se minar on financial services sofia, 15-16 september 2005

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

SeSeminar on Financial Servicesminar on Financial Services

Sofia, 15-16 September 2005Sofia, 15-16 September 2005

Introduction to the European Single Introduction to the European Single Financial Market – Financial Market –

Recent developments in the financial Recent developments in the financial services sectorservices sector

Dr. jur. Dimitris Tsibanoulis Dr. jur. Dimitris Tsibanoulis Legal Advisor, Bank of GreeceLegal Advisor, Bank of Greece

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Main Fields of Financial ServicesMain Fields of Financial Services

BankingBanking

Transactions on financial instruments / Transactions on financial instruments / Securities fieldSecurities field

InsuranceInsurance

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A Single Financial MarketA Single Financial Market

InvestorsInvestors free to invest in instruments issued/ free to invest in instruments issued/ traded in other Member Statestraded in other Member StatesIntermediariesIntermediaries free to transact freely with clients free to transact freely with clients in other Member States in other Member States IssuersIssuers free to tap a deeper and more liquid free to tap a deeper and more liquid market market Infrastructure suppliersInfrastructure suppliers can make their facilities can make their facilities available to market participants/users in EU available to market participants/users in EU Enforcement of Enforcement of authoritiesauthorities able to prosecute able to prosecute cross-border infringementscross-border infringements

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The The integrationintegration of the European financial markets of the European financial markets and its importance for growth and economic and its importance for growth and economic

development in Europedevelopment in Europe

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

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Why do we need an Integrated Why do we need an Integrated Financial Services Market?Financial Services Market?

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

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Building blocks of the Single Building blocks of the Single MarketMarket

Home country/country of origin Home country/country of origin authorization and supervisionauthorization and supervision

Mutual recognition of equivalence of Mutual recognition of equivalence of partner country authorization/supervisionpartner country authorization/supervision

Harmonisation of key regulatory Harmonisation of key regulatory protections/rulesprotections/rules

Close co-operation between host State Close co-operation between host State and home State authorities and home State authorities

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

action planaction plan

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

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Financial Services Action Plan (FSAP)Financial Services Action Plan (FSAP)

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

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The FSAP is designed:The FSAP is designed:

- to enhance the integrity of European - to enhance the integrity of European markets;markets;

- to increase investor confidence;- to increase investor confidence;

- to lower the costs of offering cross-- to lower the costs of offering cross-border services; andborder services; and

- to unify the primary markets.- to unify the primary markets.

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42 legislative and “soft law” measures 42 legislative and “soft law” measures to enhance the EU legislative to enhance the EU legislative framework:framework:Common EU rule-book for securitiesCommon EU rule-book for securities

-- Directive 2004/39/EC on markets in financial Directive 2004/39/EC on markets in financial instruments, amending Directives 85/611/EEC instruments, amending Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC and repealing and 93/6/EEC and Directive 2000/12/EC and repealing Directive 93/22/EECDirective 93/22/EEC

- Directive Directive 2003/6/EC2003/6/EC on insider dealing and market on insider dealing and market manipulationmanipulation

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Single set of financial reporting standardsSingle set of financial reporting standards-- Regulation (EC) No Regulation (EC) No 1606/20021606/2002 of the European of the European

Parliament and of the Council of 19 July 2002 on Parliament and of the Council of 19 July 2002 on the application of international accounting the application of international accounting standardsstandards

- Commission Regulation (EC) No Commission Regulation (EC) No 1725/20031725/2003 of of 29 September 2003 adopting certain 29 September 2003 adopting certain international accounting standards in international accounting standards in accordance with European Parliament and accordance with European Parliament and Council Regulation (EC) No Council Regulation (EC) No 1606/20021606/2002

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Common initial and regular disclosure Common initial and regular disclosure documents documents

- Directive Directive 2003/71/EC2003/71/EC on the prospectus to be published on the prospectus to be published when securities are offered to the public or admitted to when securities are offered to the public or admitted to trading and amending Directive trading and amending Directive 2001/34/EC2001/34/EC

- Transparency Directive 2004/109/ECTransparency Directive 2004/109/EC

First steps towards EU framework for First steps towards EU framework for occupational pension fundsoccupational pension fundsDirective 2003/41/EC of the European of the European Parliament and of the Council Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision

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Secure and transparent environment for Secure and transparent environment for cross-border restructuring of companiescross-border restructuring of companies

-- Directive 2001/24/EC of the European Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit the reorganisation and winding up of credit institutionsinstitutions

-- Directive 2001/17/EC of the European Directive 2001/17/EC of the European Parliament and of the Council of 19 March 2001 Parliament and of the Council of 19 March 2001 on the reorganisation and winding-up of on the reorganisation and winding-up of insurance undertakingsinsurance undertakings

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Strengthening of supervision of companies Strengthening of supervision of companies and markets and markets

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

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FSAPFSAP

Need for further work on integrationNeed for further work on integration

Markets remain fragmentedMarkets remain fragmented

Obstacles remainObstacles remain

Developments and changes in the markets Developments and changes in the markets call for appropriate responsescall for appropriate responses

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How to achieve the goal of How to achieve the goal of integrated financial markets ?integrated financial markets ?

