Select Committee on European Scrutiny Thirty-Ninth Report

1   Financial services

(a) (29503) 6996/08 COM(08) 119

(b) (29873) 12149/08 + ADDs 1-2 COM(08) 458

(c) (30003) 13713/08 + ADDs 1-2 COM(08)602

(d) (30057) 14317/08 COM(08) 661

Amended draft Directive on the taking-up and pursuit of the business of insurance and reinsurance: Solvency II (recast)

Draft Directive on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS)

Draft Directive amending Directives 2006/48/EC and 2006/49/EC as regards banks affiliated to central institutions, certain own funds items, large exposures, supervisory arrangements, and crisis management

Draft Directive amending Directive 94/19/EC on deposit guarantee schemes as regards coverage level and the payout delay

Legal base(a) Articles 47(2) and 55 EC; co-decision; QMV

(b)-(d) Article 47(2) EC; co-decision; QMV

Document originated(d) 15 October 2008
Deposited in Parliament(d) 24 October 2008
DepartmentHM Treasury
Basis of consideration(a)-(c) Minister's letter of 11 November 2008

(d) EM of 5 November 2008 and Minister's letter of 11 November 2008

Previous Committee Reports(a) HC 16-xxi (2007-08), chapter 6 (14 May 2008), HC 16-xxiv (2007-08), chapter 1 (18 June 2008) and HC 16-xxvii (2007-08), chapter 18 (16 July 2008)

(b)HC 16-xxxii (2007-08), chapter 4 (22 October 2008)

(c) HC 16-xxxiv (2207-08), chapter 8 (5 November 2008)

(d) None

To be discussed in Council2 December 2008
Committee's assessmentPolitically important
Committee's decision(a)Debated in European Committee on 14 July 2008

(b)-(d)For debate in European Committee


1.1  In order to facilitate the single market for financial services there is Community legislation relating to prudential supervision of life and non-life insurance, reinsurance, insurance groups and winding up, which is contained in 13 Directives. The legislation in relation to solvency matters was updated on an interim basis in 2002 under the rubric Solvency I. In July 2007 the Commission presented a draft Directive intended to establish a framework, Solvency II, to revise, amend and consolidate the present legislation governing the prudential regulation of insurance and reinsurance companies operating in the Community. In February 2008 the Commission replaced that proposal with an amended draft Directive, document (a), to take account of new related legislation.[1] This document was cleared from scrutiny after debate in European Committee in July 2008.[2]

1.2  The 1985 Directive on undertakings for collective investment in transferable securities, as amended, commonly referred to as the UCITS Directive, sets out common rules for investment funds in the Community. Funds which meet these rules may be sold freely in any Member State on the basis of a single national authorisation. The draft Directive, document (b), would implement small targeted reforms to the UCITS Directive to further the aim of developing a true single market in investment funds. The Commission's proposal would also consolidate the existing legislation and the proposed amendments into one Directive and includes a large number of small technical amendments linked to the consolidation process.

1.3  When we considered document (b), in October 2008, we noted that the draft Directive would make important changes to the regulatory regime for UCITS and that the Government and the UK UCITS industry were supportive of the proposals. However, before considering the proposal further we asked to hear from the Government about both:

  • developments on a possible management company passport, following the awaited advice from the Committee of European Securities Regulators; and
  • in the light of the Commission's comments about the difficulty of obtaining the views of consumers, what information the Government had about the views of UK consumers.

Meanwhile the document remained under scrutiny.[3]

1.4  Directives 2006/48/EC and 2006/49/EC — known collectively as the Capital Requirements Directive — introduced, from 1 January 2008, a new framework for the prudential supervision of the capital held by banks and other financial services firms in the Community. This reflected new standards, known as Basel II, agreed internationally in the Basel Committee on Banking Supervision[4] in 2004. The draft Directive, document (c), is to amend the Capital Requirements Directive with the aim of:

  • strengthening prudential requirements;
  • improving supervisory coordination and efficiency of supervision; and
  • increasing convergence across the Community.

