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Report from the Commission to the European Parliament, the Council, the European Central Bank and the Economic and Social Committee - Financial services action plan - Progress report

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51999DC0630

Report from the Commission to the European Parliament, the Council, the European Central Bank and the Economic and Social Committee - Financial services action plan - Progress report /* COM/99/0630 final */


REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE ECONOMIC AND SOCIAL COMMITTEE - FINANCIAL SERVICES ACTION PLAN PROGRESS REPORT

FINANCIAL SERVICES ACTION PLAN

Progress Report

Introduction

The European Council in Cologne and the European Parliament have supported both the content and urgency of the Action Plan for Financial Services [1]. The Action Plan details the work that has to be accomplished to reap the full benefits of the euro and to ensure the continued stability and competitiveness of EU financial markets. The Council invited the Commission to report on a regular basis on the progress made and to present its first report before the end of 1999. This first report to the Council and to the European Parliament tracks progress over the first six months (until 10 October) since the adoption of the Action Plan. In view of the short period sice the adoption of the Action Plan, this report focuses in particular on the legislative progress that has been made. Annexed is a detailed breakdown of the separate action points. The second progress report will be made to the ECOFIN Council and the European parliament in mid 2000: it will contain an assessment of the progress, direction and results of the integration of the EU financial services sector and its contribution to growth and employment in the Union.

[1] Financial Services - Implementing the Framework for financial markets: Action Plan. Commission Communication of 11.05.1999 COM(1999)232

Mechanisms & process

The mechanisms for implementing the Action Plan are critical to its achievement. Over the past six months, and in line with the suggestions in the Action Plan, the Commission has put in place the following structures.

· The Financial Services Policy Group (FSPG), comprising personal representatives of economic and finance ministers, has resumed its tasks as a forum to forge consensus between national ministries involved in financial services regulation. The FSPG has met twice since the adoption of the action plan and has assisted the Commission in monitoring progress and preparing this report.

· Initial informal discussions have taken place with representatives of the European Parliament with a view to finding arrangements to discuss major policy orientations with parliamentarians at an early stage.

· EU representative bodies have submitted short lists of experts to help the Commission assess certain implications of technical issues raised in the Action Plan. These 'Forum Groups', composed of market experts, are initially considering issues related to market manipulation; updating the Investment Services Directive; collateral; consumer information requirements for retail financial services; and differences in national legislation that hinder the cross-border marketing of financial services. Further groups may be set up in the future.

Some progress has been made on implementing the Action Plan &.

The challenge set by the Action Plan for all of the Union's institutions is considerable. It will demand intense and sustained activity if we are to achieve the fierce timescale demanded by the rapidly-changing financial services sectors. The first months have seen welcome progress. Already the Commission has issued its Communication on Pension Funds and is actively preparing a draft directive. It has also adopted a proposal for a directive to amend the Money Laundering Directive. With regard to wholesale markets work is well underway within the Forum of European Securities Commissions (FESCO) and the Accounting Contact Committee to meet the timeframe set out in the Action Plan. The Commission also recently adopted its Communication on the implementation of the Risk Capital Action Plan. The Commission will increase its efforts in the field of accounting policy and will present proposals to enhance regulatory co-operation between securities supervisors. Progress to achieve open and secure retail markets is also satisfactory. Discussions in the Council and the European Parliament on the distance selling proposal for financial services are continuing. The preparation of a legislative proposal for insurance intermediaries is on track as is the work on a number of Communications (consumer information, insurance) and a Green Paper on E-Commerce and financial services. Work on prudential rules has also advanced. The proposal for a E-Money Directive is advancing through Council and European Parliament. The review of bank capital rules in parallel with the G-10 Basel Committee on Banking Supervision, the insurance solvency requirements, and the supervision of financial conglomerates are on schedule. The adoption of a Commission Recommendation on the disclosure of financial instruments is imminent. Finally, work on wider conditions for a single market are continuing with a view to direct taxation. The Council deliberations on the Commission proposal on a minimum taxation of savings income are continuing at full speed and it is hoped that a political agreement can be reached before the end of the year. The same holds, mutatis mutandis, for the work of the Council group working on the implementation of the Code of Conduct on business taxation. After first fruitful discussions, inter alia in the Taxation Policy group, work on the taxation of supplementary pensions and financial services in general will be continued as a priority in 2000. A Commission proposal for supplementary pensions is already under preparation.

