Presented at the Bankers Association for Finance and Trades 83rd Annual Meeting A Global Focus

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John Houston, Founding Chairman, Houston
Consulting FOCUS EUROPE Executive Briefing Panel
Presented at the Bankers Association for
Finance and Trades83rd Annual Meeting A Global
Focus
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BAFT Annual Conference Focus Europe Session

• European Political Realities
• A European View
• John Houston, Chairman CEO
• Houston Consulting Europe
• Miami, Florida
• April 19, 2005

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Focus Europe

• The European Union does it matter?
• European politics and financial regulation
• Changing political environment
• Integration of EU financial markets
• The current agenda
• Prognosis

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1957
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1973
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1981
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1986
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1995
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2004
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2007
?
2007
2015?
2005
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European Union (EU)

• An important evolution of the geopolitical and
  economic landscape
• EU is part supranational, part intergovernmental.
• Differences of this enlargement?
• Reforming the way the 25 work together to agree
  rules and policies within EU institutional
  triangle

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Commission
The EUs  Institutional Triangle 
Member States
Council of Ministers of the EU
European Parliament
Interest Groups - Lobbies
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European Politics and Financial Regulation

• Political realities particularly important in
  financial market possibilities in Europe
• State ownership
• Political constraints on cross-border
  consolidation
• Consumer protection v cross-border selling
• Politics of supervision
• Minimizing domestic change
• A highly regulated and politically sensitive
  industry

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Political climate changing

• Political brake on integration of European
  financial markets weakening
• External factors
• Euro,
• technology,
• Global competition (and global business lines)
• International work on prudential and other
  regulation
• Changing political and regulatory climate for
  business
• Europes perception of competitiveness gap
• EU legislation to remove barriers
• Supervisor collaboration Euro-SEC?

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Integration v Fragmentation

• Wholesale markets integrating rapidly
• Continued fragmentation of other markets
• EU has tried to drive process via legislation
• Single Market and European Passport
• Financial Services Action Plan (FSAP)
• Results mixed some progress, but problems with
  enforcement, regulatory burdens, ambiguous
  legislation

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Current Agenda

• Better Regulation
• From Old FSAP to New FSAP or not?
• Asset Management
• Payments
• Retail Markets consumer credit and mortgage
  credit
• Ongoing issues Basel II, Clearing and
  Settlement, Corporate Governance
• EU Competition policy targeting financial markets
• Getting supervision organized
• The Transatlantic (and global) regulatory
  dialogue
• Cross-border consolidation

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Political Outlook

• For economic, business and political reasons
  integration of European markets across state
  borders will continue and may accelerate
• Powerful vested interests will see this as a
  threat and will resist by political means
• EU level rules will displace many of the state
  rules, including at supervisor level
• There will be no pan-European single supervisor
  within the next decade
• More of the same? But with key players developing
  more continental reach
• Strains of constant enlargement could provoke a
  political crisis with economic consequences
• a known unknown

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(No Transcript)