Examination of Witnesses (Questions 120
- 131)
MONDAY 9 JULY 2007
Ms Angela Knight
Q120 Lord Geddes: Does not
the increasing use of the Internet, which I fully understand,
to an extent get over the linguistic barrier?
Ms Knight: It does but the one thing that you
cannot say when you are negotiating in Brussels is that it does
not matter about the language because everybody speaks English.
In effect, that is precisely the case. The Internet sites are
mostly in English and they are Internet sites in all their forms.
The predominance is in English. I need to say that they are also
there in many other languages as well but you are right in the
point that you make.
Q121 Lord Lee of Trafford:
How helpful are the commercial developments taking place on the
ground being in helping to create the single market and overcoming
barriers? To an extent my question is somewhat complementary.
I am thinking obviously of banking mergers, stock exchange mergers
or intended mergers. I am thinking also of the activities of people
like Provident Finance establishing operations and subsidiaries
in Eastern Europe on the door to door lending and similar and
the overall thrust of this taking place from the ground in real,
commercial terms, as distinct from the efforts of politicians.
Ms Knight: The nub of the matter is if a commercial
entity sees a commercial opportunity it is going to take it. Perhaps
the two things that these last few years have done as far as the
liberalising of market measures is concerned is that they have
firstly wised up different entities in different countries to
the commercial opportunities and, secondly, wised them up to the
commercial threats as well. We can see steps being taken from
a commercial perspective before the supposed barriers have started
to be removed. In the end it is that commercial thrust which will
bring about the changes because, unless there is a commercial
opportunity, it does not matter whether there is a barrier or
not in front of you; you are not going to shift from your current
market.
Q122 Lord Lee of Trafford:
The commercial will drive the political agenda in a way?
Ms Knight: Yes. There is sometimes a healthy
and sometimes an unhealthy competition between the two, dare I
say it. There has been competition where a business is on its
way and it says, "Look, there is this, this and this. Can
you do your part of it?" That is fine. It is when business
is on its way and politicians say, "We do not like you doing
that, that and that." That is where you get the unhelpful
discussions between the two.
Q123 Baroness Eccles of Moulton:
In something you said earlier there was a suggestion that the
Commission had rather tended to use legislation to solve some
of the problems perhaps a touch prematurely and that it would
have been better if the ground had been more thoroughly prepared
or maybe that they had been more knowledgeable about particular
problems they were going to hit. I know it is looking backwards
but sometimes that can inform what to do now. What are the sorts
of things that the Commission might have done in order to prepare
the ground more thoroughly before legislating?
Ms Knight: It is important to look back. Many
other trade associations and the Commission themselves are looking
back, not to rewrite history but to learn the lessons of history.
The Commission also sometimes find themselves in the middle between
national politicians saying, "We want this to be done"
and the market saying, "Hang on, we need to think about it."
What happened in the case of the Financial Services Action Plan
was a political decision made to bring down once and for all the
barriers across Europe. Clearly this is not going to happen but
it will mean a significant number of positive steps in providing
a single market. However, given that broad, political thrust,
the Commission not only had to find ways of putting in place what
their political masters had asked for but do it against a very
tight timetable. The whole area of looking to see how markets
operate differently in different countries—whether they
had time to do that or not I do not know, but even if they had
time to do it they did not think about it then because that was
not the way of doing things. Today, if this current Commission
was given exactly the same political task to undertake, this current
Commission would say, "Right, we are going to do the market
studies. We will get the consultation process in place. We will
notify the relevant trade associations, bodies and groupings.
We will have our communication lines tied up with the relevant
powers, national assemblies and so forth and, when we know what
we are doing, we will move forward with codes of practice. We
will look at competition policy. We will look at commercial realities
and only then will we get to Directives." That is the lesson
learned from this current wave of legislation. I sincerely hope
that those learned lessons will become law within the Commission
and not just get pushed to one side when we have a Commission
change, as we will at some point.
Q124 Baroness Eccles of Moulton:
When you say that the current Commission perhaps ought to have
been a bit more thoughtful and prepared the ground a bit more,
what length of time has elapsed since the previous Commission
rushed into it without doing the things you have just described?
Ms Knight: The current programme by and large
got itself under way in about 1998. We have been drawing teeth
for a very long period of time over this. It started to bear fruit
into legislative proposals in 2000/01 but such things as the arrangements
which bring together regulators, members of the Lamfalussy process,
the Committee of European Securities Regulators and so on all
had to be created at the same time. To give them their due—and
I do sincerely want to do so—the Commission learned as it
went along and learned quickly, particularly about consultation
because consultation is truly about asking the industry, getting
the industry's response, having a consideration and making some
changes accordingly; and, if you do not make changes, explaining
why not. Prior to that it was mostly information dissemination:
here is the com doc. Whatever you say we are going to do it anyway.
