3 Financial services policy
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15345/05
COM(05) 629
+ ADD 1
| Commission White Paper: Financial services policy 2005-2010
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| Legal base | — |
| Department | HM Treasury |
| Previous Committee Report | HC 34-xvi (2005-06), para 3 (25 January 2006)
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Standing Committee (decision reported 25 January 2006)
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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. In December 2005 the Commission published this document
— a White Paper in which it set out its financial services
policy for 2005-10.
3.2 In January 2006 we recommended that this document
should be debated in European Standing Committee.[12]
This debate has yet to take place.
Further information
3.3 Since making that recommendation we have received
from the City of London Corporation a paper which, whilst saying
the City supports much of the content of the White Paper, expresses
some unease as to how the Commission's financial services policy
will turn out in practice.
Conclusion
3.4 We annex to this report the City of London
Corporation's paper since we think it will be of interest to Members
taking part in the European Standing Committee debate we have
recommended on the White Paper.
Annex: The European Commission's White Paper on
Financial Services Policy (2005-2010)
COMMENT FROM THE CITY OF LONDON CORPORATION
The City supports much of what is contained in the
White Paper which closely follows the approach of the earlier
Green Paper and which takes account of many comments from City
practitioners and trade associations.
Although the number of new proposals likely to impact
directly on the City is declining the range of proposed future
reviews, studies and legal consolidation actions will continue
to create a large administrative burden that could lead to problems
for a wide range of financial services practitioners.
There can be little doubt that the stated approach
of the Internal Market Commissioner Charlie McCreevy in seeking
a better regulation agenda, and of only legislating when absolutely
necessary, is close to the stance of most City practitioners.
However, within the Brussels environment and the services of the
Commission there are many who are profoundly sceptical of the
better regulation agenda and of the value of regulatory impact
assessments. For many, the European "project" has been
driven by the EU institutions bringing forth legislative measures
to harmonise the European market. Indeed, for many officials their
success in delivering to this agenda was the benchmark for their
career development.
An underlying concern in the City is that the documents
outlining the new agenda also worryingly contain an ambiguity
of language which could easily allow a return to previous working
methods. Examples of such language include the "dynamic consolidation"
of the accounting, company law and consumer acquis of the
body of European law. This is a potentially huge undertaking with
no guarantees of achieving results which are better than those
already in place.
Initiatives of this type also pose the question of
how the Commission, with its limited staff resources, intends
to deliver on the key priority of ensuring that existing EU law
is actually implemented correctly and enforced consistently in
all 25 Member States, while at the same time setting such wide
and challenging objectives.
The attached annex provides a summary of the main
measures contained in the new White Paper on Financial Services
and the Simplification Programme. Option 5 of the White Paper
lists the four main areas for new legislation each of which will
be the focus of regulatory impact assessment:
- Retail financial services;
- Solvency II;
- Clearing and settlement; and
- Asset management.
Option 4 of the White Paper is potentially challenging
as this introduces the concept of "dynamic consolidation"
which aims for "quick wins" in removing competitive
barriers. The use of this process will require intense scrutiny
to ensure it remains true to the stated objectives.
In the simplification programme there are seven potential
recasts of major items or sectors of EU legislation. This programme
is an immense undertaking which is creating concern not only because
of the administrative burden but also because it allows for the
introduction of new legislative measures.
ANNEX TO CITY OF LONDON COMMENT
WHITE PAPER ON FSAP AND SIMPLIFICATION PROGRAMME
Below follows a summary of the main measures from
these two initiatives, with notes on key definitions in the footer.
White Paper on Financial Services Policy
The Commission has structured its policy plans for
the next five years around five different policy approaches. Below
follows a summary list of the measures under each policy approach.
1. Option 1: Take no further action at EU level
- Financial analysts;
- Rating agencies.
2. Option 2: Repeal existing pieces of EC legislation
or proposals
- Consistency between general
consumer and sectoral legislation;
- The Hague Convention.
3. Option 3:[13]
Ensure follow-up of past policy actions (or "limited follow-up)
- Implementation of agreed Level
1 FSAP measures;
4. Option 4: Consolidate dynamically the framework
set in place by the FSAP (or "extensive follow-up")
- Overall policy stance;
- Policy synergies;
- Supervisory convergence;
- Review qualifying shareholdings (article 16 of
banking directive and article 15 of insurance directive)
- Elimination of unjustified barriers to cross-border
consolidation;
- External dimension.
5. Option 5: New initiatives
- Retail financial services;
- Solvency II;
- Clearing and settlement;
- Asset management.
Simplification Programme
The Commission Communication set out plans for simplification
of EU legislation over the next few years. There are three approaches:
repeal, codification and recasting.
Notes on Simplification:
Codification is the process
whereby the provisions of an act and all its amendments are brought
together in a new legally binding act which repeals the acts which
it replaces, without changing the substance of those provisions.
Recasting is the process
whereby a new legally binding act repealing the acts which it
replaces combines both the amendment of the substance of the
legislation and the codification of the remained
which is intended to remain unchanged.
1. 2006
- Codification or recast of company
law acquis (7 directives) — consultation to decide
which option;
- Recast of Directive 1997 1997/5 on cross-border
credit transfers;
- Recast of Council Directive 1969 on indirect
taxes on the raising of capital;
- Recast of 6th VAT Directive;
- Recast of Council Directive 2003 on common system
of taxation applicable to interest and royalty payments made between
associated companies of different Member States;
- Accounting acquis;
- Codification of 7 UCITS Directives.
2. 2007
- Recast and simplification of
the Consumer protection acquis (8 directives);
- Recast and codification of the accounting acquis.
12 See headnote Back
13
Notes on White Paper:
Option 3: Essentially means checking
implementation of FSAP measures through Level 2 Lamfalussy, working
towards a more pro-active enforcement policy.
Option 4: A variant of option 3: implies
analysis of the resulting framework which may reveal limited inadequacies,
inconsistencies or gaps where some quick wins could be gained.
It could result in future policy actions "most probably with
a very targeted and calibrated ("surgical") approach
in order to consolidate the framework without fundamentally changing
it". Back
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