Report from the Commission to the European Parliament, the Council, the European Central Bank and the Economic and Social Committee - Financial services action plan - Progress report
COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 24. 11. 1999 COM(1999)630 final REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE ECONOMIC AND SOCIAL COMMITTEE FINANCIAL SERVICES ACTION PLAN PROGRESS REPORT FINANCIAL SERVICES ACTION PLAN Progress Report Introduction The European Council in Cologne and the European Parliament have supported both the content and. The Action Plan details the work that has to be urgency of the Action Plan for Financial Services 1 accomplished to reap the full benefits of the euro and to ensure the continued stability and competitiveness of EU financial markets. The Council invited the Commission to report on a regular basis on the progress made and to present its first report before the end of 1999. This first report to the Council and to the European Parliament tracks progress over the first six months (until 10 October) since the adoption of the Action Plan. In view of the short period sice the adoption of the Action Plan, this report focuses in particular on the legislative progress that has been made. Annexed is a detailed breakdown of the separate action points. The second progress report will be made to the ECOFIN Council and the European parliament in mid 2000: it will contain an assessment of the progress, direction and results of the integration of the EU financial services sector and its contribution to growth and employment in the Union. Mechanisms & process The mechanisms for implementing the Action Plan are critical to its achievement. Over the past six months, and in line with the suggestions in the Action Plan, the Commission has put in place the following structures.    The Financial Services Policy Group (FSPG), comprising personal representatives of economic and finance ministers, has resumed its tasks as a forum to forge consensus between national ministries involved in financial services regulation. The FSPG has met twice since the adoption of the action plan and has assisted the Commission in monitoring progress and preparing this report. Initial informal discussions have taken place with representatives of the European Parliament with a view to finding arrangements to discuss major policy orientations with parliamentarians at an early stage. EU representative bodies have submitted short lists of experts to help the Commission assess certain implications of technical issues raised in the Action Plan. These ‘Forum Groups’, composed of market experts, are initially considering issues related to market manipulation; updating the Investment Services Directive; collateral; consumer information requirements for retail financial services; and differences in national legislation that hinder the cross-border marketing of financial services. Further groups may be set up in the future. Some progress has been made on implementing the Action Plan …. The challenge set by the Action Plan for all of the Union’s institutions is considerable. It will demand intense and sustained activity if we are to achieve the fierce timescale demanded by the rapidly- changing financial services sectors. The first months have seen welcome progress. Already the 1 FINANCIAL SERVICES - Implementing the Framework for financial markets: Action Plan. Commission Communication of 11. 05. 1999 COM(1999)232 2 Commission has issued its Communication on Pension Funds and is actively preparing a draft directive. It has also adopted a proposal for a directive to amend the Money Laundering Directive. With regard to wholesale markets work is well underway within the Forum of European Securities Commissions (FESCO) and the Accounting Contact Committee to meet the timeframe set out in the Action Plan. The Commission also recently adopted its Communication on the implementation of the Risk Capital Action Plan. The Commission will increase its efforts in the field of accounting policy and will present proposals to enhance regulatory co-operation between securities supervisors. Progress to achieve open and secure retail markets is also satisfactory. Discussions in the Council and the European Parliament on the distance selling proposal for financial services are continuing. The preparation of a legislative proposal for insurance intermediaries is on track as is the work on a number of Communications (consumer information, insurance) and a Green Paper on E-Commerce and financial services. Work on prudential rules has also advanced. The proposal for a E-Money Directive is advancing through Council and European Parliament. The review of bank capital rules in parallel with the G-10 Basel Committee on Banking Supervision, the insurance solvency requirements, and the supervision of financial conglomerates are on schedule. The adoption of a Commission Recommendation on the disclosure of financial instruments