Select Committee on Treasury Written Evidence



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.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2006
Prepared 8 June 2006