The main amendments relate to the large exposures regime, hybrid capital instruments, supervision and supervisory colleges, requirements for securitisation and risk transfer activities and liquidity. The draft Directive would make also a number of technical amendments including some designed to highlight the need for bankers to set an appropriate level of liquidity risk tolerance and better understand their liquidity risk profile.

1.5  When we considered document (c) earlier this month we said that improvement to the Capital Requirements Directive was to be welcomed and we noted the Government's general acceptance of the proposals in the draft Directive. However we also said that we wanted to hear in due course from the Government how negotiations on this proposal developed and, meanwhile we drew the document to the attention of the Treasury Committee in connection with its present inquiry into the banking crisis. Moreover we said that once we had further information from the Government and had seen the Treasury Committee's report of its inquiry we might recommend this document for debate. Meanwhile it remained under scrutiny.[5]

1.6  Deposit guarantee schemes are a safety net for depositors, so that, if a credit institution fails, they would be able to recover at least part of their bank deposits. Directive 94/19/EC requires Member States to ensure that there are one or more schemes in their territory. It sets the minimum level of compensation, and the time by which compensation must be paid in the event of the failure of a deposit taker. The Directive specifies the eligibility of depositors, permitted exclusions, the arrangements for making payments, the treatment of deposits in branches of overseas banks and cooperation between the compensation schemes of Member States.

The new document

1.7  The draft Directive, document (d), would update Directive 94/19/EC so as to:

  • increase minimum coverage from €20,000 to €50,000 as of 15 October 2008 and to €100,000 by 31 December 2009;
  • reduce the payout period from three months to three days; and
  • introduce 100 per cent coverage of eligible deposits.

The proposal would also require the Commission to:

  • review compensation limits annually;
  • adjust compensation limits — assisted by the European Banking Committee;[6]
  • introduce temporary increases in limits for up to 18 months; and
  • report on the possible introduction of an Community-wide deposit guarantee scheme and funding mechanism.

The Government's view of the new document

1.8  In his Explanatory Memorandum the Financial Services Secretary to the Treasury (Lord Myners) says that the Government supports the proposals in the draft Directive, document (d), to increase the minimum level of compensation, to reduce the payout delay and to move to compensate 100 per cent of eligible deposits, commenting that they have the potential to deliver significant benefits to consumers. The Minister says further that:

  • updating the present Directive also provides a mechanism for coordinating the return of temporary increases in unlimited support, recently introduced by many Member States, to more sustainable levels that do not compromise depositor security and that eliminate competitive distortions;
  • there are a number of practical questions around the proposals to increase the minimum guarantee to €100,000 by 31 December 2009 and to reduce the payout delay from three months to three days and the precise level of compensation and of the payout deadline are yet to be finalised;
  • there are also a number of other practical questions to be resolved, such as equivalent limits for non-eurozone Member States, how to improve cooperation between Member States' schemes and application of exclusions;
  • it is necessary to strike the right balance between role of the Commission in reporting on the effectiveness of the increased limits and the revised Directive and the role of Member States, through the Council, in setting and reviewing guarantee limits;
  • it is necessary to distinguish between arrangements to review and update compensation limits in a non-crisis environment and making crisis management changes to compensation levels;
  • it is necessary to strike the right balance between proposals for the imposition by the Commission of temporary increases and the discretion of Member States to do so; and
  • further notification and coordination functions would improve the smooth operation of the revised Directive and the Council and the Commission should work together on any future changes to the minimum limits in a non-crisis environment.

