Through the FSAP a large number of measures have been put in place to improve integration Europe-wide in the wholesale financial services market. In two recent speeches the Commissioner has signalled his intention to allow for a period of consolidation of these initiatives, of implementation and assessment. On the retail side, however, he recognises that there is still much work to be done.
Commissioner McCreevy, financial services are important for business, we know that, but why are they also important for the citizen?
We all have to deal with money. Also, there are more and more sophisticated financial service products on the market; with thousands of people involved. The greater economic activity there is on account of having competitive financial services, the better the economy will do generally. The reason for the FSAP was that there was no integration of the financial service market in Europe. A number of initiatives were launched and now the implementation phase has come about for a lot of them. It has been felt that the different national rules were holding up the free movement of capital. The FSAP has been quite successful and over the next number of years we hope to see the benefits of it. But there are lots of areas where there is not an integrated FS market across Europe. I made the opening address at a conference of the European Savings Bank Group [8 Dec 2004] and there was talk about the retail market in relation to banking. There are proposals and ideas in the pipeline as to how we might progress in other areas as well. Now that we are 25 MS there are different interests at play.
Does the Commission have a role in promoting financial literacy?
There has been consumer protection legislation in this area. Also if you have more competition, the consumer will benefit through lower prices. So for the consumer to get the most benefit, he or she has to be quite literate in financial products. The majority of people are not and they generally rely on advisors. Our role might be to make sure that the advice is adequate and consumers are not ripped off by unscrupulous operators.
We have already had the Statutory Accounting Directive, the agreement on the accounting standards, which was given momentum by the financial scandals on both sides of the Atlantic ……..In the States, they’ve had the Sarbanes-Oxley Act and in Europe, we are introducing rules on international accounting
You spoke at your speech to the CESR in Paris [6 Dec 2004] of the retail market having to catch up with the wholesale side, what are the main challenges you see?
There is still debate going on about how to improve things on the retail side. Most banks in Europe operate within their own Member State albeit with branches and subsidiaries [in other Member States]. If we could have more cross-border activity, the lower the costs would be for business and the consumer but achieving that is the difficulty. As I said in Paris, an awful lot has been done over the past number of years and awful lots needs to be implemented, and the phrase being used by the industry is "regulatory fatigue". So I said I would have a period of reflection but I didn’t exclude that there will not be further changes. But with all this activity, it’s time to let things settle down, see how things are. And then we’ll move forward again. But let’s bed down what has been initiated, let’s have it implemented, let’s assess it and move forward. Over the coming years I intend to have consultations, assess the situation and then see how we go forward. I don’t want to put up a big placard and say "this is what we are going to do" because greater people than I have had these ideas before and have foundered.
There was an EcoFin meeting on 8 Dec 2004 at which the Capital Requirements Directive moved a step further forward. Do you see any implications in particular for SMEs?
The Capital Requirements Directive, the Basel II recommendations, should lead further down the road to a better deal for SMEs… So it should lead to positive results for everybody which would include SMEs. Basel II and the Capital Requirements Directive are desperately technical and brilliant technicians have been involved in this area but the overall purpose is to have…. an international dimension to all these aspects. But it should not lead to less money for SMEs to borrow.
Many EU firms trade and invest in third countries, in North America, Asia, Africa and the rest of the world. What are the big issues on your agenda for getting convergence or agreement with these countries?
We have already had the Statutory Accounting Directive, which was given momentum by the financial scandals on both sides of the atlantic. In Europe we are introducing rules on international accounting standards; there was an issue about the IAS 39 and there has been a lot of debate about that. So the intention is to have systems that would be accepted globally. That would be good for business because for companies to progress it is important that they don’t have to go through further costs and duplications in listings on other exchanges etc……..But the host country would have to be satisfied with the standards and the methodology including accounts etc. ………….If Europe is to remain an attractive place for all types of businesses – goods and services, in the financial area – you have to make Europe an attractive place where businesses can compete with the rest of the globe – USA, China, Japan, now a very major market. My predecessor, Mr. Bolkestein, started a dialogue with the United States. And I intend to do the same. We will continue to have disagreements on certain aspects with the US, for example. But it is vital that we keep up a dialogue and we sort out these difficulties before they become major issues. We are both major players and we should be friends rather than bitter opponents.
You have just taken up your post as the FSAP is coming to an end, do you have any view as to where you would like financial services to be when you finish your term in office?
There were 4 expert group reports on the FSAP and in the spring we will have a synthesis report putting it all together and there will be a general assessment. We will then have consolidation and implementation and then we’ll see where it’s going forward. Where I would like to see it going is very simple. I would like to see in the end that we have made considerable progress in having pretty open FS products to all consumers in Europe. That might be a goal too far but I’d like to see we’d made considerable progress. That the consumer will be able to say of an insurance product or a banking product or a mortgage product, "no, I wont take it from you in my member state, there is a better arrangement [in another Member state] that will give me a far better rate and they can press a button and do [the transaction]. And that it would be clear and transparent.
So you think that businesses are really keen to get involved in cross-border products and to give consumers that option?
It is always the difficulty, the people that are in the existing companies say "oh no, they will never survive… Couldn’t do that – more work. It won’t work anyway". And then when [the new companies/products] are successful, they have to improve. And then they go after your customers…… I bet someone has seen your idea, EurActiv, and I bet you there is someone out there who is saying: we can do it better. And if they can do it a bit better, you have to get better. Same in financial services.
