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Financial Services Action Plan (FSAP)
Financial Services Action Plan (FSAP)
Financial Services Action Plan (FSAP)
This summary has been archived and will not be updated, because the summarised document is no longer in force or does not reflect the current situation.
Financial Services Action Plan (FSAP)
This communication on the implementation of a financial services action plan proposes policy objectives and specific measures for improving the single market in financial services .
Commission Communication of 11 May 1999 entitled "Implementing the framework for financial markets: action plan" [COM(1999) 232 final - Not published in the Official Journal].
This action plan follows on from the Communication of 28 October 1998 entitled "Financial services: building a framework for action". It was presented at the request of the European Council, meeting in Vienna in December 1998, which invited the Commission to draw up a programme of urgent work to achieve the objectives set out in the framework for action, on which a consensus had emerged. It is also based on the discussions held within the Financial Services Policy Group (FSPG), composed of personal representatives of the finance ministers and the European Central Bank (ECB).
At its meeting in Cologne on 3 and 4 June 1999, the European Council requested the Commission to continue the work undertaken on the action plan within the FSPG.
The action plan for a single financial market puts forward indicative priorities and a timetable for specific measures to achieve three strategic objectives, namely establishing a single market in wholesale financial services, making retail markets open and secure and strengthening the rules on prudential supervision.
The euro is the catalyst for a market-driven modernisation of EU securities and derivatives markets. Changes in the organisation of financial marketplaces are already visible, notably in the closer relationship between different exchanges and in the consolidation of payment and securities settlement systems. Broadly, the action planned is in six areas:
Fundamental change in the EU financial markets is being driven mainly by wholesale services. However, the retail sector is itself in the process of considerable adaptation. A legal framework is now in place that allows financial institutions to offer their services throughout the Union and has established a bulwark against institutional failure and systemic risk. And yet, an array of legal, administrative and private law obstacles hamper the cross-border purchasing or provision of these services (e.g. single bank account, mortgage credit). The Communication identifies a number of pragmatic steps that could be undertaken to overcome these obstacles. The Commission has identified six key areas for action:
Strengthening prudential structures
EU regulatory safeguards need to keep pace with new sources of financial risk and state-of-the-art supervisory practice in order to contain systemic or institutional risk (e.g. capital adequacy, solvency margins for insurance companies) and to take account of changing market realities (where institutions are organised on a pan-European, cross-sectoral basis). Suggested measures include:
Disparities between Member States' rules on corporate governance can give rise to legal and administrative barriers which hinder the efficient operation of the EU financial market. However, the term "corporate governance" covers a wide range of issues whose ramifications for the single financial market are at present unclear. Any Community initiative in this area should therefore initially be confined to reviewing national codes of corporate governance applied in the different Member States in order to identify any barriers which could frustrate the development of a single EU financial market.
Another important issue is the elimination of tax barriers and distortions. It would be politically difficult to create a single market in financial services as long as the process of tax coordination in financial markets was incomplete. The communication therefore underlines the need for early adoption of the Directive proposed in 1998 to ensure minimum effective taxation of cross-border savings income.The Commission will keep up its efforts to eliminate tax barriers impeding the smooth operation of the single market in financial services, and it plans to table proposals on pension funds and insurance, with the support of the Taxation Policy Group.
Implementing the action plan
Mechanisms are to be set in place for monitoring progress and contributing to the practical implementation of the different measures. One of these mechanisms will be continuation of the work of the Group of personal representatives of the finance ministers with a view to identifying future challenges, providing strategic data and setting priorities. A high-level forum could also be created to take soundings from bodies representing the principal EU interest groups which have an interest in the smooth and efficient operation of financial markets. EU representative bodies should also play a part in identifying experts who could help the Commission in assessing the implications of more technical solutions.
State of progress and preparation for the future
On 27 October 2003 the Commission set up a specialised group to measure the state of progress of the FSAP and prepare for the future. With the help of four new groups of market experts, it launched an in-depth evaluation of the state of integration of Europe's financial markets. This process began as the five-year legislative phase of the FSAP was coming to an end. The evaluation must be extensive, transparent and open. The formation of the expert groups, made up of high-calibre specialists in the fields of banking, insurance, asset management and securities trading, is the first step in the process. The task of these groups is to help the Commission identify the main questions which will be examined in the course of the ensuing consultation.
More information on the evaluation of the FSAP by expert groups: DG MARKT.
Commission staff working document, of 5 January 2006, "Single Market in Financial Services Progress Report 2004-2005" [SEC(2006) 17 - Not published in the Official Journal].