1.9  The Minister tells us that no formal consultation about its proposals has been undertaken by the Commission in the time available. Nor has it not carried out an impact assessment, again owing to the urgency with which the proposal has been brought forward. He says, however, that important insights were gained during a review of the efficiency of deposit guarantee schemes in 2006[7] and by work, supported by the European Forum of Deposit Insurers, carried out by the Commission's Joint Research Centre.[8]

1.10  As for the situation in the UK, the Minister says that:

  • the Financial Services Authority announced an increase in the compensation payable by the Financial Services Compensation Scheme for deposits to £50,000, with effect from 7 October 2008 — this followed an increase to 100% of £35,000 on 1 Oct 2007;
  • the Authority published a consultation paper in October 2008 covering compensation limits for other financial sectors as well as savings. It asks whether £50,000 is an appropriate limit and discusses, but does not make proposals for, moving to a per-brand or per-account basis (compensation is currently paid by "authorised bank" ) to minimise confusion about how the limit applies to savings in more than one institution operating under a single authorisation;
  • the Treasury maintains regular and close contact with deposit takers, consumer bodies and trade associations and is taking soundings on the Commission's proposal; and
  • any additional cost of funding compensation payments in the event of a failure, arising from the Commission's proposal, will be borne by the financial services industry through levies by the Financial Services Compensation Scheme.

The Minister's letter of 11 November 2008

1.11  In his letter the Minister informs us of the intention of the French Presidency to seek the agreement of Member States to general approaches on all four of these draft Directives at the ECOFIN Council of 2 December 2008, in order to allow negotiations with the European Parliament (which may rise for the elections in March 2009) to proceed. Referring to our concern that these proposals should be considered both on their own merits and in the light of the current financial turmoil, the Minister says that:

  • the Government agrees that the current climate justifies ensuring that the detail of these draft Directives is carefully scrutinised because of the significant potential impact on UK and European customers, businesses and public finances;
  • the Government has continued to work hard with other Member States and the Commission to ensure that the legislation meets its specific aims and also links in with its wider ambitions for improvements to regulatory and supervisory systems;
  • this consideration, however, must be balanced with the need for the UK to play a full part in shaping these Directives at the ECOFIN Council;
  • the endgame on all four draft Directives is now being reached and the Government fully expects that the Presidency will pursue its aim of asking Member States to agree general approaches at that Council;
  • on that basis he sends us detailed information, which we annex, on the draft Directive to amend the UCITS Directive, document (b), and the draft Directive to amend the Capital Requirements Directive, document (c), on which we had requested further information and on the Solvency II draft Directive, document (a), which the Lords' European Union Committee still has under scrutiny and which we also annex; and
  • the Government hopes that we will be able to clear the three documents, (b), (c) and (d), in time for the ECOFIN Council of 2 December 2008.


1.12  We are grateful to the Minister for his letter about the present situation in relation to these four documents. We note what he tells us about the Solvency II draft Directive, document (a), which is already cleared from scrutiny.

1.13  As for the draft Directive to amend the UCITS Directive, document (b), and the draft Directive to amend the Capital Requirements Directive, document (c), we note:

  • in the case of the former, the emerging consistency between the advice from the Committee of European Securities Regulators and the current texts on a management company passport and the generally positive, albeit understandably limited, consumer reactions the Commission and the Government have been able to gather about the proposals; and
  • in the case of the latter, three points — that, although the Government broadly supports the compromise text on the large exposures regime, it still has a key objective of ensuring a proportionate regime for the UK's smallest banks and building societies, that the Government requires modifications for mutuals in the texts on hybrid capital and that the Government is hopeful about narrowing the scope of the quantitative retention requirement.

1.14  We understand the wish to proceed with these measures speedily and recognise that the Government remains generally in favour of them. Nevertheless we believe that they should be debated in European Committee (before Prorogation), and so recommend. This is not only so that the Government can elaborate on the latest developments in negotiations, particularly on the outstanding matters mentioned in the previous paragraph, but also, because of the intrinsic importance of the proposals, so that Members can examine them more generally.

