Annex
ADDITIONAL INFORMATION
REQUESTED BY
THE TREASURY
COMMITTEE
Details of the consultative and knowledge building
process undertaken by the Treasury in advance of European negotiations
on financial services policy
The Treasury regularly consults market participants,
trade associations and consumer bodies through a range of different
fora, including through a series of roundtables, forum groups
and high-level business meetings. We continue to consult affected
parties during the course of the negotiations as legislation develops.
The Treasury has also published a number of consultation
documents on key European financial services issues, in order
to solicit a wide range of views and opinions. In addition, both
the Treasury and the FSA have regular informal meetings with the
European Commission to exchange views and share best practice,
as well as operate staff secondment programmes to share knowledge,
technical expertise, and generally promote closer working relationships.
The relationship between the Treasury and the
Financial Services Authority in negotiating European financial
services legislation
Negotiation of European legislation and responsibility
for its implementation in the UK are responsibilities of the Government.
In those areas which are subject to the FSA's rule making powers
under the Financial Services and Markets Act 2000, a Directive's
provisions will often be transposed through amendment of FSA rules.
For this reason the Treasury works very closely with the FSA in
the relevant EU fora. The FSA provides advice and technical expertise
on the regulatory implications for consumers, firms and markets
of proposed EU legislative initiatives. The Treasury's responsibility
is to determine negotiating priorities in the light of that advice
and the wider national interest.
The desirability of the FSA's existing role where
it acts as both negotiator and the body responsible for the implementation
of new European regulation
There is no reason why a body that negotiates EU
legislation should not also implement it, and Government departments,
including the Treasury, routinely do both. As already stated,
negotiation and implementation in the UK of European legislation
is ultimately the responsibility of the Government; however the
FSA does provide the Treasury with technical input and expertise.
Most of the direct input the FSA makes to the EU
legislative process takes place in the Level 3 Lamfalussy Committees.
These are: the Committee of European Banking Supervisors (CEBS),
the Committee of European Insurance and Occupational Pension Supervisors
(CEIOPS) and the Committee of European Securities Regulators (CESR).
These Level 3 Committees comprise national supervisory
authorities and provide the Commission with specialist advice
in preparing technical implementing measures for European Directives
and promoting enhanced cooperation and convergence of supervisory
practices across the EU. The activities of the Level 3 Committees
are non-binding, and therefore do not trigger an EU requirement
for implementation.
Details of the resources allocated by the Treasury
for managing new European financial services regulation
There are currently approximately 75 people working
on financial services issues in the Treasury, divided into five
teams:
— Financial Services Strategy; dealing
with strategic cross-cutting issues that arise on a national,
European and international basis.
— Financial Crime, dealing with money
laundering, terrorist financing and asset freezing issues.
— Financial stability and risk, dealing
with systemic financial stability and resilience issues, as well
as issues related to banking, insurance and reinsurance industries.
— Payments and Inclusion, dealing
with issues relating to payment services, unclaimed assets and
issues connected with financial inclusion.
— Saving and Investment, dealing with
pensions regulation and protection issues, savings and investment
markets (including institutional investment) and Mutuals.
European work is fully integrated into ongoing financial
services business and new financial services dossiers are allocated
to the team with responsibility for the issues under discussion.
So for example, a dossier dealing with banking issues would be
dealt with by the financial stability and risk team. This enables
the Treasury's domestic policy experts, to bring their knowledge
to bear on European and international negotiations as appropriate.
When negotiating new pieces of financial services
legislation, the Treasury will, in practice, lead a cross-cutting
team made up of representatives of the FSA, Bank of England (where
appropriate), UK Permanent Representation to the European Union,
and the Treasury's Legal Advisors. Furthermore, when a new legislative
proposal is put forward, the Treasury will establish a roundtable
group that will meet on an ad hoc basis under "Chatham
House" rules. This enables it to draw upon the expertise
of industry and consumer representatives. Often a smaller "drafting
group" will be established deriving its membership from the
roundtable to provide a more immediate sounding board for advice
on specific texts of proposals tabled during the course of negotiations.
Steps taken to avoid unnecessary gold-plating
of relevant European legislation
UK Government policy is not to go beyond the minimum
requirements of European legislation unless there are exceptional
circumstances, justified by strong cost benefit analysis and extensive
consultation with business.
In addition, in order to ensure that the stock of
existing laws that originate from Europe have been transposed
in the least burdensome way possible, the Government has asked
Neil Davidson to work with the Better Regulation Executive to
independently scrutinise departments' efforts to identify aspects
of UK law that have gone beyond the regulations required by the
EU. In doing so, he will selectively review areas of UK legislation
where EU-sourced rules are the principal legislative drivers,
and will present recommendations at the end of 2006.
The FSA has committed not to go beyond the minimum
standards necessary when implementing EU law on financial services,
except where a demonstrably convincing case can be made.
Implementation needs to be done on the basis of full
and proper cost-benefit analysis and regulatory impact assessment,
and supported by consultation. This will help to ensure that decisions
are taken on the basis of evidence, and result in the implementation
of a measure that is proportionate to the regulatory gap and/or
market failure that it is seeking to address.
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