s summit can conclude on long lasting measures which will bring back stability. Stability which is essential for a return to long term growth.
The largely peaceful protests by anti-capitalists – in London and across the world – should not be underestimated. They highlight that if we don’t get change right, the situation could quickly turn.
Despite the ups and downs of recent months, the fact is that we are making progress. We are demonstrating our determination to overcome together the current difficulties. And to take all the necessary steps towards a deeper economic union: it is the only solution if we want to keep our monetary union.
But our task is not only to deal with immediate crises. We must not lose sight of the financial regulation agenda. Because we need financial services back at the service of the real economy. And because we cannot afford another crisis like this one.
This agenda for financial stability was decided by the G20 members. And the EU played a key role in the G20 advocating it.
Now is the time for delivery. We only have a small window of opportunity.
We need to get down to the hard work of finalising technical details and making the new framework work.
If we don’t, lending to the real economy will slow. The already fragile recovery will stutter to a grinding halt. With catastrophic consequences on employment.
I – Where do we stand on financial regulation?
The three new European supervisory authorities for banks, financial markets and insurance and pensions started working on the 1st of January.
Beyond supervision, our agenda aims to achieve four main objectives:
1. First objective: reinforcing stability and improving the governance of financial institutions
For banks, we proposed in July to increase capital and liquidity requirements in compliance with Basel III.
Capital requirements will also become stricter, more precise and more risk-sensitive for insurance, with the "Solvency II" directive taking effect in 2013.
Measures were also agreed for hedge funds who will now be obliged to act in a more transparent way.
On credit rating agencies, our first regulation did not go far enough. In a few weeks, we will table a proposal addressing outstanding issues: over-reliance on ratings, conflicts of interest, the lack of competition and the specificities of rating sovereign debts.
2. Second objective: improving financial markets' effectiveness, integrity and transparency
A few weeks ago, we finally agreed on new rules for short-selling and credit default swaps.
I also hope there will be a final agreement to increase transparency on OTC derivatives. A market that is huge – but largely hidden – accounting for 600,000 billion euro a year.
We tabled a few days ago a proposal to revise the Markets in Financial Instruments directive (MiFID). Our proposal will regulate new trading venues and technological developments, such as high frequency trading. It will also address excessive price volatility in commodity derivatives markets, an issue that is being discussed in Cannes today.
Finally, our new proposals on Market Abuse will help better prevent, detect and punish market manipulation and insider dealing.
3. Third objective: restoring confidence in the financial sector by enhancing consumers' and investors' protection
On this, let me mention briefly 5 initiatives:
Together, these measures will hope restore trust in financial services that consumers and investors have completely lost.
4. Last objective: a framework for crisis resolution in Europe.
This is perhaps the most important piece of the jigsaw puzzle.
Since 2008, Member States have massively supported the banks. 4,600 billion euro have been committed to the financial sector, either through direct funding or guarantees.
But the financial sector can no longer be underwritten by taxpayers.
Taxpayers cannot and should not have to tolerate such a burden again.
Our new framework will equip supervisory authorities with the tools to prevent and manage banking crises.
Ladies and Gentlemen,
One last word to remind you that financial regulation alone is not enough. I also have responsibility for the Single Market. And there are real opportunities there for more growth. The UK economy’s trade with the EU remains multiples higher than with the USA or any other trading partner
But to exploit this potential, the economy needs to be based on a sound and healthy financial system.
I am confident our new rules will allow the financial sector to once again fulfil its role of financing the real economy.
On all these issues, I am fully aware of the criticisms I face. “You’re undermining the City of London’s competitiveness.” “You’re trying to promote Paris and Frankfurt over London”.
All this is nonsense.
I’ve repeated this many times before and will do so again.
I also hear a great deal about concerns we are undermining the single market for financial services. This is also untrue.
If anyone has done well out of the single market for financial services, it is the UK.
And I hope the UK, and the City in particular, will continue to do well out of it. It’s in all our interests.
You can count on the European Commission to uphold a Single Market for all 27 Member States, whether in or out of the Eurozone.
A real single market means a European framework and common European supervisory standards.
On which note, I thank you and look forward to your questions.