EU financial services law-making, traditionally:EU financial services law-making, traditionally:

too slowtoo slow

too rigid too rigid

results divorced from market reality/practice results divorced from market reality/practice

insufficient legal certainty/uniformity to sustain insufficient legal certainty/uniformity to sustain home country principle.home country principle.

Response:Response:

Lamfalussy blue-print for reform of EU legislative Lamfalussy blue-print for reform of EU legislative processprocess

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THE COMMITTEE OF WISE MENTHE COMMITTEE OF WISE MEN Ο ΟN THE REGULATION N THE REGULATION

OF EUROPEAN SECURITIES MARKETSOF EUROPEAN SECURITIES MARKETS

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

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Lamfalussy Model for a reformed Lamfalussy Model for a reformed EU-legislative processEU-legislative process

Consultation and TransparencyConsultation and Transparency

Efficient and flexible regulatory systemEfficient and flexible regulatory system

Regulatory convergence and co-operationRegulatory convergence and co-operation

Common implementation and Common implementation and enforcement.enforcement.

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THE FOUR-LEVEL APPROACH RECOMMENDED BY THE FOUR-LEVEL APPROACH RECOMMENDED BY THE COMMITTEETHE COMMITTEE

- Level 1: - Level 1: Framework principles to be decided by Framework principles to be decided by normal EU legislative procedures (i.e. proposal normal EU legislative procedures (i.e. proposal by the Commission to the Council of Ministers/ by the Commission to the Council of Ministers/ European Parliament for co-decision).European Parliament for co-decision).

- Level 2: - Level 2: Establishment of two new committees – Establishment of two new committees – an EU Securities Committee and an EU an EU Securities Committee and an EU Securities Regulators Committee (in a format Securities Regulators Committee (in a format similar to that of FESCO) to assist the European similar to that of FESCO) to assist the European Commission in determining how to implement Commission in determining how to implement the details of the Level 1 framework.the details of the Level 1 framework.

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THE FOUR-LEVEL APPROACH RECOMMENDED BY THE FOUR-LEVEL APPROACH RECOMMENDED BY THE COMMITTEETHE COMMITTEE

- Level 3: - Level 3: Enhanced cooperation and networking Enhanced cooperation and networking among EU securities among EU securities reregulators to ensure gulators to ensure consistent and equivalent transposition of Level consistent and equivalent transposition of Level 1 and 2 legislation (common implementing 1 and 2 legislation (common implementing standards).standards).

- Level 4: - Level 4: Strengthened enforcement, notably with Strengthened enforcement, notably with more vigorous action by the European more vigorous action by the European Commission to enforce Community law, Commission to enforce Community law, underpinned by enhanced cooperation between underpinned by enhanced cooperation between the Member States, their regulators, and the the Member States, their regulators, and the private sector.private sector.

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What remains to be done?What remains to be done?

Corporate scandals, money laundering and Corporate scandals, money laundering and fight against terrorismfight against terrorism

Follow up to the Action Plan on Company Law & Follow up to the Action Plan on Company Law & Corporate Governance Corporate Governance

Modernisation of 8th company law directive Modernisation of 8th company law directive (statutory audit)(statutory audit)

3rd money laundering directive3rd money laundering directive

Transposition of FATF recommendation No. 7Transposition of FATF recommendation No. 7

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Modernisation of capital adequacy rulesModernisation of capital adequacy rules

Base II / CAD IIIBase II / CAD III

Solvency IISolvency II

Payment systems: Legal framework for Payment systems: Legal framework for payments in the internal Market and payments in the internal Market and payment institutionspayment institutions

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Financial Markets Infrastructure: Clearing Financial Markets Infrastructure: Clearing and Settlement / Achievement of an and Settlement / Achievement of an integrated, efficient and safe clearing and integrated, efficient and safe clearing and settlement environment in the European settlement environment in the European Union.Union.

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Charlie McCreevy European Commissioner for Internal Charlie McCreevy European Commissioner for Internal Market and ServicesMarket and Services

The integration of European financial markets – The integration of European financial markets – our objectives for the coming yearsour objectives for the coming years

((Initiative Finanzstandort Deutschland, 20.12.2004, Initiative Finanzstandort Deutschland, 20.12.2004, Frankfurt am Main, Germany)Frankfurt am Main, Germany)

Implementation and enforcement of the existing Implementation and enforcement of the existing legislationlegislation

The new framework puts greater emphasis on the The new framework puts greater emphasis on the cooperative responsibilities of the supervisors. We want cooperative responsibilities of the supervisors. We want the concept of a “consolidating supervisor’ to work and the concept of a “consolidating supervisor’ to work and cross-border groups not to be subject to multiplicative cross-border groups not to be subject to multiplicative requirements.requirements.

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ConclusionConclusion

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

se minar on financial services sofia, 15-16 september 2005

Documents

wholesale financial

financial services sector

financial servicessofia

major financial institutions

integrated single market

market participantsusers

crossborder services

integrity of european