Brussels, 08/11/2005 (Agence Europe) - After a discussion at the Ecofin Council on the Commission's report on cross-border consolidation in the finance sector, Gordon Brown described the report as a “step forward” toward the integration of European financial markets. Mr Brown presented the Presidency conclusions to the press but not those of the Ecofin Council as Poland set forth the condition of prior scrutiny. The Presidency encourages the continuation of discussions on this subject in 2006 and stresses the importance of having just, transparent and coherent rules applicable to mergers and acquisitions. It also stresses the need to promote convergence of control practice and greater cooperation between national regulators, and calls on the Commission to initiate consultation of market players and a complete impact analysis before submitting formal proposals. Mr Brown said that they were almost unanimously in agreement on all these proposals although Poland would like a little more time for reflection. He said that there will naturally be agreement by the whole of the Council in December. The Council, he went on, did not discuss the situation in Italy, it simply envisaged conclusions at European level. The comment from the Netherlands was “Bravo to the Commission for drawing up a list of the obstacles - now they must be removed!”. Austria called for surveillance not to be neglected when it comes to measures that promote competition but stressed that surveillance itself should not “become a technical trade barrier”.
Presenting the report to the press the same day, Mr McCreevy explained that the Commission's intention was not to streamline the market of the various Member States but to encourage the “constitution of second-division champions”. “In some member States, there are very competent banking establishments which, at world level, remain small”, he commented. This is why cross-border consolidation deserves, in his view, “special attention”, as there is great potential in Europe that remains unexploited.
The study, which was carried out among 360 players on the European finance market between April and June 2005, shows that over 90% of the financial players taking part in the study pointed a finger of blame at the lack of recovery of fixed costs as being the main reason why there are few cross-border mergers within the EU. These fixed costs are not offset by large-scale savings that would allow mergers between two entities. Mr McCreevy felt that three main difficulties are at the origin of this situation: 1) the lack of convergence in the control operated by surveillance authorities on cross-border entities; 2) national legal and structural inflexibility which prevents companies from reorganising themselves and developing in a cross-border context; and 3) difficulties for selling the same financial product between one Member State and the next. The Commission's report therefore suggests solutions, at European level and Member State level, in order to create a more favourable environment for cross-border concentration in the financial sector. EUROPE will come back to this.