WRITTEN QUESTION E-1562/02

by Richard Corbett (PSE) to the Commission

(3 June 2002)

Subject: Cost of non-Europe

A recent study by the European Financial Services Round Table, quoted in the Financial Times on 22 April, concluded that the absence of a completed Europe-wide market for financial products was costing consumers and investors up to EUR 15 billion per year.

Does the Commission consider that it would be opportune to undertake and publish a new study into the costs of non-Europe, as it did in 1986?

Answer given by Mr Bolkestein on behalf of the Commission

(5 July 2002)

In 1988, the European economic model used in the original Cecchini report evaluated the potential benefit of the liberalisation of financial services as 1,5 % of the Community's 12 Member States gross domestic product (GDP) out of a total of 4,5 % to be reached after the completion of the Internal Market programme.

The report of the European financial services round table, quoted in the Financial Times on 22 April 2002, focused on the substantial potential benefits of an integrated retail market for financial services in Europe in terms of consumer gains and macro-economic growth. It concluded that closer integration of the European financial services might create additional economic growth of at least 0,5 % per year which represents EUR 43 billion per year. It also showed that, despite a number of legislative decisions already made, much remains to be done. In particular in the field of securities markets and financial services, the Community markets still remain fragmented.

In reply to the question of the Honourable Member, the Commission is currently not keen on launching a new broad macro study to calculate the cost of the non-integration. This is because methodological issues still remain to be dealt with in this area and because this kind of study would not clearly identify the specific measures needed to maximise the benefits from integration or provide a judgement on specific priorities. For this, a more detailed examination of the level of integration in the various sectors of the Community's financial system and of the likely consequences of the Community's financial market convergence is needed.

The Commission is therefore undertaking several research/study projects that could contribute to this. All studies will be finalised before the end of the 2002.

They are concentrated on two areas:

(i) developing indicators to monitor trends and developments in the financial sector on the one hand and

(ii) quantifying the benefits of financial integration on the other hand.

In the first area, (i) two studies will provide the tools for monitoring financial markets and assessing the impact of Commission policies:

- A first study on integration indicators was finalised in January 2002. The study compares alternative indicators and proposes the best indicators to monitor integration in financial markets. It distinguishes between the most integrated markets from those in need of further action. The study is now publicly available on the Internal Market Directorate General (DG) website(1).

- The second study on The monitoring of structural changes and trends in the Internal Market for financial services will provide economic and policy significant data, develop indicators and identify structural trends and developments, to allow for early detection of the remaining problem areas and swift reaction to keep pace with market developments.

In the second area, (ii above) two further studies are underway:

- A DG Internal Market one which will calculate the benefits of securities markets integration in terms of economic growth, employment, etc., concentrating on the evolution in trading costs and the costs of capital in the securities markets.

- The second study led by DG Economic and Financial Affairs, adopts an alternative bottom-up approach, tries to measure the link between financial market efficiency, increasing integration and corporate growth and calculates the changing costs of finance for Community companies in a context of deeper financial integration.

(1) http://www.europa.eu.int/comm/internal_market/en/update/economicreform.