Select Committee on Treasury Written Evidence

Letter to the Clerk of the Committee and memorandum submitted by the Corporation of London

  As you correctly identified in your email, the Corporation have taken, and continue to take, a keen interest in the EU and Financial Services particularly in relation to the implementation of the Financial Services Action Plan. To this end the Corporation have sought to contribute to the evolving debate in this area and in June 2003, submitted a memorandum to the House of Lords European Union Sub-Committee B inquiry on the Financial Services Action Plan. No doubt you will be already aware of this memorandum and the Corporation's position as set out in that paper remains largely unchanged.

  More recently the Corporation has voiced its concerns on the implementation of EU legislation having responded to both the "Bellis Report" published by the Foreign Secretary last year, and the Modernisation Committee's inquiry into the Scrutiny of European Matters in the House of Commons. So far as the City goes, there is a concern that the simplest approach is not always adopted when subordinate legislation is framed and this has the potential of reducing the City's competitiveness in the Single Market. There is certainly an argument for greater parliamentary oversight of both the formation of EU legislation and its implementation insofar as financial services are concerned.

  You may also be interested to know that the Corporation have also responded in more technical detail to the European Commission's FSAP Stocktaking exercise. Although formally submitted by the Corporation the comments reflect widespread consultation with a broad range of City practitioners and trade associations.

  Further work is currently being undertaken in this area and I think you have a copy of the recent work commissioned by the Corporation from the European Policy Forum. I will certainly ensure you get a copy of future research.

The Remembrancer

Corporation of London



  1.  We support the main thrust of the four sectoral expert forum group reports, as summarised below.

  2.  There is a need for caution in proposing new legislation beyond that already announced, especially those items stressed as priorities in our separate responses on the individual sectoral reports; all sectors are concerned by the burden of the rising tide of EU legislation.

  3.  The quality of legislation matters more than speed.

  4.  It is premature to assess the impact of FSAP but the Commission should monitor closely its implementation and should not hesitate to initiate remedial action using all appropriate means including enforcement of competition policy.

  5.  The Lamfalussy process must be given time to bed down.

  6.  Retail markets will retain national characteristics, beyond the scope of legislation, for some time; but discrimination against foreign EU suppliers, whether cross border or via local branch operations, resulting from public policy is unacceptable.

  7.  Consistent implementation and enforcement is essential; requiring appropriate priority in the allocation of [existing] Commission staff posts.

  8.  Non-legislative solutions should be sought wherever possible.

  9.  Any legislation should be based on clear principles and objectives, prior consultation with those affected with reasons given for Commission decisions, its benefits should exceed its costs, it should attack clear market failure beyond the scope of competition policy, it should be proportionate to the problem it is intended to address, sufficiently flexible to allow scope for dealing with new circumstances; we recommend that the 12 Principles outlined for Securities Market Regulation are adopted as guiding standards in the formulation of all EU financial services legislation.

  10.  The principle of consultation is rightly one which goes beyond the financial service sector, as recognised in Art. I-11 of the draft Constitutional Treaty and the relevant Protocol.

  11.  Supervisory cooperation should balance the need for commonality/uniformity and flexibility; it should be:

    —  based on best practice;

    —  proportionate;

    —  appropriate to the different risks facing different market practitioners, users, customers; and

    —  involve cooperation with market participants.

  12.  Legislation, regulation and supervision should facilitate competition and innovation within a framework of the principles set out above. The global context within which European markets and financial institutions operate and provide services should be recognised.

September 2004

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