1.15  As for document (d), we again understand why it is felt necessary to push through this draft Directive speedily, even without a proper impact assessment and public consultation. Nevertheless we are concerned that the rush should not lead to ill-considered and flawed legislation. Moreover we note that:

  • the Government has a number of practical questions to which it needs answers; and
  • it seems implicit in the Minister's comments about the balance between the responsibilities of the Commission, the Council and Member States that the Government is not convinced about the Lamfalussy process arrangements in the present text of the draft Directive.

1.16  So we recommend that this document, too, should be debated in European Committee, together with documents (b) and (c). This will give the Government an opportunity to tell Members of progress on the practical questions the Minister mentions and of its view on the Lamfalussy arrangements.



"Solvency II (Explanatory Memorandum 11978/07)

"This annex provides an update on the Government's views of the Solvency II project in the light of the current global financial turmoil. It gives information in particular in respect of attitudes towards risk and suitable levels of capital. This annex sets out that information.

"The Solvency II Directive sets a calibration standard for the main Solvency Capital Requirement which insurers will have to meet on an on-going basis under Solvency II. This standard is that an insurer should have no more than a One in 200 probability of failure over a one-year period. Subject to meeting this standard, Solvency II allows insurers to adopt the risk appetite which their board and senior managers determine is appropriate as long as they have in place systems to manage those risks effectively and of course adequate capital given the chosen risk profile. This is in line with the current approach adopted by the FSA and remains appropriate.

"It should be noted that any given capital requirement imposed by the authorities is a minimum standard which in general will be exceeded, often by a significant margin. The great majority of firms will hold an additional buffer of capital for several reasons. These include the desire to avoid regulatory intervention subsequent to any capital shortfall against the regulatory minimum and, for larger companies, to maintain a given credit rating.

"Further, the Solvency II Directive has two capital requirements and when the lower of these, the Minimum Capital Requirement, is breached, the insurer's authorisation to write new business will be withdrawn. This should ensure that well before an insurer's capital comes close to being depleted, its existing policyholders are fully protected from the risks inherent in writing new business. We expect that the Minimum Capital Requirement will typically be in the range 20-50 per cent of the main Solvency Capital Requirement. It is reasonable to expect that companies will in general still have significant amounts of capital at the point when they are prevented from undertaking new business.

"Our conclusion is that the calibration standard for the capital requirements under Solvency II remains appropriate.

"However we have also considered the issue of the quality of capital which is eligible to meet those capital requirements. In the European Commission's proposal for the Solvency II Directive, the minimum amount of Tier One or highest quality capital that a firm is required to maintain is one third of the amount of the Solvency Capital Requirement. By way of comparison, in the banking sector the equivalent requirement is that one half of the minimum regulatory capital must be matched with eligible Tier One capital.

"One key lesson emerging from the impacts of the global financial turmoil is that financial companies require high quality capital to maintain the confidence of counterparties and other financial market participants, as well as of their policyholders. At present in the UK insurance companies are required by the FSA to hold at least half of the regulatory minimum capital requirement in the form of Tier One capital. In practice in many firms the share of Tier One in total capital held is significantly higher.

"Since the current FSA capital requirements are calibrated to achieve a similar prudential standard to that proposed for the Solvency Capital Requirement under Solvency II, it follows that, on the basis of the current proposal, Solvency II would permit a material dilution in the overall quality of capital held by UK insurers.

"Of course it need not follow from the change in regulatory requirements that insurance companies would necessarily alter the share of Tier One capital in their total capital held. Nevertheless, given the events of the past year the Government's view is that it would not be appropriate to choose a lower minimum for the amount of highest quality Tier One capital. We therefore propose to advocate with the Presidency and other Member States that under Solvency II insurance companies are required to maintain Tier One capital equal to at least one half of the Solvency Capital Requirement.

