Brussels, 15/02/2001 (Agence Europe) - The Committee of the wise, chaired by Alexandre Lamfaslussy, handed in its final report on Thursday on regulating the European securities markets. The report lays down the bases for a procedure to accelerate decision-taking on regulating financial markets. It notes the "inadequate" nature of the current legislation, and, in passing, blames the Commission for being "too late at times" in this field. The aim is to create an integrated securities market capable of rivaling that of the United States, in the execution of the mandate received from last July's EcoFin Council (see EUROPE of 17 July). It proposes the creation of a European Securities Committee (ESC), devised as cornerstone to the new decision-making system. According to the authors, the report, based on public consultations, has the backing of professional circles. Alexandre Lamfalussy stipulated that the principles that guided the drawing up of the report were "consultation, transparency, a precise timetable and a follow-up". The report will be the subject of a draft resolution addressed to the Stockholm Summit. An initial evaluation by Member States will be held at the next EcoFin Council, on 12 March. The Lamfalussy Committee warns that if in 2004 nothing has budged, the Treaty will need amending to create a single regulatory authority. In addition, the "wise" multiplied their efforts at defusing the conflict with MEPs who fear that the Securities Committee would diminish their role in the process. "What we are offering the Parliament in our final proposal is not a formal veto, but it is not far off" commented Alexander Lamfalussy.
Fritz Bolkestein, Commissioner responsible for the Internal market, favourably welcomed the report, and welcomed the quality of the work, feeling that "the drafting of Community legislation must be done with sufficient flexibility and speed in order to allow for the integration of markets".
The first part of the report summarises in a concise manner the reasons that push for change. It qualifies the European structures for market regulation, forty in total, as a "veritable patchwork". "The present regulatory system is too slow, too rigid and badly adapted to the modern financial market's needs" stated Alexandre Lamfalussy, and "even when it works, which is rare, it produces text of legendary ambiguity" he added, before stating that it is in fact "of a Kafkaesque inefficiency!".
The second part of the report outlines the reform of the financial market regulations. It is a case of creating a four level regulatory framework. On level 1, the Council and European Parliament will agree on the framework principals and the defining of the executive powers of a Directive or a regulation proposed by the Commission in accordance with Article 202 of the Treaty. The later must consult those concerned before it can adopt its proposal, insists the report. Level 2 foresees the networked work of national regulators, the Commission and two new committees, in view of defining, proposing and adopting the methods for the enforcement of the legislation drafted at level 1. These two "high level" committees are: 1) the European real estate committee, responsible for voting by majority, within three months, over a proposal presented by the Commission; 2) the European Securities Market Regulation Committee, is preparing in consultation with the actors concerned an opinion that must be examined by the Commission before its proposal can be submitted to the ESC. During this process, the Parliament must be kept fully informed and may adopt a resolution if measures exceed the powers of implementation. At level 3, the national regulators cooperate in order to guarantee transposition and coherent implementation of the text. The report, at this stage, encourages convergence of European regulation structures. Level 4 is that of application of norms. On this subject, Alexandre Lamfalussy deplored the fact that: "we are staggered by how few resources the Commission has been able to dedicate to the vital work of building an integrated financial market given its importance to the European economy". He told EUROPE that the Commission does not have all the resources necessary to do everything and that, far from hampering its action, the new system will bring it into contact with the reality in the field.
The recommendations set out in the report include: 1) a clear definition of the mandate and the way the two committees should function; 2) total and institutionalised transparency of the legislative process; 3) anchoring of the process in a firm timeframe; 4) interinsitutional follow-through; 5) the need to proceed in 2004, before the next IGC, with full and transparent revision of the process, involving the Parliament; and 6) safeguarding of the institutional balance.
During the publication of the first report, last November, MEPs expressed concern about the fact that the securities regulatory committee could weaken their role in the decision-making process. Although such fears seem allayed by certain guarantees and frequent contacts with the Lamfalussy Committee, the latter rejects the creation of an "appeal" level that provides the possibility to oppose decisions by the ESC. "We did not formally propose appeal because it is not feasible", explained Alexandre Lamfalussy, and because, as a practitioner, it is hard to imagine that it would not be taken into account in a Parliament opinion. On Thursday, the EP Committee on Economic and Monetary Affairs gave a favourable welcome to the final report and proposed adoption by the Parliament of a resolution before the Stockholm Summit. Furthermore, the European federation for market surveillance professionals (FESE) called for participation by experts as observers within the committee.
CEPS wants lighter regulation than that defended by Lamfalussy Report
The Centre for European Policy Studies (CEPS) has published a new report based on the discussions of a working group. CEPS Director Karel Lannoo appealed to European decision-makers to "follow a pragmatic and innovative approach to adapt EU securities market regulation to the needs of a single capital market". He calls for the directive on investments to be strengthened by limited revision, rather than by radical upheavals. "Framework legislation is a good principle (…) but it is not a panacea", he stated. The working group formed by the CEPs, and composed of practitioners, academics and policy makers, "supports the creation of an EU Securities Committee, as proposed by the Lamfalussy Group, but would prefer a less heavy structure of regulation than what is proposed now".
The report, on the challenges to the structure of financial regulation in the European Union, makes the following recommendations: 1) clarify the objectives and level of regulation; 2) limit amendments to the key investment services directive (ISD); 3) have a truly single European passport for issuers of securities; 4) promote independent listing authorities; 5) create a European EDGAR, an integrated system to strengthen disclosure and dissemination of corporate financial and non-financial information; and 6) monitor integration of clearing and settlement systems.