They have shifted substantially. However, the whole of the promotional
regime within the Commission is still based upon he or she who
manages to create a directive and get it through. That gives them
the next step up the ladder and can also be quite good as far
as the pocket is concerned. Until we get a change which says it
is also about promotion, being a good implementer, understanding
the market, getting equivalence across Europe, all that will happen
is that we will slip from knowing that the best way is to find
out first and do later back into the directive making machinery.
That is why I say the current Commission has learned well and
I just hope that what they have learned continues and becomes
standard, good Commission practice.
Q125 Baroness Eccles of Moulton:
One could say that the comments on the previous Commission that
started it off in 1998 are partly informed with the benefit of
hindsight and that lessons have been learned during the process.
Your message is: let us hope that those lessons are adhered to
and various matters are put right so that it does not slip back?
Ms Knight: Yes. Lessons have been learned by
the industry as well, wherever it is quartered. If somebody says,
"Come on now folks, let's create a single market", there
are times when industry has to say, "Hang on. Let's think
this through". The industry did not all jump on the podium
at the same time and say, "This is a good thing" without
thinking it through. The industry must learn across Europe. Most
European countries have not had a history of the kind of trade
association that operates here in the UK, one that is staffed,
that looks at technicalities without fear and will take up matters
privately and publicly with the lords and masters. This type of
trade association which we have here has started to develop in
different ways and different cultures in the different European
countries and that is all to the good because that means that
there is a conduit through which the Commission can ask questions,
often technical questions, and can get answers.
Q126 Baroness Eccles of Moulton:
That rather implies that a central Commission regulator would
not perhaps be the answer.
Ms Knight: I do not think many people would
put their hand up for a central regulator. Even if one puts to
one side legal differences, cultural differences, the fact that
some business operates in some countries and some does not operate
in others, you would never get the flexibility that is required
for the open, vibrant market that we all want. As far as we are
concerned here in the UK, we would see our business move elsewhere.
Q127 Lord Dykes: Is there
some hope that realistically the European trade association formation
that you mentioned could also be a catalyst to this process? Obviously
there are huge variations in the examples, depending on the particular
sectors, but all too often presumably they have just been representatives
of the national federations in each country coming together and
being a sort of co-federal occasional meeting, rather than having
collective teeth. Do you think that is developing now?
Ms Knight: In some respects I am the wrong person
to ask because I am new on the banking scene and so new to the
European Banking Federation. In my previous role I created a grouping
of securities and trade associations across Europe. If I give
my answer in a slightly more general way than would otherwise
be the case, these pan-European groupings can work well as long
as they concentrate on the things in which they have common agreement.
Inevitably, not only are their members sometimes in competition;
in fact, you can have a firm that is a member of a trade association
in one country and a similar trade association in another country
saying different things because it is a competitive business that
they operate in. One has to recognise that there will be competitive
issues and you cannot go there; that there will be legal issues
and you cannot go there. There will be some cultural issues. We
buy things in one way in one country and not in another and you
are never going to come to an agreement. Having said that, on
the plus side of the line there are some areas in which these
pan-European trade associations can be a serious force for providing
good, competent, high quality decision making and information.
To my mind, the way that the one I am now associated with, the
European Banking Federation, needs to think about it is not trying
to come up with something which 27 nations agree with on everything
but to come up with something that 27 nations agree with in key,
important areas where there is a true agreement.
Q128 Lord Dykes: Can I pursue
that particular area as a putative example? The Commission decreed
that from 1 January the banking transactions between countries
would be in the single market context rather than foreign transactions
from one country to another. Obviously one does not think so much
of the need to look after the large corporations and even smaller
companies because they often have the personnel and the means
to do it and their advisers as well. If you think of individual,
personal customers of banks, there was a lot of publicity in the
British press recently about excessive charges for domestic customers
in Britain. Presumably there is even more likelihood that there
will be excessive charges, whatever that word means. You mentioned
the increasingly mobile EU population, Polish people coming here
and all the other examples. It is getting very mobile now, faster
than America, and there will be excess charges levied. Do you
think that is now getting better with the pressures, with the
banks taking the lead in creating a genuine single market, or
is it very slow?
Ms Knight: The great problem in this whole area
is that you as an individual customer are not sure what it is
that you are going to be comparing or how to look at like for
like. The reason is that the information is not necessarily readily
available elsewhere. We are used to operating in an environment
which is not only transparent but pretty comprehensible as well.