is imminent. Finally, work on wider conditions for a single market are continuing with a view to direct taxation. The Council deliberations on the Commission proposal on a minimum taxation of savings income are continuing at full speed and it is hoped that a political agreement can be reached before the end of the year. The same holds, mutatis mutandis, for the work of the Council group working on the implementation of the Code of Conduct on business taxation. After first fruitful discussions, inter alia in the Taxation Policy group, work on the taxation of supplementary pensions and financial services in general will be continued as a priority in 2000. A Commission proposal for supplementary pensions is already under preparation. But there is a need for greater effort The pressure to make progress demands a sustained response from all institutions. The European Parliament and the Council have been invited in the Action Plan to make every effort to ensure rapid agreement and implementation of the individual legislative measures. There must be a clear political commitment by all institutions and actors to commit the necessary resources if we are to achieve the ambitious deadlines that have been agreed. Indeed, lack of progress is noticeable in particular in the following areas: Political agreement on the proposal for a Take Over Bids Directive, which would make the final adoption of this proposal possible, has still not been achieved in the Council. The main stumbling block is to find a mutually acceptable solution for Spain and the United Kingdom over the status of Gibraltar. The proposed directive on the Winding-up and Liquidation of Banks was presented to the Council and European Parliament in 1985. Here too the lack of progress is the absence of a mutually acceptable solution on the application of winding-up and liquidation procedures in Gibraltar. Despite successive political commitments at the most senior level, there is little progress on the European Company Statute. This has had implications for two other measures in the field of company law (10th Company Law Directive and the 14th Company Law Directive). The preparation of a Commission Recommendation on Prior Information for Consumers will build on progress from industry in developing best practices. Delays within industry may soon be resolved. The Commission has also established an ‘Forum Group’ with industry and consumer representatives to make progress. 3  The Commission Communications on Payments in the Single Market and Fraud and Counterfeiting in Payment Systems will be presented before the end of the year. The short delay in their adoption is due to administrative reasons caused by the change in the Commission over the summer. Overall assessment: The Financial Services Action Plan has injected new urgency and momentum into the task of building a single financial market. There is now a shared understanding, at the highest political level, of what is at stake – an unheralded opportunity to put modern and efficient financial markets at the service of EU enterprise, savers and investors. The six months since the endorsement of the Action Plan by the Cologne European Council have witnessed modest but tangible progress in terms of:   the ground-work for the specific initiatives in the action plan and mobilisation of input from market practitioners and other important constituencies (consumers, users); negotiation and adoption of legislation: Council and Parliament have redoubled their efforts to secure progress on number of proposals some of which have been the subject of longstanding deadlock. These efforts have not always come to fruition but with continued application, a number of key initiatives could be agreed over the coming months such as the 13th Company Law Directive, and winding-up and liquidation of insurance undertakings. An important stumbling block to the political progress of important initiatives has therefore been the absence of a solution for two Member States (Spain and the UK) over any direct or indirect reference to Gibraltar or its status in proposed legislation. Continuation of this impasse carries heavy costs for the development of a single financial market. It is to be hoped that the two Member States concerned can finalise practical solutions to break the deadlock. Over the next six months, the onus will remain on the Commission services to come forward with a series of important measures in accordance with the time-table foreseen in the Action Plan (pension funds, green paper on Investment Services Directive, modernisation of accounting strategy, e- commerce Green Paper). In addition to the preparation of specific initiatives contained in the Action Plan, the Union will need to refine its strategy in the light of accelerating structural change in financial markets. Discussions in FSPG and other fora in the coming months will be concentrated on the following areas:    EU-wide trading of securities where particular efforts needs to be devoted to allowing issuers the possibility of raising capital on an EU wide basis. This requires concerted action relating to the demand side (clear and common understanding on authorised activities, products and intermediaries and effective cooperation in market supervision); information) and supply-side transparency, (market Emergence of internationally active conglomerates as the mainstay of EU financial system which raises questions for the EU prudential and supervisory framework. Harnessing the commercial potential of E-commerce trading of financial services in manner which offers effective safeguards to individual consumers. 