McCreevy calls near-halt to financial services legislation

By Anna McLauchlin

Date: 21/04/05

Internal Market Commissioner Charlie McCreevy will call a halt to further EU legislation in most sectors of the financial services market over the next five years, but may adopt measures to boost the cross-border provision of retail banking services and asset management.

In an outline seen by European Voice, McCreevy has mapped out his plans of a Green Paper on Financial Services Policy - known as the post-Financial Services Action Plan (FSAP) - which is to be adopted in May.

Banking services for individual customers (retail banking) and asset management services are particularly "fragmented", the paper says. It suggests that: "Carefully-targeted, evidence-based initiatives might bring benefits to the European economy."

The European Commission will set up forum groups to identify the most serious barriers and "prioritise a limited number of actions" to promote integration.

These could include directly opening up the market, or services being designed on an EU-basis so that they can be sold anywhere in the Union.

But a third approach - dubbed the "26th regime" - is also touted, whereby a European standard would be designed for certain products, such as life insurance, for those companies wanting to operate Europe-wide.

Tanguy van de Werve, head of financial markets and banking supervision at the European Banking Federation said that the concept of a 26th regime was "interesting", but warned that, "it should not be promoted merely to make up for the lack of political will to harmonise existing rules".

Van de Werve said that the Commission should also tread carefully with its suggestion of creating a "Financial Services Rulebook", which would simplify all European and national legislation into one body.

Sources say that this issue raised much discussion in Commission meetings and the EU executive is considering whether to carry out an impact assessment to see whether it would be feasible.

"If we start referring to national rules this could be a big deal," Van de Werve said.

McCreevy also identifies the supervisory system for the banking sector as an area where action could be taken.

"Monitoring cross-border risk is becoming more critical; consistent legal interpretations between regulators avoid market uncertainty," the paper reads.

This could be tackled by the development of common reporting templates and effective dispute settlement procedures, it continues. But the Commission will only consider changes to EU law on banking supervision as part of the review of the banking legislative procedure planned for 2007.

Banking supervision is a matter that currently divides member states. Germany has called for a European banking supervisor to be set up to allow international banks to report to just one supervisor rather than a potential 25.

Other member states think that it should be the home state regulator that governs the activities of international subsidiaries. But the UK does not want to lose the 'light touch' approach of its own regulator, the Financial Services Authority, which it sees as contributing to the success of the City of London.

Aside from these areas, the Commission will back off from any major legislative action on financial services and, in the spirit of the current drive for better regulation, any measures taken will have to yield "significant economic benefits".

The executive will instead concentrate on the completion and implementation of the 42 measures from Brussels under the first FSAP, which began in 1999.

"The FSAP has created an enabling legal framework which should allow issuers, investors and providers of financial services to transact on a pan-European level without undue legal impediment," the paper says. "The key, now, is to make it function well."

Article looks at the work programme of the new European Commissioner for the Internal Market and Services, Charlie McCreevy, concerning the regulation of the financial markets, especially the retail banking sector.

European Commission: DG Internal Market and Services: Free movement of services: Financial services http://ec.europa.eu/comm/internal_market/finances/index_en.htm

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