Getting information is one thing. Quite another is giving information
in an understandable manner.
Q129 Lord Dykes: The press
did not say that in Britain recently about domestic accounts.
Ms Knight: I will come to that point in a moment,
if I may. The question that needs to be addressed right across
Europe is one of transparency in a format that can be easily comprehended,
where costs and services are available for you, the customer,
to choose or not to choose. If I come to some of the specifics,
we recently had a report undertaken by Oxera that compared personal
banking in the UK with 14 or 15 other jurisdictions. A number
of those jurisdictions were European but not all of them because
there are North America, Australia and one or two others. The
intention was to look at the overall costs and experience for
the individual in four standard categories taken from our Office
of National Statistics and to see what happened, how did the individual
get on in terms of finding information, charges that they paid,
the overall experience. Interestingly, one of the European countries—I
had better not mention it—had to be dropped out of that
research. It was a very major European country. It had to be dropped
because the researchers simply could not get the information.
In the other countries—again, I stick with Europe—it
was possible to get relevant information but you could not get,
for example, unbundled accounts in most. You found yourself with
charges regardless of how much you had in your bank and your banking
experience. You also found, especially with credit cards, that
the point at which you had to pay interest or settle kicked in
much earlier than it does in the UK. The UK did not come top at
everything but put all together it came out top in all categories,
in things like with elderly people. The overall charges to them
and the typical way in which they would operate bank borrowings
and so forth over the course of the year was something like 70%
cheaper in the UK than elsewhere. This does not say the UK is
perfect. We are not perfect. I do not pretend we are perfect,
but some of the things that we do here in terms of transparency,
in terms of unbundling, in terms of trying to make it easy for
people to have choice, need to be reflected elsewhere if we are
truly going to be able to help the consumers of Europe have the
choice that they want, especially when they are part of a mobile
population.
Q130 Lord St John of Bletso:
You have touched on transparency. I am more interested in accountability.
You mentioned earlier on the role of the Commission in terms of
the efficacy of enforcing single market legislation. In your paper
you say that the Commission can take action through infringement
procedure against Member States and of course, when it comes down
to anti-trust, curtailing cartels and deterring abuses of dominant
positions, the Commission has been very effective here and it
can impose fines. Does the BBA have any statistics as to how many
times the Commission has been successful in enforcing fines against
Member States or how many cases there have been where they have
imposed fines against companies?
Ms Knight: I do not know the answer to the question.
One of my experts sitting behind might know. Whilst I do not have
a number for you here, I can certainly get hold of what information
we have internally and let you have it. That will give at least
some statistics in answer to your question. There is a general
point here. How truly successful can the Commission be in bringing
about equivalent information implementation? What can it do about
infringements? It seems to me that they have a limited ability.
After all, if you have a country that is seriously infringing,
you cannot cut it off at the bottom and throw it out into the
Mediterranean and sink it. You are pretty stuck with what you
can do. If you go to any of the tables that the Commission publishes
from time to time, you always find buckets and buckets of lists
of things that have not been implemented in various countries
or are late or whatever. In any event, the infringement process
is a long one. There is only a limited amount that they can do.
If, however, they perhaps got on with the job of trying to get
things right before they went wrong, we would be in a much more
profitable place. The Commission have historically said that until
they see that there has been an infringement in practice and it
has been reported to them they cannot do anything about the infringement.
I think the industry does not really take that as the only answer.
Now that we have some of these mechanisms that have been created
through the Lamfalussy Process, we do think there is a quick and
easy way in which the Commission could take early action. The
trade associations and their members know when something has not
been done in one country when it has in another because they are
trading in both countries. You can report that through either
to your trade association that goes on to one of these Lamfalussy
committees and up directly to the Commission or whatever. That
way we can get things fixed at an early stage. We believe that
that is a much better process than waiting for the full infringement
activity. We also believe that the competition authorities have
a strong role to play. Sometimes barriers are left in place in
order to protect your home state industry. That is a competition
issue. Whilst competition issues can be quite difficult to address
from the European perspective because they get immensely political,
nevertheless they need to be addressed. Otherwise, we are doing
a lot of expensive changes for not enough beneficial end result.
Q131 Lord Haskel: You said
that the Commission could get more effective implementation by
working with trade associations and the competition authorities.
Do you think the Commission just needs more powers?
Ms Knight: I think the Commission has enough
powers. It needs to find ways of using them more effectively.
Chairman: That is a very concise, elegant answer.
Thank you very much indeed. Do have a look at the draft record
and if there are further comments that you would like to help
us with or further submissions, we would welcome them. Thank you.
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