Brussels, 03/11/2005 (Agence Europe) - In a letter sent last week to the economics and finance ministers of the 25 EU Member States, European Internal Market Commissioner Charlie McCreevy says 'we need to accelerate supervisory convergence in both theory and practice,' in the financial sector. 'In this context, the Commission is planning to propose amendments to the relevant sectoral directives… to facilitate greater supervisory cooperation and remove unjustified obstacles to cross-border consolidation… The Commission will not hesitate to initiate infringement proceedings against Member States that prevent companies from using the basic Treaty freedoms, such as free movement of capital and freedom of establishment.' Cross-border consolidation in the financial markets is on the agenda of the 8 November ECOFIN Council, where the Commission will be unveiling the outcome of research it has carried out into the legal, tax, economic, political and behaviour obstacles to cross-border consolidation in the financial industry (see EUROPE 8934 and 8892). Since 1999, such mergers and acquisitions have accounted for 20% of all financial services mergers, but cross-border mergers and acquisitions make up almost half of all merger deals in other industries.
'Recent events have highlighted the type of difficulties that can be encountered when seeking acquisitions in another Member State,' explains Charlie McCreevy in his letter: 'And yet the fundamental principle of the Internal Market is crystal clear: companies must be able to benefit from free movement of capital and freedom of establishment. Unfortunately, this is not always put into practice. In cross-border transactions, the supervisory approval process is often long, cumbersome and sometimes opaque.' Without specifically mentioning them, the Commissioner referred to recent obstacles in Italy to Dutch bank ABN Amro's attempt in the first half of this year to buy up Italian bank Antonveneta. The discriminatory approach taken by Italian banking supervisor Antonio Fazio, President of the Banca d'Italia, was key in this case. To accelerate supervisory convergence, the Commission is suggesting amending several directives - Article 16 of Banking Directive 2000/12/EC; Article 15 of Insurance Directives 2002/83/EC and 92/49/EEC; the corresponding rule in the forthcoming Reinsurance Directive and possibly Article 10 of the MiFID Directive 2004/39/EC on financial instruments.
The Commissioner writes that economic operators 'have also identified multiple reporting requirements and diverging practices in the day-to-day supervision as additional major obstacles. I agree. Opportunities for fixed cost synergies and increased efficiency are discouraged by the burden of excessive, duplicative or unnecessary rules on information requirements. The Commission's White Paper on the overall financial services strategy, to be published before the end of November, will underscore once again the importance of reducing compliance costs for firms operating in several Member States.'
'The Commission will not hesitate to initiate infringement proceedings against Member States that prevent companies from using the basic Treaty freedoms, such as free movement of capital and freedom of establishment. Labour market rigidities also need to be tackled in this context. At EU level, much has already been done to enable companies to set up streamlined pan-European structures (e.g. the EU company statute, the cross-borders merger directive). However, further progress is needed in some areas. Companies would like to be able to transfer their registered offices more easily form one Member State to another. And unfair corporate defence mechanisms, still remaining after the Takeover Bids Directive, are also seen as a major cross-border obstacle by many market participants. I intend to consult further on this matter to define the key barriers to be removed. Our consultation shows that action is also required on the long-standing issue of inter-group VAT. The fact that VAT is not fully recoverable in the financial sector often prevents financial groups from streamlining their activities on a pan-European scale. Together with my colleague Mr Kovacs (Laszlo Kovacs, European Commissioner for Taxation and Customs Union, Ed.), we will reflect on how to overcome this obstacle.' In its report on the contribution of tax and customs policies in revamping the Lisbon Strategy, the Commission outlined these problems, indicating it would be unveiling new legislation before the end of the year (see EUROPE 9057).