4 ANNEX PROGRESS ON THE ACTION PLAN FOR FINANCIAL SERVICES This annex provides a first overview of progress on actions included in the Action Plan for Financial Services (COM(1999) 232). The reporting date is 10 October 1999. A star ( ) indicates an action which has been successfully completed. A cross ( ) indicates actions where some progress has been achieved in meeting the targets set in the Action Plan. A minus sign (-) indicates those for which progress is disappointing. The tables summarise the current situation and provide the Commission’s assessment of the degree to which Community institutions and Member States are achieving the objectives set out in the Action Plan. Where appropriate a comment has been added in the final column, notably to indicate the next steps to be taken. 5 STRATEGIC OBJECTIVE 1: A SINGLE EU WHOLESALE MARKET Raising capital on an EU-wide basis: Timeframe For issue by mid 2000 Adoption: 2002 Action Upgrade the Directives on Prospectuses through a possible legislative amendment State of Play Reflection continues within the Commission co- in close operation with a FESCO working-party Update the Directive on Regular Reporting (82/121/EEC) Launch consultation by mid 2000 Proposal: 2001 Adoption: 2002 continuing in close the in co- FESE with of EU Stock Work Commission operation (Federation Exchanges) Assessment expected Follow-up Preliminary results from FESCO in December 1999 Contact Commission’s Committee meeting first quarter of 2000 Commission’s Committee spring quarter of 2000 Consultation of FESCO and industry spring 2000 Contact meeting close Assessment Timeframe for Draft issue by end 1999 State of Play Draft Communication under preparation co- in operation with FESCO Action a Commission Issue on Communication distinction between “sophisticated” investors and retail investors. Establishing a common legal framework for integrated securities and derivatives markets: Follow-up FESCO work should be completed end December 1999 Commission adoption of final draft end 1999 Member and State industry consultation first quarter 2000 Industry ‘Forum Group’ to complete work by March 2000 Preliminary available first quarter 2000 Preliminary available December 1999 Industry ‘Forum Group’ to complete by February 2000 Work continuing in close co- operation with FESCO and the industry (‘Forum Group’) Work continuing in close co- operation with FESCO and the industry (‘Forum Group’) Proposal by end 2000 Adoption: 2003 Publish Green Paper: mid- 2000 Directive market manipulation. Green Paper upgrading the ISD results from FESCO results from FESCO address work to on 6 Towards a single set of financial statements for listed companies: fair Action Amend the 4th and 7th Company Law Directives value allow to accounting Commission Communication updating accounting the strategy EU Timeframe Proposal autumn-99 Adoption: 2001 For issue by end-99 (now deferred into the first half of 2000) of Modernisation the accounting provisions of the 4th and 7th Company Law Directives Proposal end-2000 Adoption: 2002 Commission Recommendation on EU auditing practices For issue by end-99 State of Play Assessment The draft proposal is being prepared for adoption by the Commission. in addition, The proposal has now been deferred until the first quarter of policy Following 2000. discussions in the FSPG and the Contact Committee, an outline for the Communication will be discussed with Member States end October the Accounting Contact Committee. In bi-lateral discussions are being pursued with Member States. Progress is linked to progress on to the Communication update the EU Accounting Strategy (see above) and is therefore on target. Following discussions in two meetings of the Committee on draft Auditing recommendation been prepared for Member States in the Contact Committee. Accounting has a Follow-up by Adoption the Commission by the end of 1999 Discussion of an outline of a Communication in the Contact Accounting 21/22 Committee the October, Accounting Advisory Forum on 23 November on and in Discussion Accounting Committee early 2000 the Contact in the Discussion Contact Accounting (21/22 Committee October) the Committee on Auditing (6/7 December ) and Assessment Follow-up November: interpretation meeting MS experts Implementation 11. 12. 