Select Committee on European Union Fortieth Report

FINANCIAL SERVICES POLICY 2005-2010 (15345/05)

Letter from the Chairman to Ivan Lewis MP, Economic Secretary, HM Treasury

  Thank you very much for your Explanatory Memorandum on the White Paper for Financial Services (2005-2010) which Sub-Committee B (Internal Market) considered at its meeting on 23 January 2006.

  Members are interested to consider in more detail the important implications of the Commission's post FSAP strategy as set out in this White Paper. We would like to receive further detail on whether the Commission's plans are consistent with the Government's own objectives in this area. For these reasons, it was decided to hold the document under scrutiny.

25 January 2006

Letter from Ivan Lewis MP to the Chairman

  Thank you for your letter of 25 January, requesting further detail on whether the Commission's plans are consistent with the Government's own objectives in this area.

  The UK Government strongly welcomes the Commission's White Paper on financial services policy. We believe it sets out the correct approach to taking forward EU financial services integration and well reflects our own priorities in this area. Taking each of the UK's five priorities in turn:

    —  Better implementation and enforcement of EU measures affecting the financial sector. The White Paper focuses on consolidation of existing legislation and attaches strong importance to implementing existing measures throughout the EU. It recognises that Member States need to demonstrate real commitment and deliver proper implementation on time, and furthermore commits the Commission to working with Member States to monitor progress and ensure accurate implementation.

    —  Alternatives to EU regulation. From approximately 70 concrete tasks or activities set out in the White Paper only five involve a legislative proposal (two of which have already been put forward). We believe this demonstrates a clear intention by the Commission to move away from always proposing a piece of EU legislation as the most appropriate policy response. Moreover, in fields like clearing and settlement, mortgage credit or investment funds, a decision on the nature of the instruments to be employed has not been taken at this stage. In addition, the White Paper also recognises the importance of using policy synergies between financial services and other policy areas—for example competition policy. In this respect, in June 2005, the European Commission launched competition enquiries into retail banking and business insurance, something for which the UK Government has called and fully supports. Finally, we fully support the Commission's decision not to bring forward further EU legislation on issues such as rating agencies and financial analysts, following the application of better regulation principles.

    —  Better regulation. The UK Government has long been a champion of the better regulation agenda and this is a central theme of the White Paper. We welcome the Commission's commitment to deploy the most open, transparent, evidence-based policy making underpinned by a dual commitment to open consultation and thorough impact assessments which will now accompany any new Commission proposal. There is also a commitment from the Commission that it will not hesitate to propose to modify or even repeal measures that are not delivering the intended benefits if future ex-post evaluation reveals this to be the case.

    —  Making the Lamfalussy Arrangements work well. The Commission recognises the Lamfalussy Arrangements lie at the core of the EU's supervisory framework and emphasises the wide support for, and success of, these arrangements to date. In line with UK priorities for this area, the Commission's White Paper places the focus on practical initiatives to optimise these Arrangements and ensure they achieve their full potential. For example:

    (a)  improving the transparency and accountability of these Arrangements;

    (b)  practical steps to enhance co-operation between supervisors and convergence of practices (developing streamlining reporting requirements, developing joint secondment and training schemes and developing the application of existing supervisory tools like delegation or mediation); and

    (c)  pressing for consultation and impact assessments on draft advice going to the European Commission from the Lamfalussy Level III Committees;

    —  Recognising the global nature of financial services. The White Paper recognises the importance of ensuring that financial markets remain globally competitive. The White Paper also makes a number of specific commitments, which include:

    (a)  deepening the already-successful EU-US financial markets dialogue; and

    (b)  widening dialogues and cooperation on financial issues with other countries, such as Japan, China, India and Russia.

13 February 2006

Letter from the Chairman to Ivan Lewis MP

  Thank you for your letter of 13 February, responding to my letter of 25 January and detailing the Government's support for the Commission's objectives for the White Paper on Financial Services Policy 2005-2010 which Sub-Committee B considered at its meeting on 6 March 2006.

  We are pleased that the White Paper largely reflects the UK's five priorities. As this policy is of great significance to the UK financial services sector, and remains a developing proposal, we will continue to hold the document under scrutiny, and would be grateful for information on any future developments.

8 March 2006

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