Europe’s single market. Banking on McCreevy

The EU's internal-market commissioner wants fewer, but more consumer-oriented, new regulations for financial services

FEW people with a stake in the European Union's financial markets are neutral on the subject of Charlie McCreevy. The former Irish finance minister, now the EU's internal-market commissioner, is regarded as both a sensible champion of capitalism and a bureaucrat who has slowed the march towards a single market. But he is also seen as an enforcer who roughs up member states that don't toe his line - pity his spokesman, who says, only half in jest, that Mr McCreevy wants to make him the least popular man in Brussels.

The sensible McCreevy is likely to be on display in a new financial-services plan for the next five years, due to be laid out by the European Commission on December 5th. The "White Paper" is sparing in its new proposals - a relief to financial firms groaning under a glut of past initiatives from the Brussels rule factory. In return, McCreevy the enforcer has undertaken to see through the huge volume of reforms already on the books. Being frugal with the new rules helps him to be adamant about the old.

The idea is that for Europe's 450m people the commission's latest ideas, though few, should be more visible than all the 41 initiatives on financial services that have come through the pipeline in the past five years. Hitherto, the commission has focused on harmonising wholesale financial services, such as inter-bank payment systems, and on areas in which benefits could be won fairly quickly, such as government-bond and equity markets. More has been done in commercial banking (notably on capital-adequacy requirements) and accounting (with moves towards common standards) than in, say, insurance or consumer credit. In other words, little has been done that directly affects the bank accounts, mortgages and insurance policies of ordinary Europeans.

To rectify this, the new plan pays more attention to retail financial services. For instance, the commission wants to make it easier for people to open and close bank accounts across borders, and to transfer money between accounts in different countries without hitting big obstacles or incurring high fees. The White Paper also calls for plans to harmonise asset management, credit intermediaries and banking supervision, among other things - but the details will not be fixed until industry weighs in. Efforts to align mortgage products and to reduce the costs of cross-border payment are proceeding separately.

The commission admits that differences in language, culture and regulation across the EU's 25 member states will make it relatively hard and costly to harmonise retail financial services. Even so, Mr McCreevy contends that the common man must see the benefit of what he calls "Europe". "The only way you get the message across to the public of Europe is to keep it simple," says a member of his staff. "We need a single pan-European market."

Whether consumers will take advantage of new choices in financial services is uncertain. John Tattersall, a partner at PricewaterhouseCoopers, notes that they still show a lot of inertia, even when they have options. "In some ways it's blind loyalty," he says. "Even if they're not getting great service, they'll stick with their Spanish or French bank, or their German insurer." But as more Europeans own property or work abroad, the idea of similar, pan-European financial services may gain appeal. A Eurobarometer poll last year found big increases in the numbers who say they would like to use cross-border bank accounts, credit cards, car insurance and mortgages within five years.

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Part of the reason for the White Paper's slenderness is that the commissioner's staff want better regulation, not more. This is a response to criticism from the financial industry about the quality and quantity of legislation that has emanated from Brussels. "The corporate sector is beginning to whinge" about the costs of implementing measures already passed, says Graham Bishop, a consultant on European regulation. "But their bosses have been demanding this for years and years. We're into the phase of implementation where whingeing is to be expected."

There is already plenty to do. Many regulations have been passing through the EU pipeline, from the commission to ministers, the European Parliament and national governments and legislatures. This week Britain's financial regulator, the Financial Services Authority (FSA), said that the industry should start preparing for a particularly weighty regulation, the Markets in Financial Instruments Directive (MiFID). More detailed guidelines are due from the commission next month. Although the deadline for firms to comply has been pushed back to 2007, the FSA thinks they need to act now.

"This is probably the biggest piece of financial-services legislation ever passed in the world," says Bob Fuller, head of information technology at Dresdner Kleinwort Wasserstein, an investment bank, who co-chairs a working group on the directive. "Its aim is to completely reshape the financial markets in Europe." He worries that even a 2007 deadline is too soon, given other demands on financial firms.

MiFID's objectives - increased transparency and reduced costs for users of financial instruments such as equities, bonds and derivatives - will be pursued through standardised rules on the dissemination of quotes and on pre- and post-trade transparency, as well as vaguely defined "best execution" practices. Implementing the directive could require large amounts of new information technology and cost the financial industry plenty. Consultants have reckoned the bill for the average European investment firm to be euro20m-30m ($24m-35m). Another estimate puts the cost of technology implementation in Britain alone at GBP1.5 billion ($2.6 billion).

Jean-Rene Giraud, of Edhec Risk, a research firm, says that complaints about cost are mere scaremongering. In his view, consumers have the most to gain. He also predicts that dealings in financial instruments will be increasingly concentrated in the hands of global investment banks, which should gain from the regulation. Losers are likely to include small financial firms, and possibly exchanges, if they do not react fast.

How much more regulation there will be, and when, depends in large part on how quickly national governments convert EU directives into national law. So far the pace has been uneven. When states drag their heels, the enforcer steps forward. In a speech last week, Mr McCreevy sounded resolute. "When times are tough there is a perhaps understandable, though entirely misguided, temptation to throw up protectionist barriers in the hope of short-term, quick-fix gains," he said. "I will fight this tendency tooth and nail."

The commission has begun an investigation of potential obstruction of cross-border mergers in Italy, for instance, and still could start proceedings against the government there over its handling of foreign bids for Italian banks. The recent successful bid by the Netherlands' ABN Amro for Antonveneta suggests that Mr McCreevy is being heard.

Charlie McCreevy, European Commissioner for the Internal Market and Services, wants fewer, but more consumer-oriented, new regulations for financial services.