In this progress report, the Commission reviews the achievements in financial services since mid-2004. Progress reports are among the undertakings made in the White Paper on financial services policy 2005-2010 published on 5 December 2005. The Commission concludes that 98% of the measures provided for in the PASF have been achieved within deadline (2005). Work has begun on implementing the measures.
The report mentions, among others, progress made in adopting:
Tenth progress report, of 2 June 2004, entitled "Turning the corner - preparing the challenge of the next phase of European capital market integration".
This tenth progress report concludes that almost all of the 42 FSAP legislative measures (93%) have been adopted within the given deadlines in mid-2004. Since the ninth progress report in November 2003 agreement has been reached on:
The Commission has also adopted:
As future priorities the Commission underlines the importance of continuing the legislative work on:
Ninth report, of 24 November 2003, on implementation of the Financial Services Action Plan, entitled "The FSAP enters the home straight".
The Commission's last intermediate report (PDF) concludes that the FSAP, which is scheduled for completion in 2005, is one of the driving forces behind the development of the European capital market. The FSAP has thus improved the prospects for sustainable, investment-driven growth and employment. Further progress has been made in adopting the legislative measures provided for by the Plan, and in particular:
Nevertheless, the report stresses that, on account of the European Parliament elections and enlargement of the European Union in May and June 2004, it is essential to reach an agreement over the next four months on the important FSAP measures still to be taken, namely: the Investment Services Directive, the Transparency Directive and the Directive on takeover bids.
Lastly, the report emphasises the initiatives taken by the Commission in assessing the state of integration of European financial markets.
Eighth report, of 2 June 2003, on implementation of the Financial Services Action Plan - nine months left to deliver the FSAP.
According to the eighth report (PDF), the overall financial outlook strengthens the political case for integrating financial services within the EU. This integration, through the FSAP, should make it possible to reinforce financial stability and market integrity, establish a framework for the implementation and enforcement of common European legislation and ensure that the new additional markets after enlargement will be absorbed smoothly into the EU regulatory system.
Even if many of the legislative measures needed to establish an integrated financial market have already been adopted, the report stresses that it is crucial to finalise the rest of these measures to ensure that the FSAP is fully implemented by 2005.
In the short term, the Commission does not intend to propose a new complete programme of measures in the financial services sector, but to work on two broad policy goals where more work is needed over the coming years: (a) common implementation and enforcement, notably by developing networks of financial regulators and supervisors; (b) the global dimension of the European financial market, in particular relations with the United States.
Seventh report, of 3 June 2002, on implementation of the Financial Services Action Plan.
The seventh report (PDF) notes that considerable progress has been made in integrating the sector, notably as regards investment services, capital adequacy of banks and investment firms, clearing and settlement, the new directive on takeover bids, prospectuses, pension funds, financial conglomerates and market abuse. Almost all the priority measures identified in 2001 have now been adopted. The report does, however, emphasise that momentum must be kept up if the 2005 deadline set by the FSAP is to be met in spite of ailing financial markets and decreased investor confidence. To strengthen the monitoring of the FSAP, the Commission will develop a series of indicators to help prioritise financial policy initiatives. It would also be desirable to extend the "Lamfalussy" process to all financial sectors, allowing EU regulation to respond rapidly and flexibly to market developments. Lastly, it raised the issue of drawing up an action plan for company law including corporate governance in the course of 2003.
Sixth report, of 3 June 2002, on implementation of the Financial Services Action Plan [COM(2002) 267 final - Not published in the Official Journal].
This sixth report states that tangible progress has been made but calls on the Member States to do more. It notes that eight legislative proposals still have to be adopted in the field rapidly. The proposals concern market abuse, financial collateral arrangements, distance marketing of financial services, insurance intermediaries, prospectuses, financial conglomerates, international accounting standards and supplementary pension funds. The report regrets that, after twelve years of negotiations, the proposal on takeover bids has been abandoned and notes that the Commission is to put forward a new proposal on this subject. In the wake of the Enron group's collapse, a group of experts is to submit recommendations on best practices in corporate governance and auditing practices. Nevertheless, the Commission stresses that most of the issues highlighted by Enron are already being tackled in the context of the action plan. Lastly, new proposals on financial analysts and credit rating agencies are in the pipeline.
Fifth report, of 30 November 2001, on implementation of the Financial Services Action Plan [COM(2000) 712 final - Not published in the Official Journal].
