2 Financial services
| (28613)
9293/07
COM(07) 226
| Green Paper on retail financial services in the single market
|
| Legal base | — |
| Document originated | 30 April 2007
|
| Deposited in Parliament | 9 May 2007
|
| Department | HM Treasury |
| Basis of consideration | EM of 21 June 2007
|
| Previous Committee Report | None
|
| To be discussed in Council | Not known
|
| Committee's assessment | Politically important
|
| Committee's decision | Not cleared, further information awaited
|
Background
2.1 In the earlier part of this decade the Community's Financial
Services Action Plan resulted in adoption of more than 40 legislative
measures designed to establish an integrated European financial
services market. In December 2005 the Commission published a White
Paper about financial services policy for 2005/2010. The themes
of the White Paper were:
- better regulation;
- global competition and competitiveness;
- optimising the Community's existing supervisory
structures; and
- implementing and enforcing existing measures.
The White Paper identified further integration of
Community retail markets as an area where a number of carefully
targeted initiatives might be useful.[2]
2.2 In January 2007 the Commission published a report
on its competition inquiry into the retail banking sector.[3]
In January 2007 the Commission also published an Interim Report
on the Business Insurance Sector by its Competition Directorate-General.[4]
The document
2.3 In this Green Paper the Commission sets out,
and seeks views on, its latest thinking on how to further the
integration of Community retail markets in financial services.
It builds on the 2005 White Paper and takes into account the results
of the sectoral inquiry into retail banking and the interim report
on business insurance. The document gives the Commission's high-level
aim as furthering integration of retail markets by:
- bringing down prices through
increased competition to increase choice, quality and innovation;
- enhancing consumer confidence; and
- empowering consumers to make the right decisions
for their financial circumstances through improved financial literacy,
clear, appropriate and timely information and high quality advice.
2.4 The Commission reports on recent developments,
noting modest cross-border activity, wide variation in prices,
restricted product diversity and choice and large variations in
market performance. The Green Paper also describes the next steps
for many current initiatives, such as those on:
- payments — where the
Commission is closely monitoring the progress of the Single Euro
Payments Area (SEPA) and will assess progress and consider further
measures to ensure SEPA's success, in a Communication to be published
before the end of 2007;
- insurance — where during the course of
2007 the Commission, together with the Committee of European Insurance
and Occupational Pensions Supervisors (CEIOPS), will examine the
national "general good" rules taking into account the
relevant case law principles;
- mortgage credit — where the Commission
will publish a White Paper on Mortgage Credit later in 2007, containing
proposals to facilitate creation of an integrated market for mortgage
credit and where in 2008 the Commission will review national regulatory
frameworks under which equity release products are marketed and
the role of non-banks in mortgage markets;
- retail banking — where the Commission will
tackle the barriers to competition identified by the sectoral
competition inquiry into retail banking and, in relation to payment
cards, will apply Community competition law where schemes artificially
raise costs for consumers. Action will also be pursued to ensure
access to credit registers and to payment clearing and settlement
systems is not unduly withheld; and
- credit intermediaries — where the Commission
will shortly launch a study in order to analyse the Community
credit intermediation market, to review the framework in which
intermediaries operate and to examine any possible consumer detriments.
2.5 The Green Paper also identifies some further
areas where there may be new initiatives:
- pensions and life-time savings
— where the Commission seeks views on a "28th Regime"
for savings and 3rd Pillar pension products;[5]
and
- financial literacy — where the Commission
believes more could be done to promote financial literacy and
capability and seeks views on whether there is a role for the
Commission in developing guidelines and promoting best practice.
2.6 The Green Paper emphasises work on all these
matters is at a preliminary stage and action will only be pursued
if, in accordance with better regulation principles, there is
a strong economic case for so doing. In determining what action,
if any, to take the Commission says it will consider a full range
of options, including non-legislative ones. The Commission asks
for views on the matters in the Green Paper by 16 July 2007, and
poses 14 specific questions to which it seeks responses. It says
the results of the consultation will be incorporated into its
single market review report to be published in the autumn of 2007.
The Government's view
2.7 The Economic Secretary to the Treasury (Ed Balls)
says that the Government's initial views towards the integration
of retail markets was set out in After the EU Financial Services
Action Plan: UK response to the reports of the four independent
expert groups published in September 2004.[6]
He says that in general the Government believes any analysis of
methods by which to further integration of retail markets needs
to be underpinned by a robust analysis of both specific barriers
and market failures that may exist.
2.8 The Minister then comments that the Government
believes that retail markets are intrinsically different to wholesale
markets and that many of the barriers that obstruct retail markets
are not regulatory, for example:
- language barriers, which may
prevent purchasers of financial products from either understanding
the products available, or purchasing them;
- cultural practices, which may result in consumers
preferring, for example to use domestic financial services providers
as opposed to "foreign" brands; and
- patterns of spending, saving, borrowing and investing,
which differ between Member States.
He continues that this suggests that a legislative
approach will often be less likely to be effective in removing
many of the barriers present in retail markets. Rather the integration
of retail markets through robust use of competition policy to
remove barriers and obstacles to firms engaging in cross-border
business, particularly cross-border merger and acquisitions activity,
and development of specific Community-wide products may provide
a more effective way forward.
2.9 The Minister concludes that the Government is
currently considering and further analysing the content of the
Green Paper and will be responding to the Commission.
Conclusion
2.10 This document suggests several possible
policy initiatives which may have a significant effect on retail
financial services. Before considering the Green Paper further
we should like to see in due course the Government's response
to the Commission. Meanwhile the document remains uncleared.
2 (27072) 15345/05 + ADD1: see HC 34-xvi (2005-06),
para 3 (25 January 2006) and HC 34-xxi (2005-06), para 3 (8 March
2006) and Stg Co Deb, European Standing Committee, 20 March
2006, cols. 3-32. Back
3
(28352) 6238/07: see HC 41-xii (2006-07), para 1 (7 March 2007)
and Stg Co Deb, European Standing Committee, 14 May 2007,
cols 3-22. Back
4
http://ec.europa.eu/comm/competition/antitrust/others/sector_inquiries/financial_services/
interim_report_24012007.pdf Back
5
28th regimes are legal frameworks of Community rules
which do not replace national rules but are an optional alternative,
for example the European Company Statute. Back
6
http://www.hm-treasury.gov.uk/media/406/DE/406DE2E4-BCDC-D4B3-106864F573A9AF21.pdf
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