European Commission, Technical Assistance Information Exchange Unit (TAIEX), DG Enlargement in co-operation with the Bulgarian Chamber of Commerce and Industry

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European Commission, Technical Assistance
Information Exchange Unit (TAIEX), DG Enlargement
in co-operation with the Bulgarian Chamber of
Commerce and Industry

• Seminar on Financial Services
• Sofia, 15-16 September 2005
• Introduction to the European Single Financial
  Market
• Recent developments in the financial services
  sector
• Dr. jur. Dimitris Tsibanoulis Legal Advisor,
  Bank of Greece

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Main Fields of Financial Services

• Banking
• Transactions on financial instruments /
  Securities field
• Insurance

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A Single Financial Market

• Investors free to invest in instruments issued/
  traded in other Member States
• Intermediaries free to transact freely with
  clients in other Member States
• Issuers free to tap a deeper and more liquid
  market
• Infrastructure suppliers can make their
  facilities available to market participants/users
  in EU
• Enforcement of authorities able to prosecute
  cross-border infringements

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The integration of the European financial
markets and its importance for growth and
economic development in Europe

• The achievement of a fully integrated single
  market is a key objective of the European Union
  that is a market allowing for the free movement
  of goods and services and for the right of EU
  citizens to take up employment or establish their
  business anywhere within the EU, without
  discrimination, on the basis of a harmonized set
  of rules and regulations.

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Why do we need an Integrated Financial Services
Market?

• Long term economic benefits
• Greater market liquidity
• More efficient allocation of investment
  resources
• Greater freedom for investors consumers
• Lower cost of capital increased investment
• Better return on private savings for ordinary
  investors and funds will help defuse pension
  time-bomb
• More venture capital and finance for higher-risk
  segments
• Increased growth, employment

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Building blocks of the Single Market

• Home country/country of origin authorization and
  supervision
• Mutual recognition of equivalence of partner
  country authorization/supervision
• Harmonisation of key regulatory protections/rules
• Close co-operation between host State and home
  State authorities

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Financial Services Action Plan
(FSAP)Implementing the framework for financial
markets action plan

• The Financial Services Action Plan adopted in May
  1999 set out a road map to get rid of all
  existing barriers to the integration of European
  financial markets. It contained over forty
  measures, both legislative and non-legislative,
  which covered the entire financial services
  field, from securities and banking to insurance,
  as well as from major financial institutions to
  retail investors.

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Financial Services Action Plan (FSAP)

• The action plan for a single financial market
  put forward indicative priorities and a timetable
  for specific measures to achieve strategic
  objectives, namely
• establishing a single market in wholesale
  financial services
• making retail markets open and secure
• strengthening the rules on prudential
  supervision
• widening conditions for an optimal single
  financial market.

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Financial Services Action Plan (FSAP)

• The FSAP is designed
• - to enhance the integrity of European markets
• - to increase investor confidence
• - to lower the costs of offering cross-border
  services and
• - to unify the primary markets.

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Financial Services Action Plan (FSAP)

• 42 legislative and soft law measures to
  enhance the EU legislative framework
• Common EU rule-book for securities
• - Directive 2004/39/EC on markets in financial
  instruments, amending Directives 85/611/EEC
  and 93/6/EEC and Directive 2000/12/EC and
  repealing Directive 93/22/EEC
• Directive 2003/6/EC on insider dealing and market
  manipulation

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Financial Services Action Plan (FSAP)

• Single set of financial reporting standards
• - Regulation (EC) No 1606/2002 of the European
  Parliament and of the Council of 19 July 2002 on
  the application of international accounting
  standards
• Commission Regulation (EC) No 1725/2003 of 29
  September 2003 adopting certain international
  accounting standards in accordance with European
  Parliament and Council Regulation (EC) No
  1606/2002

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Financial Services Action Plan (FSAP)

• Common initial and regular disclosure documents
• Directive 2003/71/EC on the prospectus to be
  published when securities are offered to the
  public or admitted to trading and amending
  Directive 2001/34/EC
• Transparency Directive 2004/109/EC
• First steps towards EU framework for occupational
  pension funds
• Directive 2003/41/EC of the European Parliament
  and of the Council of 3 June 2003 on the
  activities and supervision of institutions for
  occupational retirement provision

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Financial Services Action Plan (FSAP)