The progress report stresses the urgent need for an integrated European financial sector. The latest developments affecting the sector, such as the introduction of the euro, the economic slowdown, market volatility in the wake of 11 September and efforts to combat the funding of terrorism, must be taken into account. The report welcomes the progress made, such as the adoption of the anti-money laundering Directive, the agreement on the Regulation on cross-border payments, the adoption of the Statute for a European Company, the political agreement on the distance marketing Directive and the setting-up in the securities sector of the committees recommended in the Lamfalussy Report. However, proposals on pension funds, prospectuses, financial conglomerates and international accounting standards and the new proposal on takeover bids are all key measures which must be adopted quickly.
Fourth report, of 5 June 2001, on implementation of the Financial Services Action Plan [COM(2001) 286 final - Not published in the Official Journal].
The report assesses the state of progress with the relevant proposals and directives. It states that decision-making powers now lie with the Council and the European Parliament. Since the action plan was endorsed, eighteen measures have been put forward and, although agreement has been reached on some points, others represent a real challenge. A real political will is needed to complete the action plan by 2003-05. This is the case, for instance, as regards the setting-up of the two securities committees advocated in the Lamfalussy Report. As matters stand, the European Parliament is unwilling to grant powers to an unelected body and it has clashed with the Council on this point. The report also states that the rapid changes which have taken place in the banking sector will have to be taken into account; the urgency of revising supervisory regulations is more pressing than had been thought. Another area dealt with is cross-border cooperation between stock exchanges. Lastly, the report mentions progress achieved in implementing the action plan (financial conglomerates, prospectus to be published for securities offered to the public or admitted for trading, market abuse, collateral risk and lending risk) and the remaining problem areas (pension funds and e-commerce).
Third report, of 8 November 2000, on implementation of the Financial Services Action Plan [COM(2000) 692/2 final - Not published in the Official Journal].
On the whole the situation is satisfactory although, for want of sufficient momentum, the FSAP will not on present form be completed for the ambitious date of 2005. The Commission has adopted a detailed timetable ("critical path") to ensure compliance with the deadlines, as monitored by the "2005 Group". In order to follow market developments and trends, the Commission has prepared a list of indicators.
Second report, of 30 May 2000, on implementation of the Financial Services Action Plan [COM(2000) 336 final - Not published in the Official Journal].
This report recalls that the Lisbon European Council called for the action plan to be implemented by 2005. The Commission notes that substantial progress has been made. However, little progress has been made in some fields: the European company statute, fraud and counterfeiting in payment systems and transposal by the Member States of the Directive on the definitive nature of the regulation. In order to meet the cut-off date of 2005, implementation of the action plan must be speeded up in five priority sectors: a "European passport" for issuers of securities, enhanced comparability of companies' financial statements, elimination of barriers to investment by pension funds and UCITS, improved functioning of cross-border sale and repurchase markets and a fundamental review of the Investment Services Directive.
First report, of 24 November 1999, on implementation of the Financial Services Action Plan [COM(1999) 630 final - Not published in the Official Journal].
The report tracks progress over the first five months since the action plan was adopted. It focuses in particular on progress in several areas following the adoption of a number of the measures envisaged. The report also paints a generally favourable picture of the efforts made to prepare the ground for specific initiatives contained in the action plan, and it acknowledges the scale of the contribution made by the various market players and by consumers and users. The report stresses that both the Council and Parliament have redoubled their efforts to secure progress on a number of proposals, even if these have not always borne fruit. It goes on to call on the Commission to step up its efforts in the months ahead to come forward with a series of important measures in accordance with the timetable laid down in the action plan (pension funds, Green Paper on the Investment Services Directive, modernisation of accounting strategy, e-commerce Green Paper). In addition to the measures contained in the action plan, the European Union will need to refine its strategy with a view to accelerating structural change on financial markets.
Communication of 21 May 2003 from the Commission to the Council and the European Parliament entitled "Modernising Company Law and Enhancing Corporate Governance in the European Union - A Plan to Move Forward" [COM(2003) 284 - Not published in the Official Journal].
The Commission considers that the European regulatory framework for company law and corporate governance needs to be modernised, particularly because of the recent financial scandals, the growing tendency of European societies to operate trans-nationally within the internal market, the continued integration of European capital markets, the development of new information and communication technologies and the imminent enlargement of the EU to ten new Member States. With this in view, the Commission is setting key policy objectives, distinguishing between short-, medium- and long-term objectives, and indicating the types of instruments to use and when to use them. The main objectives of its action plan are strengthening shareholders' rights and third-party protection, and fostering efficiency and competitiveness of business. Furthermore, in drawing up its action plan, the Commission pays particular attention to the need for any regulatory response at European level to respect a number of guiding criteria: respecting the subsidiarity and proportionality principles; being flexible in application but firm in the principles; help shape international regulatory developments.
Several initiatives related to this action plan but distinct from it are covered by this integrated approach:
Last updated: 04.07.2006