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Speech - The G20 must remain committed to global implementation of financial reforms

Commission Européenne - SPEECH/13/699   13/09/2013

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European Commission

Michel BARNIER

Member of the European Commission, responsible for Internal Market and Services

The G20 must remain committed to global implementation of financial reforms

Eurofi Financial Forum

Vilnius, 13 September 2013

Mr. De Larosière,

Ladies and Gentlemen,

Five years ago, on 13 September 2008, some of you here in this room were probably in Nice for the informal Ecofin. It is precisely on that day in the United States that things were hotting up, in the run up to Lehman's collapse.

How many of us then foresaw the tsunami that was about to be unleashed?

To contain this tsunami, and learn the lessons from the weaknesses which were exposed, G20 partners committed to a series of reforms.

You have heard about those reforms many times before. They have been my roadmap since my first day's work as European Commissioner in February 2010.

But it's worth repeating, because these reforms are not minor. And because there is still a long way to go.

Stronger capital rules for banks. Suitable resolution tools. New regulation of derivatives. Stricter rules on how financial market players are rewarded. Increased supervision and reduced reliance on credit rating agencies. Greater transparency in the markets. Increased consumer protection.

And importantly, we have also agreed on a system of global governance. To ensure that the agreed reforms are implemented effectively and consistently around the globe.

This is not an easy task. But for me, this implementation check is crucially important. In this context, I am pleased that the St. Petersburg summit, a couple of days ago, again took stock of global progress.

Because we are making progress.

5 years after the collapse of Lehman Brothers, the financial markets are in a better and safer place than before.

On the 30th of August, the Basel Committee issued a positive report on the implementation of Basel III, with 25 out of 27 jurisdictions in the world having rules in place. Of course, this includes the EU.

In fact, as you have been hearing over the last day and a half, the European Union has been at the forefront of translating the G20 commitments into law.

The Commission has now proposed all the main pieces of legislation.

And many texts are already in force:

I think of EMIR, the Short-selling Regulation, the latest revision of the rules on credit rating agencies and our rules on alternative investment funds.

Other key legal texts, like the CRD 4 and the Single Supervisory Mechanism, are due to come into force very soon. And the Bank Recovery and Resolution Directive is expected to be adopted later this year. That will be an important step for the EU in implementing the Financial Stability Board’s Key Attributes of effective resolution regimes.

And with the SRM, the Single Resolution Mechanism, we will complete the Banking Union in the coming months. Breaking the detrimental link between sovereigns and their banks.

Avoiding further massive public bail-outs of banks.

Just last week, we presented proposals to regulate money market funds. And a roadmap to address the risks inherent in shadow banking. Let me remind you that the shadow market in Europe represents 23 trillion Euros.

These proposals now need to be voted by the legislators.

With parliamentary elections in May next year, it is no secret that the agenda is challenging.

We cannot afford to be complacent.

Legal proposals, and even implemented laws, are only one part of the story.

We have a duty to ensure that the rules we introduce in our respective jurisdictions work well together.

Since 2008, all of the G20 partners have been committed to international cooperation. To addressing outstanding cross-border issues. To making sure that financial reforms are consistent. And to avoiding the fragmentation of global financial markets.

Part of this cooperation entails making efforts to overcome conflicts. Fill gaps. And do away with inconsistencies and duplications.

I spoke about this issue at this conference already one year ago.

Reality is, we are not yet there.

As regards OTC derivatives, the European Commission and the US Commodities and Futures Trading Commission reached agreement recently on how to approach cross-border derivatives. This was a big step forward.

This is a complex issue and there is still work to do. We still need to work together to find a solution for meaningful temporary relief for EU venues from US SEF rules. More broadly, I would still invite other countries to join this approach to make sure that the G20 commitments are applied in a sensible yet rigorous way.

And we must go beyond a single agreement for a single area. That's why I believe that including financial services in the TTIP would be useful.

There needs to be global cooperation in a variety of other areas. On the effective convergence of international accounting standards. On implementing a global system of legal entity identifiers. On closing the last of the data gaps. On fighting non-cooperative jurisdictions and tax evasion.

And on coordinating our approaches in reforming how financial benchmarks are set.

Speaking of financial benchmarks, the Commission will make a proposal next week, regulating these vital instruments. Our proposal will be in line with IOSCO’s principles published in July, establishing rules on good governance and transparency.

I have listened carefully to stakeholders, ensuring that the rules are proportionate. Taking into account the specificities of different indices and benchmarks, including commodity benchmarks.

Ladies and Gentlemen,

As a final point - I think we all acknowledge that the current measures for the banking sector, although demanding, are not enough.

Additional reforms to address the structure of banks are necessary. Structural reforms to reduce the intra-group complexity and connectedness of large banking groups will usefully complement policy measures in place.

But we need to get the balance right.

Preserving the diversity in the EU's banking landscape. I will not forget that banks in Europe finance three quarters of the real economy.

I will come forward with a proposal this autumn.

Ladies and Gentlemen,

To conclude, let me reiterate my main message:

All G20 jurisdictions, including the EU, must remain committed to the timely, full and consistent implementation of agreed policies.

Only then will we create a stable and integrated global financial system. Only then will we be able to prevent – or at least mitigate - future crises. Only then will we finally enable the financial sector to play its central role in supporting the economy and growth.

Financial reform remains a key plank of the G20 agenda.

Well-regulated financial markets drive the dynamism, innovation, and entrepreneurship that we all need for sustainable economic growth. And the framework for sustained and permanent international cooperation must be maintained and further developed.

The Commission stands ready to continue playing its role in this context and let me conclude that it is only on the basis of a healthy financial sector that our initiatives for growth and to relaunch the single market are likely to succeed: the patent and innovative policies, e-commerce and of course, the telecoms package proposed this week.

Thank you.


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