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[Check Against Delivery]
Member of the European Commission, responsible for Internal Market and Services
The challenge of implementing market regulations consistently at the global level
Keynote introductory remarks, Eurofi Financial Forum
Milan, 12 September 2014
Good afternoon ladies and gentlemen. Many thanks to you Jacques de Larosière for inviting me once again to this Forum, perhaps for the last time.
At the Copenhagen Eurofi conference in 2012, I spoke about global convergence in financial services.
Two and a half years on, at the start of a new parliamentary term, and with - in a few weeks - a new Commission, where do we stand?
Today, the objectives of global convergence and deference to other jurisdictions are broadly shared. Because that is the only sensible way forward. If we want efficient financial markets to sustain growth and jobs, then global regulators must cooperate, trust and rely on each other.
Today, the EU legislative framework to implement G20 commitments is broadly in place, and the concept of third country equivalence is enshrined in it.
Now, we need to deliver on implementation. How rules work in practice on the ground.
Because that's what will allow us to reap the benefits of global convergence.
My message is simple: we must ensure rules are applied in a consistent and coherent way.
This is particularly true for the EU and the US, the markets of which are so closely interlinked - that is why it is a good sign that Michael Pedroni from the Treasury is on the Panel today. But this is also true for emerging financial centres such as Hong Kong – and I want to greet Ashley Alders, CEO of the Hong Kong Securities and Futures Commission.
Ladies and Gentlemen,
We have come a long way.
Capital requirements for banks have been strengthened around the world. We are now waiting for the results of the AQR. I don't need to remind you how important this exercise is.
The trading and clearing of derivatives has been made more secure and more transparent.
And on both sides of the Atlantic we have carried out reforms to end “too big to fail” banks. But there is still work to be done to deal with the structure of the biggest banks – banks which are not only too big to fail, but also too costly to save and too complex to resolve. We must continue to work and to act on shadow banking in a spirit of cooperation and convergence.
And we need to go further along this way when it comes to applying new rules to cross-border activities. Let me mention the five key challenges.
1. I have already mentioned derivatives.
The Path Forward, agreed in July 2013, sets the foundations, both for the EMiR and the MiFID rules. We are now in near daily discussions with the CFTC and its Chairman Tim Massad on the details. Let me reassure you: We want to find practical solutions in the coming weeks. It takes two to tango. The American side must also deliver.
2. Another area where the cross-border angle needs to be taken into account is bank resolution.
The FSB’s work on loss absorbency [GLAC] is an important element. But we need to do more: we need a true cooperation framework for cross-border resolution.
Again, our objective must be deference to each other's rules. Not making foreign banks subject to double requirements.
3. Securitisation also needs looking at. We need common global standards for sound and simple securitisations. If we get this right, I am sure there is real potential for increased growth.
4. On international financial reporting standards – IFRS – I am much more pessimistic. The prospects that these standards will be used by all major jurisdictions are even dimmer today than in past years, despite our efforts and the time I spent in IASB meetings. This remains an issue of major concern.
5. And finally, we need to converge regulation and supervision of the global insurance sector. Initially, and most importantly, by addressing the issue of reinsurance collateral.
Ladies and Gentlemen,
If we are to make progress in all of these areas, we need to do the talking where it can be the most effective.
Both in multilateral fora – such as IOSCO, represented by Chair Greg Medcraft today - and in bilateral talks.
We engage extensively in multilateral talks.
But I believe we could have even greater impact if we improved our coordination within the EU. So that we speak more systematically with a single voice. This is one of my messages to the new European leaders.
Bilaterally, we will continue with our useful regulatory dialogues with key international partners.
But experience has shown that these dialogues have their limits.
That is why the EU is pushing to include financial regulatory cooperation in the TTIP.
We want to put in place a transparent, accountable and rules-based process.
One that would commit the EU and the US to work together.
I am sure that the new Commissioners responsible for trade and financial services, Cecilia Malmström and Jonathan Hill, once confirmed by the European Parliament, will be able to convince our American partners that this approach will not lower standards but will achieve greater financial stability and a more efficient framework.
Ladies and gentlemen,
Consistent implementation of our rules will remain work-in-progress for the coming years.
I will certainly continue to work for increased trust between regulatory communities and workable common solutions until the last day of my mandate.
I count on you to do the same and to pursue that work in years to come in your roles as members of parliament, governments, regulators, supervisors and market participants.