The Commission's regular progress report on the single market in financial services, published in January 2006, declares the period 2004-2005 to have been one of "significant strides". The next five years, therefore, will see a period of consolidation with a tidying up of remaining specific issues.

Overview

According to the January 2006 Progress Report, 98% of the Financial Services Action Plan (FSAP) measures have been put in place and work has begun on implementation. The Commission therefore is pleased with progress made and Internal Market Commissioner McCreevy commented: "These (FSAP) initiatives will strengthen the overall EU economy, improve corporate behaviour and build confidence."

The Commission has therefore moved on to look at the next five years, with its white paper on financial services policy 2005-2010. It puts the main emphasis for the next five years on "dynamic consolidation".

When it issued its green paper in May 2005, the Commission was clear that there was to be no 'son of' the FSAP: the period of weighty legislation was over. Instead, the FSAP measures were to be given time to settle, were to be monitored, implemented and enforced. Consultation followed and then the white paper was published on 5 December 2005. This final set of proposals differs little from the green paper, focussing again on implementation, enforcement and supervisory convergence. 

Some areas, however, will receive further legislative attention including consumer credit, pensions, banking consolidation and the single payments area.

Issues

Overall

One of the principles underlying the financial services policy is that it should dovetail with policy in related areas such as tax, consumer and competition. The 2005-10 strategy will highlight this dimension. It will also acknowledge that the EU must function on the international stage in financial services if it is to see economic success. Dialogue with the US will therefore be vital. Work will continue through the EU-US economic ministerials  on transatlantic economic integration, inaugurated on 30 November 2005.

Wholesale

The greatest benefits from the FSAP to date have been seen in the wholesale sector, albeit that a number of areas remain to be tidied up. The Mifid directive is yet to come into force and work continues on prospectuses, market abuse and insurance (Solvency II). In addition, no decision has yet been taken on whether to legislate on clearing and settlement - this will be considered in 2006.

Retail

The retail (consumer) sector is still lagging behind the wholesale in terms of integration but several proposals are already in train. A new proposal for consumer credit was put forward in October 2005. Mortgage credit has been dealt with in separate proposals. The most noticeable development for consumers is likely to be the creation of a single European area for payments which will enable citizens to make payments across borders as quickly and as cheaply as they do at home.

Supervisory convergence

At present the activities of banks and financial institutions are regulated at national level. In a truly Europe-wide market, this can cause difficulty, expense and uncertainty. The Commission’s aim, therefore, is for regulators and supervisors from each member state to work from the same set of rules: supervisory convergence. Work towards this began in 2004 through the bodies set up under the Lamfalussy process: 
CEBS
for banks, 
CESR
 for securities regulators and 
CEIOPS
 for the insurance industry. Aims for 2005-10 are: 

  • Devise simplified reporting templates which can be sent to all authorities. 
  • Eliminate duplicate reporting requirements by 2008.
  • More exchange of information among supervisors.
  • Personnel swaps and Europe-level staff training.

Positions

Commissioner McCreevy emphasised that a rigorous 'better regulation' policy approach will be taken regarding all legislation. There will be detailed consultation and impact assessment prior to legislation. In addition if, through ex-post evaluation, any measures were found to be ineffective, they would be re-evaluated.

Launching the white paper, David Wright, head of DG Internal Market, said that real progress had been made through the FSAP: markets were strong, mergers being successfully concluded and the financial services industry was doing well. What remained was to build on the present successes and remove the remaining barriers.

The banking sector, overall, is pleased at the halt to new legislation: the cost of complying with EU regulations has doubled over the last four years. One comment made by the European Association of Co-operative Banks was that care must be taken to ensure that the impact studies (proposed by the Commission to precede and to follow new legislation) are properly carried out and that the better regulation principles are closely followed. 

The European Banking Federation, while backing the continuation of the Lamfalussy process, would like the Commission to move further towards real consolidation for banking supervision.

The European Savings Bank Group put in a word for the speedy resolution of the comitology argument between the Parliament and the Council. Parliament is pushing for the right to call back legislation with which it is unhappy (a right which would have been granted by the European Constitution - see EurActiv 22 Sept 2005) and the ESBG supports this position.

Timeline

  • 2006 will see:
    • mortgage credit white paper;
    • white paper on investment funds;
    • consideration of proposal on clearing and settlement;
    • proposal on cross-border banking consolidation.
  • Next Financial Services Progress Report will be at the end of 2006.
  • There will be a major review of the FSAP in 2007-8.