3 FINANCIAL SERVICES POLICY
(27072)
15345/05
+ ADD1
COM(05) 629
| Commission White Paper: Financial services policy 2005-2010
|
| Legal base | —
|
| Document originated | 1 December 2005
|
| Deposited in Parliament |
7 December 2005 |
| Department | HM Treasury
|
| Basis of consideration |
EM of 10 January 2006 |
| Previous Committee Report |
None, but see HC 34-iv (2005-06), para 20 (20 July 2005)
|
| To be discussed in Council
| Not known |
| Committee's assessment | Politically important
|
| Committee's decision | For debate in European Standing Committee
|
Background
3.1 The Financial Services Action Plan (FSAP), endorsed by the
Lisbon European Council in March 2000, has been an important element
in implementing the Lisbon Strategy (aimed at making the Community
"the most competitive and dynamic knowledge-based economy
in the world" by 2010). It focused on the legislative action
necessary to establish an integrated European financial services
market. Since almost all of the 42 measures it proposed have now
been adopted the legislative phase of the FSAP is drawing to a
close.
3.2 In May 2005 the Commission published a Green Paper, the basis
for a public consultation, on its view of what the next stage,
during the period 2005-10, of financial services policy should
be. We reported on this document in July 2005 and noted that we
thought the issues raised should be debated and that the occasion
for such a debate recommendation might be the White Paper which
was to follow the Green Paper.[8]
In December 2005 we also reported on two Commission Green Papers
on specific financial services issues, investment funds and mortgage
credit, which we noted would be relevant to the debate we expected
to recommend.[9]
The document
3.3 The Commission has now published the expected White Paper.
It is a definitive statement of the Commission's financial services
policy for 2005-10 and is fully in line with the earlier Green
Paper. In summarising the paper the Commission says "Dynamic
consolidation is the leitmotiv of the Commission's approach
— an approach that is practical, ambitious and reflective
of stakeholder sentiment." There are four important themes
in the document:
- better regulation;
- global competition and competitiveness;
- optimising the Community's existing supervisory
structures; and
- implementing and enforcing existing measures.
3.4 On better regulation the Commission is suggesting
Community-level action only where there is a genuine need —
wherever action can be taken, or would be better taken, by national
authorities or through market initiatives the Commission will
advocate this and decline to take action itself. Specific announcements
and commitments include:
- a full evaluation of all FSAP
measures implemented prior to 2005 to be completed by 2009;
- evaluation of subsequent measures four years
after their implementation deadline;
- modifying or repealing those measures where evaluation
reveals they have not delivered their intended benefits;
- carrying out sectoral and cross-sectoral consistency
checks to ensure legislation is kept as simple and coherent as
possible — starting with the securities sector;
- producing impact assessments based on rigorous
cost-benefit analysis to accompany all new proposals; and
- enhancing the open consultation processes —
particularly ensuring adequate representation of consumer groups.
3.5 On global competition and competitiveness the
White Paper asserts the importance of ensuring that financial
markets remain globally competitive, and the need to ensure the
Community's financial markets and centres can compete on a global
basis. The Commission says that it will:
- deepen the already-successful
EU-US financial markets dialogue;
- widen dialogues and cooperation on financial
issues with other countries, such as Japan, China, India and Russia;
and
- seek stronger representation and more effective
coordination of the Community's participation on international
bodies.
3.6 On enhancing supervisory structures the White
Paper acknowledges that the Lamfalussy processes[10]
lie at the core of the Community's supervisory framework and emphasises
the wide support for and success of these arrangements to date.
The Commission's specific initiatives include:
- improving the transparency
and accountability of these arrangements;
- developing cross-sectoral regulatory cooperation;
and
- pressing for consultation and impact assessments
on draft advice going to the Commission.
3.7 In terms of the convergence of practices among
the Community's supervisors, an important role of the third level
of the Lamfalussy processes, the Commission recommends:
- measures to improve the efficiency
of supervision through developing common data and reporting templates;
- measures to deliver common decision-making and
enforcement practices, for example joint inspections, peer reviews,
staff exchanges and joint training exercises; and
- work to develop and enhance the use of existing
supervisory tools such as delegation to other supervisors and
mediation between supervisors.
3.8 With almost all of the FSAP measures having now
been adopted the Commission recognises the need to shift its focus
to implementation and subsequent enforcement of these existing
measures. It intends to launch swiftly infringement proceedings
against Member States in the event of a failure to implement measures
properly.
3.9 The White Paper also discusses ongoing and future
legislative activities. The Commission says that it will carry
forward on-going work but that it will introduce only a limited
number of carefully targeted new initiatives. Areas it has already
identified for possible new initiatives will be introduced are
retail financial services and investment funds. The Commission
also confirms that it will take no further action at present on:
- optional instruments;
- ratings agencies;
- financial analysts;
- Lamfalussy second level measures for the Takeover
Bids Directive on requirements in the offer document; and
- capital requirements for regulated markets.
The Government's view
3.10 The Economic Secretary to the Treasury (Mr Ivan
Lewis) notes that agreeing a future strategy for the Community's
future financial services policy was a priority for the Government
during the UK Presidency. He says the White Paper builds on the
Green Paper and on ECOFIN Council Conclusions of 11 October 2005[11]
which reflected well Government priorities in this area.
3.11 The Minister reminds us that the Government's
views on these matters had been set out previously in its papers
After the EU Financial Services Action Plan: A new strategic
approach (May 2004), After the EU Financial Services Action
Plan: UK response to the reports of the four independent expert
groups (September 2004) and Supervising financial services
in an integrated European Single Market: A discussion paper
(January 2005).
3.12 Finally the Minister notes that the White Paper
also includes some references to tax issues and comments that,
as the Government has made clear, tax is a matter for Member States.
Conclusion
3.13 The White Paper marks an important stage
in the development of a single market for financial services and
the overall thrust of the Commission's policy proposals seems
unexceptional. But we think the document provides a useful opportunity
for Members to explore the present and likely future state of
financial services regulation and the single market for financial
services. Accordingly we recommend the document be debated in
European Standing Committee.
8 See headnote. Back
9
See (26726) 11190/05 + ADD1 (26742) 11500/05: HC 34-xiii (2005-06),
para 16 (14 December 2006). Back
10
The Lamfalussy processes are a four-level approach to regulation
of the European financial services industry. At the first level
the European Parliament and Council adopt legislation, setting
framework principles and the Commission's implementing powers,
on the basis of Commission proposals on which it is advised by
sector-specific committees of high-level representatives of Members
States chaired by the Commission. At the second level sector-
specific committees of national regulators prepare and advise
on implementing measures to be adopted by the Commission. At this
level the committees of high-level representatives perform a "comitology"
role (comitology procedures regulate exercise by the Commission
of implementing powers conferred on it by the Council and the
European Parliament and are essentially intended for detailed
measures to implement Community legislation) of voting on the
Commission's implementing measures before their adoption. At the
third level the committees of national regulators work on strengthening
coordination of regulation, for instance by establishing common
interpretations of legislation and peer group review of regulatory
practice. At the fourth level the Commission strengthens compliance
with and enforcement of EU rules. Back
11
See http://ue.eu.int/ueDocs/cms_Data/docs/pressData/en/ecofin/86529.pdf
. Back
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