Financial Services Action Plan

The EU’s Financial Services Action Plan (FSAP) was designed to open up a single market for financial services in the EU. Begun in 1999, it comprises 42 measures designed to harmonise the member states’ rules on securities, banking, insurance, mortgages, pensions and all other forms of financial transaction. By the end of 2004, almost all of these measures have been adopted.

The impetus for urgent action towards the integration of financial services throughout the European Union came at the Cardiff European Council in June 1998. It had become clear that an overall framework for the integration of financial services was a prerequisite for the attainment of the EU’s economic potential on the introduction of the Euro. The Financial Services Policy Group, made up of EcoFin ministers, representatives of the European Central Bank and under the chairmanship of the Commission, was given the task of identifying priorities for action. 

In October 1998, the Commission published a Communication setting out a Framework for Action on Financial Services, followed by the     FSAP  itself in May 1999.

At the European Council in Lisbon (see Euractiv Linksdossier on Innovation) in April 2000, it was agreed that the FSAP should be completed by the end of 2005 with the first stage, the integration of the securities markets, being in place by the end of 2003. The Council saw the FSAP as being an integral part of what has come to be known as the 'Lisbon Agenda', a plan to make the EU 'the most dynamic, innovative, knowledge-based economy in the world by 2010'. To achieve this, companies, whatever their geographical base, would have to be able to raise capital EU-wide. Similarly, for investment, financial statements would have to be compatible. There would have to be legal security for cross-border trade in securities and cross-border mergers and takeovers would have to be relieved of the existing blocks and pitfalls. 

Underlying the FSAP aims was the recognition that financial services were increasingly becoming an international market and that any European rules would have to be compatible with those used on the world stage. The FSAP rules, therefore, were to be tight and restrictive enough to ensure legal certainty and confidence, but also loose and malleable enough to allow institutions to act and adjust on an international level. 

In October 2003, the Commission set up four expert groups to report on the success of the FSAP in promoting integration in banking, insurance, asset management and securities trading. Their reports overall showed that the FSAP had been successful not only in the adoption of legislation but also in the fostering of an atmosphere of co-operation between the European Institutions and market participants. The reports were made open for public comment and a substantial consultation process was carried out. 

In its tenth progress report on the FSAP, in June 2004, the Commission stated emphasis from 2005 onwards will be on ensuring implementation and monitoring the effectiveness of the plan through, inter alia, the Financial Integration Monitor. 

The FSAP set out 42 action points, split into three categories:


The objectives in this category were aimed at the capital and corporate side of financial services: i.e. raising capital, investment, securities and corporate regulation. An important aspect of this part of the FSAP was the decision that legislation should be determined on the basis of wide consultation and agreement with all bodies in the field. The maquette for this consensus-based legislative structure was the Lamfalussy process.

  In July 2000, Baron Alexandre Lamfalussy, together with the Committee of Wise Men, was given the task of identifying how the urgent integration of financial services regulation could best be approached. The consequent '   Lamfalussy process', predicated on the value of wide consultation, became the procedural basis for the FSAP legislation. It involves four steps, with the key political aims being formulated by the Commission and the details of implementation being decided through consultation with national and European regulatory bodies.  

The FSAP set out four chapters relevant to the wholesale market:

  • Common Rules for integrated securities and derivatives markets: this entailed an updating of the  Investment Services Directive. The new Directive  was adopted in April 2004 and will allow investment firms to operate throughout the EU.   
  • Raising capital on an EU-wide basis: the aim was to simplify the procedures for issuers to offer securities in other Member States through the risk capital action plan (  RCAP ) outlined in the Commission Communication of July 1998. The  Prospectus Directive , which allowed capital to be raised throughout the EU on the basis of one set of documents, and the 
    Market Abuse Directive 
    , which set accepted practice on inside information and market manipulation, were implemented by Regulation in April 2004. A Regulation endorsing the majority of the 
    International Accounting Standards 
    (IAS) was adopted in September 2003. All EU companies will have to adhere to the new standards from 1 January 2005.   
  • A single market for supplementary pension funds: legislation to allow pension funds to operate throughout the EU was brought in by a directive in June 2003. Work is still being done on the transferability of    pension rights.

  • Collateral
    : this is property (such as securities) provided by a borrower to a lender as security for a loan. To create a single market the Commission sought to reduce the formal requirements, harmonise and clarify the process. This has been addressed through the 2002 Collateral Directive 


Barriers to cross-border transactions at the consumer level run deep, being bound by cultural, linguistic and simply habitual differences. The Commission’s proposed measures in this area focussed mainly on promoting access, providing reliable information and ensuring the availability of redress procedures. The FSAP set out six areas:

  • Information and transparency
  • Redress procedures
  • Application of consumer protection rules
  • E-commerce based financial business
  • Insurance intermediaries
  • Cross-border retail payments



The FSAP recognised that an efficient supervisory and regulatory regime was essential to the proper functioning of the proposed legislation. This would entail close co-operation and co-ordination amongst the authorities within the EU responsible for how legislation is implemented and observed by market players. Given the increased globalisation of financial services markets, strong and united representation of EU interests at international fora would also be needed. To this end the Commission saw a need for cross-sectoral co-operation; the possibility of a single regulatory authority for securities markets and a review of the arrangements for cross-border supervision in the banking sector. 

Two general areas of importance were identified:

  • Corporate Governance: The High Level Group of Company Law Experts’ report in Nov 2002, together with the corporate scandals of Enron, Parmalat and Ahold highlighted the need for harmonisation of member states’ rules on corporate governance. This led to the setting up of a  Corporate Governance Forum  in October 2004 to work on these issues. 
  • Taxation: the aim in this area, as part of the Commission’s   EU tax policy strategy, is the elimination of tax obstacles to single market trading. In December 1997, a Tax Package was agreed upon which included a code of conduct to eliminate harmful business tax regimes, legislation on a minimum level of taxation of savings income and measures to eliminate source taxes on cross-border payments of interest between associated companies. EU finance ministers adopted this package in June 2003 (see  Press Release, 3 June 2003).

The immediate emphasis in the next year will be on implementation and consolidation of the FSAP. Further specific steps:


  • Initiatives already in train: Capital Requirements Directive (see EURACTIV 9 Dec 2004); Solvency II; reinsurance; legal framework for payments; corporate governance; statutory audit; reform of company law; clearing and settlement (this will be a priority).
  • The Commission will prepare an analysis of the Experts’ Reports on the FSAP which will be published in early 2005.


  • New initiatives to be taken in: consumer credit; mortgage credit; single payment area for retail payments (cross-border debit cards).
  • A consultative Green Paper is to be published in May 2005.

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