.. But there is a need for greater effort

The pressure to make progress demands a sustained response from all institutions. The European Parliament and the Council have been invited in the Action Plan to make every effort to ensure rapid agreement and implementation of the individual legislative measures. There must be a clear political commitment by all institutions and actors to commit the necessary resources if we are to achieve the ambitious deadlines that have been agreed. Indeed, lack of progress is noticeable in particular in the following areas:

( Political agreement on the proposal for a Take Over Bids Directive, which would make the final adoption of this proposal possible, has still not been achieved in the Council. The main stumbling block is to find a mutually acceptable solution for Spain and the United Kingdom over the status of Gibraltar.

( The proposed directive on the Winding-up and Liquidation of Banks was presented to the Council and European Parliament in 1985. Here too the lack of progress is the absence of a mutually acceptable solution on the application of winding-up and liquidation procedures in Gibraltar.

( Despite successive political commitments at the most senior level, there is little progress on the European Company Statute. This has had implications for two other measures in the field of company law (10th Company Law Directive and the 14th Company Law Directive).

( The preparation of a Commission Recommendation on Prior Information for Consumers will build on progress from industry in developing best practices. Delays within industry may soon be resolved. The Commission has also established an 'Forum Group' with industry and consumer representatives to make progress.

( The Commission Communications on Payments in the Single Market and Fraud and Counterfeiting in Payment Systems will be presented before the end of the year. The short delay in their adoption is due to administrative reasons caused by the change in the Commission over the summer.

Overall assessment:

The Financial Services Action Plan has injected new urgency and momentum into the task of building a single financial market. There is now a shared understanding, at the highest political level, of what is at stake - an unheralded opportunity to put modern and efficient financial markets at the service of EU enterprise, savers and investors. The six months since the endorsement of the Action Plan by the Cologne European Council have witnessed modest but tangible progress in terms of:

· the ground-work for the specific initiatives in the action plan and mobilisation of input from market practitioners and other important constituencies (consumers, users);

· negotiation and adoption of legislation: Council and Parliament have redoubled their efforts to secure progress on number of proposals some of which have been the subject of longstanding deadlock. These efforts have not always come to fruition but with continued application, a number of key initiatives could be agreed over the coming months such as the 13th Company Law Directive, and winding-up and liquidation of insurance undertakings. An important stumbling block to the political progress of important initiatives has therefore been the absence of a solution for two Member States (Spain and the UK) over any direct or indirect reference to Gibraltar or its status in proposed legislation. Continuation of this impasse carries heavy costs for the development of a single financial market. It is to be hoped that the two Member States concerned can finalise practical solutions to break the deadlock.

Over the next six months, the onus will remain on the Commission services to come forward with a series of important measures in accordance with the time-table foreseen in the Action Plan (pension funds, green paper on Investment Services Directive, modernisation of accounting strategy, e-commerce Green Paper). In addition to the preparation of specific initiatives contained in the Action Plan, the Union will need to refine its strategy in the light of accelerating structural change in financial markets. Discussions in FSPG and other fora in the coming months will be concentrated on the following areas:

· EU-wide trading of securities where particular efforts needs to be devoted to allowing issuers the possibility of raising capital on an EU wide basis. This requires concerted action relating to the demand side (market transparency, information) and supply-side (clear and common understanding on authorised activities, products and intermediaries and effective cooperation in market supervision);

· Emergence of internationally active conglomerates as the mainstay of EU financial system which raises questions for the EU prudential and supervisory framework.

· Harnessing the commercial potential of E-commerce trading of financial services in manner which offers effective safeguards to individual consumers.

ANNEX

Progress on the Action Plan for Financial Services

This annex provides a first overview of progress on actions included in the Action Plan for Financial Services (COM(1999) 232). The reporting date is 10 October 1999. A star (() indicates an action which has been successfully completed. A cross (() indicates actions where some progress has been achieved in meeting the targets set in the Action Plan. A minus sign (-) indicates those for which progress is disappointing.

The tables summarise the current situation and provide the Commission's assessment of the degree to which Community institutions and Member States are achieving the objectives set out in the Action Plan. Where appropriate a comment has been added in the final column, notably to indicate the next steps to be taken.

STRATEGIC OBJECTIVE 1: A SINGLE EU Wholesale market

Raising capital on an EU-wide basis:

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Establishing a common legal framework for integrated securities and derivatives markets:

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Towards a single set of financial statements for listed companies:

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Containing systemic risk in securities settlement:

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Towards a secure and transparent environment for cross-border restructuring:

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A Single Market which works for investors:

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STRATEGIC OBJECTIVE 2: OPEN AND SECURE RETAIL MARKETS

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Strategic objective 3: STATE-OF-THE-ART PRUDENTIAL RULES AND SUPERVISION

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GENERAL objective: WIDER CONDITIONS FOR AN OPTIMAL

SINGLE FINANCIAL MARKET

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