Brussels, 14/03/2005 (Agence Europe) - When it comes to the integration of the European financial markets, “much has been done, but much remains to be done”, Jean-Claude Trichet, President of the ECB, told the banking and financial sector which met in Luxembourg on Thursday for the 4th annual conference of the Parisian think-tank EUROFI, on the theme “Single Capital Market: Time to Tackle the Toughest Challenges”. Jacques de Larosière, EUROFI co-president and former Governor of the Banque de France (1987 - 1993), feels that “the European financial area is a mosaic of different practices”, especially in the field of taxation, which handicaps market performance in terms of size and liquid assets. The conference, which brought together many professionals and politicians, highlighted the obstacles to the integration of the financial markets in Europe. Nonetheless, the implementation of the Financial Services Action Plan (FSAP) is underway, moving practice and mindsets forward. Those taking part shared their views about new initiatives in fields such as regulation and monitoring, a European area for payments, retail banking and delivery-versus-payment. More specifically, EUROFI forwarded the idea of setting up a 26th regime to create European financial products in the retail banking sector.
In the view of Jacques de Larosière, the plan is an “ambitious basis” which has led to “tangible progress”. Philippe Maystadt, President of the European Investment Bank (EIB), described the plan as a “success” and “good legislative work”. The European financial markets are committed to a process of consolidation and are starting to think more on a pan-European basis, he said, adding that from the EIB's point of view, progress remains possible in the financial infrastructure (delivery versus payment operations for shares) and in resolving market fragmentation in the short term, plus that of the share market.
“We are on the right tracks”, said the Commissioner for the Internal Market, Charlie McCreevy, because the Plan allows the EU to give “an alternative at world level”. Mr McCreevy explained why the EU needs its financial markets to be integrated and to have “enough rules which are reasonable and viable”. The time has come for a regulatory break, for the 42 measures of the legislative package to be implemented and for their economic impact to be assessed. In May, the Commission is to publish a Green Paper on how the financial services action plan should be followed up, which will be open to public consultation during the summer, with political conclusions expected for November. The legislative initiatives underway must be carried through. Charlie McCreevy spoke of work on reinsurance, corporate governance, audit, reform of company law, the “Solvabilité II” legislative package and international accounting standards. He reiterated the fact that legislative proposals are only to be made in fields which really need new rules, and only on the basis of detailed impact studies.
EUROFI, which is made up of representatives from the banking, insurance and investment sectors, hopes to use its influence on the European institutions with the aim of speeding up the integration of the financial markets at European level. For example, in the retail banking sector, EUROFI suggests a 26th regime for the creation of European products somewhere between harmonisation of national legislation and the application of the principle of mutual recognition. The creation of a European consultative committee would accompany reflections on this subject. This 26th regime would remain optional for banking establishments, and would be an extra regulatory approach to existing national legislation. The EUROFI document indicates that in practice, it will require the definition of a body of European rules, which must be simple but sufficient, to help the European financial products to break through: simple in order to allow financial institutions the maximum of creativity and sufficient to ensure adequate and necessary consumer protection. These European products, to be available from local players and on a cross-border basis alike, would be competing with those defined at national level. This kind of regime would mean that a local business would be subject to the same competition conditions as newcomers to the market, unlike the situation arising from the application of the principle of mutual recognition. According to EUROFI, an approach taking the legislation of the service provider's country of origin as a basis for commercial relations would lead to “unacceptable situations of competitive inequality between domestic and cross-border players”, due to the demise of national laws. EUROPE points out that financial services are excluded from the highly controversial proposed directive on services in the internal market. EUROFI is proposing the creation of a European consultative committee to involve all interested parties in the reflection on the 26th regime. This “Consultative and monitoring group for the Europe of retail financial services consumers” will be chaired by a unanimously-appointed individual and will comprise users, politicians and representatives of the banking and financial sectors.
The reflection process will begin with an assessment of the political and regulatory difficulties hampering integration of the financial markets. Charlie McCreevy has not rejected the idea of “task forces” to explore the potential offered by this new regime but indicated that discussions were for the instant only at an “embryonic stage”.
In Luxembourg, Michel Pébereau, president of the European Banking Federation (EBF) underlined the need for the European integration of retail banking. Studies demonstrate that such a development would enable the EU to gain 0.5% in Gross Domestic Product and that consumers would benefit from increased competition in terms of chose and prices. He declared that, “supply creates demand. Private concerns choices are based on availability and prices”, he declared. Echoing EUROFI's proposal on the 26 regime, the EBF president listed the five fundamental principles which consumers had the right to expect if integration of retail banking is to succeed in Europe: provision of appropriate information for a decision (with full knowledge, “quality above quantity”: enough time to reflect on the purchasing decision, (which should accompany the right of retraction); improved the products offered thanks to regulatory flexibility; customer advice; greater and cheaper access to mediation system for cross-border businesses. Michel Pébereau said that if these rules are implemented, “we will have genuine European products that benefit from economy of scale and confidence”. However, he did admit that the level of consumer protection could not be aligned on that prevailing in Member States where rules were even higher.
Speaking on behalf of the Caisse national des caisses d'épargne, Martine Monneron, warmly welcomed EUROFI's proposals. He highlighted the banking and financial institutions' lack of knowledge about consumer needs and recognised that they would need more time for everyone to agree on the essential elements for a European approach, as well as on the secondary elements on which mutual recognition would apply. Legal modalities for translation of the 26th regime therefore represent a significant challenge. Daniel Lebègue, co-president of EUROFI concluded that there was an urgent need to move into a new phase.