1999 date: Discussions industry Group’) October 1999 with (‘Forum started Containing systemic risk in securities settlement: Action Implementation of the Settlement Finality Directive Directive on cross-border use of collateral. Timeframe Commission to continue monitoring of implementat ion in a working Group. Commission report to Council end 2002 Launch consultation autumn-99: proposal end-2000. Adoption: 2003 State of Play Transposition of the Directive already completed in: BE, IR, NL done Preparation within the Commission of preliminary discussions with industry (‘Forum Group’), also taking into account the ‘Giovanni Group’ Report on EU Repo Markets 7 Towards a secure and transparent environment for cross-border restructuring: Action Political agreement of the proposed directive on Take Over Bids Political agreement on the European Company Statute Review of EU corporate governance practices Amend the 10th Company Law Directive Timeframe Mid-99 Adoption: 2000 Mid-1999 Adoption: 2000 Launch review early 2000 Proposal autumn 1999 Adoption: 2002 in State of Play Final adoption awaiting political agreement on issue of Gibraltar No further progress the A terms of reference for the proposed study is currently being drafted. Awaiting political agreement on the ECS Company 14th Directive Law Proposal autumn 1999 Adoption: 2002 in Awaiting political agreement on the ECS Assessment ϑϑϑϑ ϑϑϑϑ ϑϑϑϑ ϑϑϑϑ Follow-up Final adoption expected before the end of 1999 No progress expected before the end of 1999 Issue of terms of tender for a study by end of 1999 Commission led meeting of Member law State company experts on 30 September/ 1 October led Commission meeting of Member law State company experts on 30 September/ 1 October A Single Market which works for investors: Action Commission Communication on Funded pension Schemes Political agreement on the proposed directives on UCITS Timeframe Issued on 11 May 1999 Com (99)134 End-1999 Adoption: 2000 on Directive the prudential supervision of pension funds Proposal: Mid 2000 Adoption: 2002 State of Play Assessment Follow-up Negotiations continue the Council. EP will start its first reading in The Commission is finalising a first draft text of a directive for discussion with member states experts. The FSPG discussed the outline of a draft directive at its October meeting Political agreement should be reached end 1999. First reading in EP end 1999 First discussion of a draft outline of the directive with Member States on 25 November 1999: experts Early 2000: discussion with MS experts on draft Directive (2nd draft) 8 STRATEGIC OBJECTIVE 2: OPEN AND SECURE RETAIL MARKETS Timeframe End 99 Adoption 2000 State of Play Amended proposal adopted by the Commission (COM(1999) 385 of 23 July 1999) Discussions with industry (‘Forum Group’) in preparation Assessment Follow-up discussions Technical are underway in the Council, with a view to achieving a common position by November 1999. Meeting with industry (‘Forum Group’) started October 1999 Action Political agreement on proposal for a directive on the distance selling of financial services Commission communication codifying clear and comprehensible information for purchasers Recommendation to support best practice in respect of information provision (mortgage credit). Commission report on substantive differences between national arrangements relating to consumer-business transactions. on Interpretative Communication the freedom to provide services and the general good in insurance Proposal for amendment of Insurance Intermediaries Directive Review of market practices to begin end 99: Communica -tion: mid 2000 For issue by end-99 Review to begin autumn 1999: status report - mid-2000: Discussions with Council, EP to begin end-2000. For by: 1999 issue end Proposal mid-2000 Adoption: 2002 Commission Communication on a single market for payments Commission Action Plan to prevent fraud and counterfeiting in payment systems Commission green paper on an e-commerce policy for financial services For issue summer 1999 Communica tion for issue by: end-1999 For issue by: mid- 2000 Dialogue was interrupted: the Commission is seeking to restart ϑϑϑϑ * Recommendation end 1999 Discussions with industry (‘Forum Group’) in preparation minor All services have agreed draft. Some translation corrections to be made, but otherwise on track for adoption by Commission in end 1999. Draft proposal for a Directive has been prepared and has been discussed by Member State experts in September. Communication to be adopted by the Commission end 1999 Draft preparation Communication in Discussion on policy outline in continuing October the FSPG in ϑϑϑϑ ϑϑϑϑ Meeting with industry (‘Forum Group’) started October 1999 Market consultation beginning 2000 Draft report consultantcy autumn 2000: for examination with MS Commission imminent adoption industry Meetings with Member States experts, and consumers will continue in the 2nd semester of 1999. The IC will be