European Scrutiny Committee Contents

71 Financial services



COM(10) 301

Commission Communication: Regulating financial services for sustainable growth

Legal base
Document originated2 June 2010
Deposited in Parliament11 June 2010
DepartmentHM Treasury
Basis of considerationEM of 17 June 2010
Previous Committee ReportNone
Discussion in Council6 June 2010
Committee's assessmentPolitically important
Committee's decisionCleared


71.1 Since the inception of problems in the financial services in 2008 the Commission has proposed a range of temporary and permanent responses, many of which have been or are being adopted. Some of the most important of these proposals relate to changing the regulatory and supervisory regimes for the financial services sector.

The document

71.2 In this Communication the Commission says that its aim is for a safe, sound, responsible and transparent financial services sector targeted at serving the real economy and that it intends to deliver various proposals, informed by consultation and impact assessment, over the next nine months. It also highlights the need for an assessment of the cumulative impact on the financial sector of the regulations. It then very briefly reviews actions already completed and outlines the need it perceives to complete regulatory and supervisory change by the end of 2011.

71.3 The Commission next lists proposals currently under discussion which it urges the Council and the European Parliament to adopt very soon:

  • the new EU supervisory architecture consisting of a European Systemic Risk Board and three European Supervisory Authorities;[304]
  • the draft Alternative Investment Fund Managers Directive;[305] and
  • the third revision of the Capital Requirements Directive, related to remuneration and capital requirements for trading book positions.[306]

71.4 In the third section of the Communication the Commission identifies four themes for the financial services legislative proposals it plans — 'enhanced transparency', 'effective supervision and enforcement', 'enhanced resilience and stability of the financial sector' and 'strengthened responsibility and consumer protection.' The matters the Commission plans to address in the next nine months are:

  • in relation to enhanced transparency, the need for greater transparency for supervisors, investors and the general public, with work on credit rating agencies, derivatives markets and improvements to the Markets in Financial Instruments Directive as intrinsic to this;
  • in relation to effective supervision and enforcement and the supervisory architecture, the need for revision of the Credit Rating Agencies Regulation to give direct oversight of these agencies registered in the EU to the European Securities and Markets Authority and a Communication on greater harmonisation of sanctions in the financial services sector;
  • in relation to enhanced resilience and stability of the financial sector, the need for amendments to the Capital Requirements Directive to improve the quality and quantity of capital held by banks, to introduce an effective liquidity regime and capital buffers and to address excessive reliance on leverage, the need for greater resilience for central counterparties clearing over the counter derivatives, the need for a better crisis management framework, the need for tools for prevention and resolution of failing and failed banks and the need for global convergence around one set of accounting standards; and
  • in relation to strengthened responsibility and consumer protection, the need for restoring consumer and investor confidence in financial markets, with measures to tackle naked short selling and excessive speculation on credit default swaps, revision of the Market Abuse Directive, the Deposit Guarantee Scheme Directive and the Investor Compensation Schemes Directive, a White Paper on Insurance Compensation Schemes, proposals on Packaged Retail Investment Products and revisions to the Undertakings for Collective Investments in Transferable Securities Directive depositories function.

71.5 The Commission concludes the Communication by reiterating the need for:

  • well calibrated and proportional regulation, agreed in consultation with industry and stakeholders to ensure that economic growth is not stunted and that pro-cyclical effects are limited; and
  • prompt action, with the final pieces of legislation adopted by the end of 2011, where possible with global convergence of standards.

The Government's view

71.6 The Financial Secretary to the Treasury (Mr Mark Hoban) notes that the Communication is a summary of the Commission's workplan and says that it has no policy implications.


71.7 As the Minister says this Communication merely outlines a Commission workplan. And we agree that of itself it has no policy implications. But, given the importance of the financial services sector and of the measures that will come forward, whilst clearing the document we draw it to the attention of the House.

304   (30950)-(30957) 13648/09-13657/09: see HC 19-xxviii (2008-09), chapter 6 (21 October 2009), HC 19-xxx (2008-09), chapter 2 (4 November 2009) and HC 5-i (2009-10), chapter 2 (19 November 2009) and HC Deb, 1 December 2009, cols 990-1030 and (31088) 15093/09: see HC 5-i (2009-10), chapter 1 (19 November 2009 and HC Deb, 1 December 2009, cols 990-1030. Back

305   (30624) 9494/09 + ADDs 1-2 (31089) 15162/09: see HC 19-xviii (2008-09), chapter 9 (3 June 2009), HC 19-xxii (2008-09), chapter 3 (1 July 2009), HC 5-vi (2009-10), chapter 2 (13 January 2010 and Stg Co Debs, European Committee B, 23 February 2010, cols 3-28. Back

306   (30802) 12093/09 + ADDs 1-2: see HC 19-xxvi (2008-09), chapter 8 (10 September 2009), HC 19-xxvii (2008-09), chapter 8 (14 October 2009) and HC 5-ii (2009-10 ), chapter 13 (25 November 2009). Back

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