Brussels, 08/03/2007 (Agence Europe) - Visiting the United States this week, Charlie McCreevy, European Internal Market Commissioner, spoke with US financial market officials of work underway on the regulatory auditing framework and accounting standards. On 26 and 27 March a transatlantic summit will be held in Dublin on financial services.
During their meeting on Tuesday 6 March in Washington, Mr McCreevy and Mark Olson, Chairman of the American Public Company Accounting Oversight Board (PCAOB), decided to finalise a joint roadmap to reach, by 2009, mutual recognition of public oversight systems. “Equivalence does not require systems and standards to be identical but simply to be robust enough to ensure investor confidence. The goal is to move towards inspections of audit firms carried out by an independent and rigorous home-country public oversight authority by 2009”, the European commissioner states in a press release. Directive 2006/43/EC on the statutory audit obliges EU member states to register and oversee third-country auditors, including US auditors, of companies listed on EU regulated markets. It also gives the Commission power to decide on the equivalency of audit systems in force in third countries under European rules. These questions were the focus of a public consultation (see EUROPE 9343).
Speaking the same day before the US Chamber of Commerce, Mr McCreevy took a position in favour of limiting the responsibility of the audit firms. He said he felt it is devoid of all sense to have “unlimited responsibility”. There are four reasons, he says, why there should be limitation: - there is the risk of bankruptcy of one of the four major audit firms worldwide (the famous “Big Four”) in the event of ruinous judiciary procedures; unlimited responsibility does not constitute an absolute guarantee of conformity in financial documents audited; audit firms are often seen as “milking cows” and the limitation of responsibility would not necessarily entail a lower quality of audit.
Still speaking before the American Chamber of Commerce, the EU internal market commissioner acknowledged the “need to follow the impact of hedge funds on financial stability”. Surveillance of this kind is, he says, the responsibility of controllers such as central banks and “prime brokers”. Those who call for specific European regulations on hedge funds “do not seem to know exactly what they want to regulate and why”, he said, and they do not know the negative effect that such an initiative would have, mainly in terms of relocation of these funds outside the EU. He suspected these persons of wanting to protect company administrators against “shareholder activism”, wrapping the latter up in a cotton “cocoon” and changing their “nappies every hour”.
During a meeting with officials of the US Securities and Exchange Commission (SEC), Mr McCreevy took stock of progress being made in work on mutual recognition between International Financing Reporting Standards (IFRS) and the US accounting standards (US GAAP), which should reach a conclusion in 2009 according to the joint roadmap of 2006 (see EUROPE 9141).
In a speech delivered at the Centre Heymans on Wednesday 7 March, Mr Mc Creevy finally set out six principles for building a transatlantic market in the field of financial services: regulators should attempt to stay out of the line of play as much as possible, allowing the market to function; act in a coordinated multilateral manner; avoid regulatory duplication; recognise equivalency of standards on the basis of international standards; let transatlantic markets serve as the laboratory of globalisation; ensure implementation of the rules and exchange information. Early January, German Chancellor Angela Merkel had called for strengthened transatlantic economic partnership (see EUROPE 9336 and 9338). (mb)