"The fourth Quantitative Impact Study

"The purpose of the fourth Quantitative Impact Study (QIS 4) is to analyse the impact on insurance companies of the proposed quantitative elements of the Solvency II framework. At the time the specification of QIS 4 was developed by CEIOPS and then agreed by the Commission — late 2007 through to early 2008 — global financial markets had not yet experienced the extraordinary disruptions we have recently witnessed. As a result the specification of QIS 4 is of course consistent with the Directive as proposed by the Commission but has not been altered in the light of the recent events in global financial markets.

"Nevertheless, the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has produced analysis of the financial stability of the insurance sector at EU level, including an assessment of its exposure to US sub-prime mortgage risk either via holdings of Asset Backed Securities, or through investment in hedge funds. The conclusion reached is that across the exposures to this risk category is modest for the EU insurance sector as a whole.[9]

"Further, the fact that it was not possible for QIS4 to reflect the implications for policy of the global financial turmoil does not imply that that cannot be taken into account in the Solvency II legislation.

"The Solvency II framework has the flexibility to be adjusted to the lessons of the financial crisis once the policy implications are fully analysed. As you are aware Solvency II adopts the Lamfalussy arrangements for developing financial services legislation. This means that the Directive currently under negotiation provides a framework and core principles but leaves considerable areas of the detailed technical legislation for so-called 'level two' implementing measures.

"The Lamfalussy arrangements were deliberately designed to achieve flexibility in EU financial services legislation so that it could respond to significant changes in the financial sector. This will allow lessons that are relevant to the insurance sector to be applied in the detailed legislation of Solvency II. However, we must avoid knee-jerk reactions to the current financial problems and in particular we need to be careful to ensure that the economics of the insurance sector, which is fundamentally different from the economics of banking, is taken into account fully where any read across between the sectors is envisaged.

"Along with other Member States' authorities, HM Treasury and the FSA have a central interest in ensuring that the level two implementing measures in Solvency II provide the technical requirements to deliver a robust prudential framework while also being proportionate in the regulatory burden imposed on industry."

"UCITS (Explanatory Memorandum 12149/08)

"This annex sets out further information on the proposed reforms of the UCITS Directive, and in particular information on developments on a management company passport following the advice requested from the Committee of European Securities Regulators (CESR) and for information on the views of UK consumers.

"On the former, CESR published its advice to the Commission on 31 October.[10] This advice set out a framework which a majority of CESR members believed would deliver the management company passport while maintaining an appropriate level of investor protection and supervisory oversight. The key points of this framework are:

—  that the management company's home Member State should be the state in which it has its registered office;

—  that the UCITS home Member State should be the state in which the UCITS is authorised;

—  the depositary (the institution responsible for safekeeping of the fund assets and some oversight of the management company) should be located in the UCITS home Member State and should have an information sharing agreement with the management company to ensure ready access to necessary information;

—  where the management company is making use of the passport, it should appoint the depositary or another financial institution to act as a local point of contact in the UCITS home Member State for the UCITS supervisor and investors;

—  that management companies using the passport should be subject to the rules of their own home Member State for matters relating to their general conduct as a management company (for example conduct of business, risk management), but that the rules of the UCITS home Member State should be observed for matters relating directly to the operation of the specific UCITS fund (for example investment policies and limits);

—  that supervisors should have the power to conclude cooperation agreements in respect of their supervision of UCITS managed by non-local management companies;

—  that the UCITS and the management company should be subject to independent audits and that when the two are audited by different auditors, those auditors should conclude an information sharing agreement; and

—  that the UCITS supervisor should have the power to take enforcement action for breaches of its rules whether or not the UCITS is managed by a local management company.

"The Government believes CESR's advice represents a good basis for the introduction of a management company passport. The advice is broadly consistent with the proposals currently being developed in Council working groups and the Presidency is now going through the advice to consider where changes need to be made.

"The main point on which the Council's proposal may differ from CESR's advice is on CESR's proposal for a local point of contact — it is likely that the Council's position will focus on ensuring that there are adequate procedures to allow investors of a UCITS to make complaints about the management company, even where that management company is not local. The balance of opinion in the Council is that this is the key point for ensuring investors' rights are protected and that the necessity for a local point of contact for supervisors is adequately dealt with i) by the provisions to allow UCITS supervisors to request a wide range of information about the running of the fund; and ii) by the broad provisions for cooperation between supervisors.

