Oviedo, 12/04/2002 (Agence Europe) - The informal meeting of the EU finance and economy ministers on Saturday in Oviedo, under the chairmanship of Rodrigo Rato, was aimed at allowing them to take stock of the measures that could be adopted by the EU to prevent situations like the Enron affair from arising. European Commissioner Frits Bolkestein was to present a note recalling measures being prepared in the context of the action plan for financial services and those that he plans to present in the future. Mr Rato pointed out before the debate opened that he planned to tackle the question of European and international coordination mechanisms on financial security. "We must coordinate the efforts made by the Commission's high level group on corporate law and the Forum on financial stability set in place by the G10, in order to improve and guarantee good corporate governance", he declared. "With a view to the Seville Summit", he said, "it would be interesting to present a document on how to coordinate the work of these two groups". German Finance Minister Hans Eichel and British Finance Minister Gordon Brown addressed a letter to the President of the Council to remind them that the supervision of the financial institutions comes under subsidiarity, while acknowledging that the Community instruments for maintaining financial stability are insufficient.
In his note, Commissioner Bolkestein recalls that the EU is already working on most of the regulatory questions posed by the Enron affair, through the action plan on financial services. He identifies five priority areas: 1) financial reporting: the Commissioner recalls that the regulation that is to make international accounting standards, IAS, compulsory from 2005 on, must be adopted in second reading by the Council, the European Parliament having given its opinion at second reading. The EU should then ensure their application and persuade the United States to accept the reports of the European companies drafted according to these standards. Mr Bolkestein will be in the United States in May to tackle the question; 2) the status of auditors: The Commission adopted, in November 2000, recommendations defining minimum quality requirements required of the audit services, and plans to present, before the end of the year, recommendations on auditing independence. Mr Bolkestein should notice that the EU has neither common norms on audit nor mechanisms on the supervision of companies; 3) corporate governance: The Commission plans to call on the group of experts on corporate law, chaired by Jaap Winter from Unilever, to reflect on certain aspects such as the role of non-executive directors, supervisory boards, salaries of directors, and the responsibility of management teams in the preparation of financial information. Mr Bolkestein is expected to invite the Council to rapidly adopt the directive on pension funds, recalling that the Enron case showed there is a risk in authorising the pension fund of a company to invest a large part of its assets in its own company; 4) transparency: the Commission will invite the Committee of European Securities Regulators (CESR) to present a report on the supervision of derived products markets. Complex instruments such as derived products may escape real supervision, mainly when trade is carried out on non-regulated markets, writes the Commission; 5) financial analysts and quotation agencies: Mr Bolkestein will be calling on the Council to rapidly take a stance on the directive on market abuse, adopted at second reading by the Parliament and introducing sanctions for insider dealing and the diffusion of misleading information. He is also to propose that the consultation under way on revision of the directive on investment services should also cover the requirements necessary for carrying out the profession of financial analyst. The Commission also plans to analyse the case of quotation agencies.
In their joint letter, Gordon Brown and Hans Eichel recognise that the growing integration of the European financial markets makes it increasingly necessary to have adequate structures for: ensuring the implementation of the objectives defined by the European Summits on financial services; - promoting cooperation between national regulators and the financial supervisory institutions; - making a technical contribution to the European legislative process; - and identifying and answering financial stability problems. The ministers state they are firmly convinced that the appropriate level for supervision is the national level. Nonetheless they say, "we must examine in greater detail the mechanisms that will allow us to achieve the objectives at Community level". In their view, after the setting in place of the committee on securities and the committee on security regulators, "we should rapidly examine how appropriate it is to set in place similar mechanisms for sectors such as banking and insurance".