• Secure and transparent environment for
  cross-border restructuring of companies
• - Directive 2001/24/EC of the European Parliament
  and of the Council of 4 April 2001 on the
  reorganisation and winding up of credit
  institutions
• - Directive 2001/17/EC of the European Parliament
  and of the Council of 19 March 2001 on the
  reorganisation and winding-up of insurance
  undertakings

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Financial Services Action Plan (FSAP)

• Strengthening of supervision of companies and
  markets
• Internal Market for retail customers
• Directive 2002/65/EC of the European Parliament
  and of the Council of 23 September 2002
  concerning the distance marketing of consumer
  financial services and amending Council Directive
  90/619/EEC and Directives 97/7/EC and 98/27/EC.

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FSAP

• Need for further work on integration
• Markets remain fragmented
• Obstacles remain
• Developments and changes in the markets call for
  appropriate responses

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How to achieve the goal of integrated financial
markets ?

• EU financial services law-making, traditionally
• too slow
• too rigid
• results divorced from market reality/practice
• insufficient legal certainty/uniformity to
  sustain home country principle.
• Response
• Lamfalussy blue-print for reform of EU
  legislative process

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THE COMMITTEE OF WISE MEN ?N THE REGULATION OF
EUROPEAN SECURITIES MARKETS

• ?he challenges facing the creation of an
  integrated securities market in Europe are
• that the basic legislation is not in place
• that there is still insufficient prioritization
• that the present system cannot produce quickly or
  flexibly enough the type of legislation that
  modern financial markets require and
• that inconsistent implementation is severely
  handicapping the emergence of a pan-European
  market.

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Lamfalussy Model for a reformed EU-legislative
process

• Consultation and Transparency
• Efficient and flexible regulatory system
• Regulatory convergence and co-operation
• Common implementation and enforcement.

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THE FOUR-LEVEL APPROACH RECOMMENDED BY THE
COMMITTEE

• - Level 1 Framework principles to be decided by
  normal EU legislative procedures (i.e. proposal
  by the Commission to the Council of Ministers/
  European Parliament for co-decision).
• - Level 2 Establishment of two new committees
  an EU Securities Committee and an EU Securities
  Regulators Committee (in a format similar to that
  of FESCO) to assist the European Commission in
  determining how to implement the details of the
  Level 1 framework.

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THE FOUR-LEVEL APPROACH RECOMMENDED BY THE
COMMITTEE

• - Level 3 Enhanced cooperation and networking
  among EU securities regulators to ensure
  consistent and equivalent transposition of Level
  1 and 2 legislation (common implementing
  standards).
• - Level 4 Strengthened enforcement, notably
  with more vigorous action by the European
  Commission to enforce Community law, underpinned
  by enhanced cooperation between the Member
  States, their regulators, and the private sector.

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Financial Services Action Plan (FSAP)

• What remains to be done?
• Corporate scandals, money laundering and fight
  against terrorism
• Follow up to the Action Plan on Company Law
  Corporate Governance
• Modernisation of 8th company law directive
  (statutory audit)
• 3rd money laundering directive
• Transposition of FATF recommendation No. 7

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Financial Services Action Plan (FSAP)

• What remains to be done?
• Modernisation of capital adequacy rules
• Base II / CAD III
• Solvency II
• Payment systems Legal framework for payments in
  the internal Market and payment institutions

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Financial Services Action Plan (FSAP)

• What remains to be done?
• Financial Markets Infrastructure Clearing and
  Settlement / Achievement of an integrated,
  efficient and safe clearing and settlement
  environment in the European Union.

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Charlie McCreevy European Commissioner for
Internal Market and Services

• The integration of European financial markets
  our objectives for the coming years
• (Initiative Finanzstandort Deutschland,
  20.12.2004, Frankfurt am Main, Germany)
• Implementation and enforcement of the
  existing legislation
• The new framework puts greater emphasis on
  the cooperative responsibilities of the
  supervisors. We want the concept of a
  consolidating supervisor to work and
  cross-border groups not to be subject to
  multiplicative requirements.

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Conclusion

• Huge potential benefits from integrated financial
  market
• Legislative phase nearly complete
• Immediate focus now on implementation and
  enforcement
• Need to have flexible system which allows to
  adapt quickly
• Need for strong involvement of stakeholders to be
  successful