consulted beginning 2000. Proposal for a directive: summer 2000 Informal consultation of the in market will November take place A first draft Green Paper available end Nov. ; interested parties will be consulted 9 STRATEGIC OBJECTIVE 3: STATE-OF-THE-ART PRUDENTIAL RULES AND Action the Adopt proposed directive on the winding- up and liquidation of insurance undertakings the Adopt proposed directive on the winding- up and liquidation of banks proposal for Electronic Money Adopt the an directive Amendment of the money laundering directive on financial Commission Recommendation disclosure of instruments the directives Amend governing capital framework for banks and investment firms the Timeframe first New reading in EP beginning 2000. Political agreement as soon as possible. Adoption: 2001 Common position: end-99 Adoption: 2001 Common position: autumn 99 Adoption: 2000 Commission adopted on 14. 7. 99 Adoption: 2001 Communica tion mid 1999 Proposal for directive: 2001, pending develop- ments Basle Adoption: 2002 in SUPERVISION State of Play Work in Council working group progressing steadily but slowly due to technical issues. Finnish presidency very co- operative. A Council working group meeting took place on 23/24 September and other meetings has been scheduled for October and November. Assessment Follow-up An amended proposal will be adopted by the Commission as soon as the evolution of the file in Council makes this appropriate (most likely in november/december) The Finnish presidency will re- open discussions in the Council working group. ϑϑϑϑ Awaiting breaking of deadlock in Council on the ‘Gibraltar’ issue. is The Finnish presidency seeking a common position in the of ECOFIN Council 8 November July Commission proposal adopted on 1999 14 (COM(1999)352). A first exchange of views took place in EP in September. Adoption by the Commission scheduled for end 1999. Discussions in the BAC have been completed with a view to agreeing on relevant issues and possible policy options. The rules on impact of new securities being is firms examined. Second reading in EP and likely adoption of the proposal in the first quarter of 2000. The Finnish presidency has scheduled at least 2 group meetings before end ‘99 working the towards Commission A paper consultation to the available November. industry: The the results of consultation will help EU determine position the proposals of the G-10 Basel Committee The IC will be consulted on of technical discussions in spring The Commission will draw its from conclusions these discussions and adopt its proposal mid 2000 results 2000. the Amend the margin requirements the insurance directives solvency in Proposal for directive: mid 2000 Adoption: 2003 Additional technical meetings held on 17/6 and 5/7 with follow-up meeting scheduled for 15 Nov. Work programme is proceeding satisfactorily. 10 Action Proposal to amend the insurance directives and permit the ISD exchange information with third countries to Timeframe Proposal autumn 1999 Adoption: 2001 Development of prudential rules for financial conglomerates following the recommendations of the ‘Joint Forum’ Creation of a Securities Committee Proposal: end- 2000 Adoption: 2002 Proposal end 2000 Adoption: 2002 Assessment Follow-up of in Adoption a Commission proposal is scheduled for end 1999. a Discussions Council working group: November Recommendations technical the from group will be discussed in the BAC, HLSS and IC. The Commission will draw conclusions those from deliberations The Commission will define the structure and content of a proposal for a directive State of Play procedure Internal Commission proposal underway for The Commission’s regulatory committees (BAC, HLSS and IC) reached agreement on a work mandate for a technical group of experts. The first meeting of the group for end is scheduled November consequences The Commission is considering the the comitology Council’s decision of July 1999 new of 11 GENERAL OBJECTIVE: WIDER CONDITIONS FOR AN OPTIMAL SINGLE FINANCIAL MARKET Action Adopt a Directive on the minimum of savings income taxation the Implementation of December 1997 Code of Conduct on business taxation taxation of Review of financial service products proposals Commission for co-ordination of the tax arrangements governing supplementary pensions Timeframe Political agreement by November 1999 Adoption: 2000 Ongoing examination in the Code of Conduct group Discussions in Tax Policy Group Proposal 2000 Adoption: 2002/3 State of Play Work in Council is progressing steadily. Finnish The presidency is seeking progress. Work on the Code of Conduct Group as is scheduled. progressing A preliminary analysis and discussions have started. Technical discussions have taken place with Member States in a technical sub group of the Taxation Policy Group. Assessment Follow-up A final report will be the ECOFIN sent to Council in November 1999. Discussions continue in 2000. will A draft proposal under preparation is 12