"Your second question was on the information the Government has on the opinion of consumers. The area in which consumer views are perhaps most important is on the proposed reforms to the information provided to potential investors (to be known as 'key investor information'). The Commission held workshops with strong representation from consumer bodies when developing its high-level proposals, and CESR has also consulted consumer representatives in the course of developing advice to the Commission on detailed rules on the form and content of this information. The Commission is in the process of testing CESR's draft proposals directly with consumers, and the results of that testing will in turn inform the final version of CESR's advice. The Government believes this will deliver a real improvement to consumer information in the UCITS market.

"Concerning the other issues in the package, it would be difficult to collect views directly from consumers since these are largely technical amendments relating to the way UCITS are run and do not substantially affect the nature of UCITS as a product. However, in its response to the Commission's earlier consultation on its proposals, the UK Financial Services Consumer Panel[11] agreed that the UCITS review was "both timely and appropriate". Of the consumer protection issues raised by the panel in its response, the Government believes the large majority have been addressed. Concerning the management company passport specifically, the Panel expressed some concern about the potential for confusion around the Commission's initial proposal for a "partial" passport which would have allowed some activities to be passported but not others. The Government shared this concern and believes it will be addressed through the replacement of the partial passport proposal with a full management company passport, backed up by full and effective provisions for supervisory cooperation."

Capital Requirements Directive (Explanatory Memorandum 13713/08)

"This annex sets out how negotiations on the Capital Requirements Directive are developing and gives a clarification of which outcomes the Government desires and which aspects it wished to change.

"It sets out updates on negotiations and the proposed timetable for completion. Firstly, on the timetable. There is a high probability that the French Presidency will seek to achieve a general approach among Member States at the December meeting of Finance Ministers. While this timetable poses significant challenges, especially in regard to the ongoing scrutiny process, negotiations have progressed well in a number of areas.

"On the negotiations themselves, the proposal covered four main areas:

—  The large exposures regime: limits to ensure financial institutions are not exposed too heavily to any single or connected counterparty;

—  The supervisory framework and supervisory colleges: reinforcing the efficiency and effectiveness of supervision of cross-border banking groups by formalising supervisory colleges in legislation and requiring closer cooperation on the determining of group capital levels;

—  The definition and limits on hybrid capital: providing a common interpretation of the three main eligibility criteria that correspond with 'higher quality' capital: permanence, loss absorption and flexibility in payments, and establishing harmonised quantitative limits for the extent to which hybrids may be accepted as firms' original own funds; and

—  Securitisation and risk transfer activities: revisions aimed at improving risk management by better aligning potentially misaligned incentives, disclosure and diligence requirements on the investor before they can invest and monitoring requirements on an ongoing basis, alongside transparency requirements on originators before they can sell.

"In terms of the large exposures regime, the current approach sets a maximum limit for all exposures from banks to non-banks and all interbank (bank to bank) exposures over one year, but contains a national discretion on interbank exposures for less than a year.

"So far in negotiations the main thrust of the Commission's original proposal, to extend the current limit for inter-bank exposures to all exposures regardless of maturity, has been maintained. Further to this, our key negotiating objective, that of ensuring a proportionate regime for the UK's smallest banks and building societies, has also been maintained.

"The Government believes this will represent a significant improvement to the stability of the financial sector in the UK, decreasing the risk of large systemic linkages between institutions. The original Commission proposal aimed to reinforce the efficiency and effectiveness of supervision of cross-border banking groups by formalising supervisory colleges in legislation. It also required agreement between supervisors on entities in the same group on issues for the whole banking group such as total capital for the group, the distribution of capital across subsidiaries, liquidity in subsidiaries and branches and reporting requirements, and where agreement is not reached, a mediation mechanism was proposed using CEBS[12] as an advisory body. Ultimately it was proposed that the consolidating supervisor (that is the supervisor responsible for the parent institution or holding company) would take the final decision.

