During 1999 the European Commission embarked on the Financial Services Action Plan (FSAP), a wide-ranging and ambitious programme of new wholesale financial services legislation. As the FSAP comes to an end, the evidence that we received indicates that there is now a single market in wholesale financial services in Europe. There is also some evidence of retail financial services institutions expanding through the acquisition of banks and insurers in other European countries. However, a single market in European financial services, with comparable products and services available to consumers direct across borders, does not appear to be a realistic proposition in the near future.
The Commission recently set out its financial services policy objectives for the period 2005-2010. The Commission is now attaching greater importance to ensuring consistent and workable implementation of the existing financial services legislation, with new initiatives in only a few, targeted areas, rather than proposing an ambitious new programme. We support this change of emphasis, believing that there is the need for a period of 'bedding down' of European financial services legislation.
We welcome Commissioner Charlie McCreevy's assurances that the Commission will undertake full cost-benefit analysis to prove that new regulation will have a clear benefit to the European economy. To ensure growth and competitiveness in the European financial services industry, the Commission must now deliver on its promise to ensure better regulation principles are followed in its policy-making.
We examined three case studies on selected policy areas, namely the implementation of the Markets in Financial Instruments Directive (MiFID), the Commission's consideration of a possible Clearing and Settlement Directive and the Commission's consideration of mortgage credit in the context of the development of a single market in retail financial services. In each of these areas, the Commission will need to demonstrate its commitment to 'better regulation' and its new focus on implementation and enforcement. For example, the Commission will need to ensure that MiFID is implemented consistently across Europe and it will need to ensure that any new mortgage regulation is the best possible policy solution. European cross-border clearing and settlement are far more costly than at the domestic level. These high costs are borne by investors, either directly or through pension funds and other investment vehicles. Furthermore, the high costs of cross-border trading may be deterring retail investors from investing across Europe. It is therefore important that the additional cost associated with clearing and settlement across borders is reduced over time. The Commission must keep its promise to step aside if a market-led solution to reducing the present high costs of clearing and settlement emerges. But if the market does not address the unacceptably high costs of clearing and settlement in Europe, it can have no complaints when policy-makers start to become involved.