Select Committee on Treasury Seventh Report

1  Introduction

1. Over the next year or so, the United Kingdom's financial services sector will need to implement a significant amount of new regulation as a result of European Union (EU) decision-making. For example, many firms will need to meet new requirements as a result of the Markets in Financial Instruments Directive (MiFID) and the Capital Requirements Directive (CRD, which will implement the new Basel II capital adequacy framework). These will bring significant challenges for City practitioners, lawyers and the regulator. In addition, there is potential new legislation on the horizon. The European Scrutiny Committee of the House of Commons recently published a report setting out the programmes for 2006 of the European Commission (the Commission) and the Council of the European Union (the Council), which includes possible measures in the areas of mortgage credit and clearing and settlement.[1]

2. In the light of these developments, we decided to undertake an inquiry into European financial services, looking at the legislative process generally, together with 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. Our inquiry has been limited to looking at the European legislative process in the context of the Financial Services Action Plan (FSAP) and certain directives, rather than a comprehensive examination of the merits of all aspects of current or prospective legislation.

3. Our inquiry started with a visit to Brussels in late-November 2005 to discuss informally the Commission's goals for the financial services sector with Mr Charlie McCreevy, European Commissioner for Internal Market and Services, and officials from the European Commission's Internal Market and Services Directorate General (DG MARKT). In addition, we met representatives from the European Banking Federation (EBF, Federation Bancaire de L'Union Européenne), the European Federation of National Insurance Associations (CEA, Comité Européen des Assurances) and the European Mortgage Federation (EMF). On 14 December 2005, we heard oral evidence at Westminster from trade associations, the Financial Services Authority (FSA) and consumer groups. We subsequently invited interested parties to submit supplementary written evidence on the Commission's formal drafts of the MiFID 'Level 2' implementing measures, which were presented on 6 February 2006. We would like to express our thanks to all who have contributed to this inquiry and, in particular, to thank Commissioner Charlie McCreevy for meeting us in Brussels.

1   European Scrutiny Committee, Twenty-fourth Report of Session 2005-06, The Commission's and Council's Programmes for 2006, HC 34-xxiv, p 13 Back

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