# CE2004084EN.01087301.xml

| 3.4.2004 | EN | Official Journal of the European Union | CE 84/873 |
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3.4.2004

EN

Official Journal of the European Union

CE 84/873

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(2004/C 84 E/0966)

WRITTEN QUESTION E-0758/04

by José García-Margallo y Marfil (PPE-DE) to the Commission

(11 March 2004)

Subject:   Loss of investor confidence following recent financial scandals

Subject:

In the light of recent financial scandals, what avenues is the Commission exploring to restore public confidence in the financial markets? What measures does it envisage taking?

Answer given by Mr Bolkestein on behalf of the Commission

(23 April 2004)

(23 April 2004)

The Commission largely agrees with the concerns outlined in the resolution adopted by the Parliament on 11 February 2004. Most of these concerns are already covered by the Commission Communication on Reinforcing statutory audit in the EU (1); the Commission Communication on statutory audit in the European Union: the way forward (2); the Action Plan on Company Law and Corporate Governance (3) and the Financial Services Action Plan (4). These action plans have been fine-tuned to take account of the most recent developments.

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The Commission adopted on 16 March 2004 (5) a proposal that fundamentally changes the European regulatory regime for auditors. The proposal clarifies the duties of statutory auditors, their independence and ethics, by introducing a requirement for external quality assurance and by ensuring robust public oversight of the audit profession. This considerably broadens the scope of the former Eighth Council Directive on Company Law (5), which only dealt with the approval of statutory auditors.

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Although prepared well in advance of the Parmalat scandal, the proposal has been adjusted to take into account the specific implications of that case. For example, it addresses group audits and public oversight. Based upon the experience in the Ahold case, the proposal also clarifies the role of the audit committee in relation to the internal control of the company. Following the Ahold case, the proposal now specifically states that in the case of public interest entities, the audit committee must monitor the effectiveness of the company's internal control, internal audit, and risk management systems.

Moreover, the proposed Directive would require that only non-audit practitioners can participate in the governance of the system of public oversight of auditors of ‘public interest entities’ — in other words mainly listed companies, banks and insurance companies.

Further action will comprise a proposal which will require more transparency in transactions with related parties — especially regarding the use of special purpose vehicles. Moreover, the proposal will provide clarification of the responsibility of directors for the financial statements and key non-financial information and the publication of an annual corporate governance statement by listed companies. Moreover, the Commission will issue a recommendation on the role of non-executive directors.

The Commission will propose a 3rd Money Laundering Directive that will prescribe more detailed customer due diligence requirements for all intermediaries — ranging from financial institutions to corporate service providers. Given the role that investment banks, rating agencies and the financial analysts played in the Parmalat affair, the Commission will analyse whether further regulation is needed.

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(1)  OJ C 236, 2.10.2003.

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(2)  OJ C 143, 8.5.1998.

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(3)  COM(2003) 284 final.

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(4)  COM(1999) 232 final.

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(5)  COM(2004) 177 final.

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