Commission races to meet deadlines set by Lisbon summit

Date: 13/07/2000

By Renée Cordes

THE EU has given itself just five years to create a fully integrated market in financial services.

In an ideal world, this should have gone hand in hand with the arrival of the single currency. But this has not happened.

Companies planning to sell their shares in several countries have to meet a host of listing requirements, investors find it hard to compare firms' financial accounts directly and there is little, if any, coordination of national banking, insurance and securities markets, often exposing investors to unnecessary risks.

The European Commission sought to remedy the problem in May 1999 by unveiling an ambitious financial services action plan which called for a series of measures to ensure investors can take full advantage of the euro while maintaining a high level of consumer confidence and protection.

To work, any good plan needs deadlines, and Union leaders meeting in Lisbon in March set a target date of 2005 for implementing the plan. They also set a 2003 deadline for a separate action plan on risk capital for start-up companies.

The 2005 target date is, however, a few years later than European employers' organisation UNICE wanted. It had argued that the necessary measures should be introduced in full by 2002, when the euro notes and coins will enter into circulation. "It seems a bit incongruous if we do not have the whole action plan in place by then," said a policy expert.

To a large extent, implementation of the action plan has been held up by the EU's slow and bureaucratic decision-making procedures. After all, only nine of the 42 measures outlined in the blueprint are proposals for new directives, while the rest are non-binding recommendations or amendments to existing legislation, so it is not as if the policy-makers had to start from scratch on most of these issues.

Spurred on by growing impatience among member states and firms about the lack of a liquid, well-integrated financial market, the Commission is preparing to shift into top gear as it races to adopt at least eight new measures between now and the end of this year.

These include a new directive on insurance intermediaries, due to be unveiled before the summer break, changes to the Union's law governing the information to be included in share-sale prospectuses scheduled for adoption in autumn, and the creation of an EU securities committee, which is due to be established by the end of the year.

"We have made substantial progress towards our common goals, but still have some way to go," said Internal Market Commissioner Frits Bolkestein earlier this year. But he added that he was optimistic that the commitment made at Lisbon to improve the efficiency of the financial markets would help speed up implementation of the plan.

In Lisbon, Union leaders called for swift action in five key priority areas. These include simplified registration procedures for companies planning to have their shares publicly traded, a single financial reporting framework for all publicly traded firms, a new pension funds directive and a fundamental review of EU investment services legislation.

Of course, deadlines have been missed in the past and the onus is now on the Commission to demonstrate that it can stick to its targets.

The proposed directive on distance-selling of financial services should, for example, have been agreed long ago, but a third version probably will not see the light of day until the end of this year.

Meanwhile, the high-level financial services group made up of member state representatives which laid the groundwork for the action plan still continues to meet three to four times a year, offering policy-makers advice on improving financial market regulation.

Its work is crucial to the Commission's regular progress reports on implementation of the action plan, with the next one due to be presented to economic and finance ministers in November. The EU executive will have to work hard - and fast - if it wants to avoid an embarrassing report card.

The EU has given itself just five years to create a fully integrated market in financial services. Article forms part of a survey on financial services.