"This approach would produce significant benefits for cross-border banking groups, and potentially deliver more efficient supervision and reduced burdens. The current draft of the compromise text maintains this general approach, which the UK has broadly supported. Furthermore, on the issue of determining the total required capital for the group, the text now proposes that the final decision on key supervisory issues shifts back to the local supervisor. The Government believes this approach strikes the right balance between efficiency of supervision and the distribution of supervisory powers and responsibilities, and will be seeking to ensure this option remains in the text, which will allow the Financial Services Authority to remain ultimately responsible for the capital levels of UK institutions.

"The Commission's original proposal on hybrid capital was to introduce a common interpretation of the three main eligibility criteria that correspond with 'higher quality' capital: (permanence, loss absorption and flexibility in payments), and establish harmonised quantitative limits for the extent to which hybrids may be accepted as firms' original own funds has largely been maintained. Subject to some modifications to ensure that instruments issued by mutuals (who cannot issue pure equity) can, in some circumstances, be deemed as comparable to equity, this is an approach the Government continues to support, and one that will bring significant benefits to cross border financial institutions.

"Finally, the Commission has proposed revisions aimed at improving risk management by better aligning potentially misaligned incentives, specifically by requiring investor institutions in the EU to only invest in credit risk transfer products if the originator has committed to holding a net economic interest of at least five per cent. It has also proposed disclosure and diligence requirements on the investor before they can invest and monitoring requirements on an ongoing basis, alongside transparency requirements on originators before they can sell.

"The Government initially had concerns over the scope of the quantitative retention requirement, which would effectively cover a wide range of instruments beyond simply securitised assets. Negotiations are progressing well, and the scope is being narrowed. This will help to ensure that the requirements reflect a proportionate response to the financial market disruption. We hope to see continued progress on further refining the scope as negotiations proceed. In terms of the disclosure and diligence requirements, the Government was supportive of these improvements, but has agreed amendments to ensure they are workable in practice and are less burdensome on the industry."

1   See headnote. Back

2   Stg Co Debs, European Committee, 14 July 2008, cols 3-18. Back

3   See headnote. Back

4   The Basel Committee is composed of representatives of the supervisory authorities (and central banks where these are not the same institution) of Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. The Financial Services Authority and the Bank of England represent the UK at the Basel Committee. Back

5   See headnote. Back

6   The European Banking Committee is the Lamfalussy process Level 2 committee for the banking sector. The Lamfalussy process is a four-level approach to regulation of the European financial services industry. At the first level the European Parliament and Council adopt legislation, setting framework principles and the Commission's implementing powers, on the basis of Commission proposals on which it is advised by sector-specific committees of high-level representatives of Members States chaired by the Commission. At the second level sector-specific committees of national regulators prepare and advise on implementing measures to be adopted by the Commission. At this level the committees of high-level representatives perform a "comitology" role (comitology procedures regulate exercise by the Commission of implementing powers conferred on it by the Council and the European Parliament and are essentially intended for detailed measures to implement Community legislation) of voting on the Commission's implementing measures before their adoption. At the third level the committees of national regulators work on strengthening co-ordination of regulation, for instance by establishing common interpretations of legislation and peer group review of regulatory practice. At the fourth level the Commission strengthens compliance with and enforcement of EU rules. Back

7   (28103) 16011/06: see HC 41-viii (2006-07), chapter 11 (30 January 2007). Back

8   The relevant reports are available at . Back

9   As outlined in CEIOPS Spring 2008 Report on financial conditions and financial stability in the European Insurance and Occupational pension fund sectors 2007 -2008 Back

10  Back

11   Available at  Back

12   Committee of European Banking Supervisors. Back

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