Communication from the Commission - Implementing the framework for financial markets: action plan
Date: 1999-05-11
Institutions: European Commission
Subjects: financial institution, financial legislation, financial market, free movement of capital, single market

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  11.05.1999 

COM(l999) 232 final 

COMMUNICATION FROM THE COMMISSION 

IMPLEMENTING THE FRAMEWORK FOR FINANCIAL MARKETS: ACTION PLAN 

IMPLEMENTING THE FRAMEWORK FOR FINANCIAL MARKETS: ACTION PLAN 

1:  INTRODUCTION: 

A single  market  for  financial  services  has  been  under  construction  since  1973.  Important 
strides  have  been  made  towards  providing  a secure  prudential  environment in  which  financial 
institutions  can  trade  in  other  Member  States.  Yet,  the  Union's  financial  markets  remain 
segmented  and  business  and  consumers  continue  to  be  deprived  of  direct  access  to  cross 
border  financial  institutions.  Now,  the  tempo  has  changed.  With  the  introduction  of  the  euro, 
there  is  a unique window of opportunity to  equip  the  EU  with  a modern  financial  apparatus  in 
which  the  cost  of capital  and  financial  intermediation  are  kept  to  a minimum.  Corporate  and 
household users of financial  services will benefit significantly,  and  investment and  employment 
across  the  Union  will  be  stimulated.  The  structural  changes  triggered  by  the  euro  also  herald 
new challenges for financial  regulators  and  supervisors which  call  for effective  answers,  with  a 
vlew to  ensuring the balanced  regional distribution of the benefits of competitive and  integrated 
financial services markets. 

In  recognition of this changing financial  landscape,  the  Cardiff European  Council  in  June  1998 
invited  the  "Commission  to  table  a framework  for  action ...  to  improve  the  single  market  in 
financial services" I.  In response to this mandate, the Commission  published  a Communication2 
which  identified  a range  of  issues  calling  for  urgent  action  to  secure  the  full  benefits  of  the 
single  currency  and  an  optimally  functioning  European  financial  market.  Five  imperatives  for 
action were highlighted: 

• 

the  EU  should  be  endowed  with  a legislative  apparatus  capable  of  responding  to  new 
regulatory challenges; 

•  any  remaining  capital  market  fragmentation  should  be  eliminated,  thereby  reducing  the 

cost of capital raised on  EU  markets; 

.,  users  and  suppliers  of financial  services  should  be  able  to  exploit  freely  the  commercial 
opportunities  offered  by  a single  financial  market,  while  benefiting  from  a high  level  of 
consumer protection; 

•  closer co-ordination of supervisory authorities should be encouraged; and 

o 

an  integrated  EU  infrastructure  should  be  developed  to  underpin  retail  and  wholesale 
financial transactions. 

The  Vienna  European  Council,  in  December  1998,  considered  it  vital  to  translate  the  clear 
consensus  on  the  challenges  and  opportunities  that  confront  EU  financial  markets  into  a 
concrete  and  urgent  work  programme3  - stressing  the  importance  of  the  financial  services 
sector  as  a motor  for  growth  and  job-creation  and  the  need  to  confront  the  new  challenges 
posed  by  the  introduction  of  the  single  currency.  A group  of  personal  representatives  of 
ECOFIN  Ministers  and  the  European  Central  Bank,  meeting  under  the  Chairmanship  of  the 
Commission,  was  thus  entrusted  with  the  task  of  assisting  the  Commission  in  selecting 
priorities for action for consideration by the May 25 ECOFIN Council. 

1 

2 
3 

Pt.  17, Presidency Conclusions from  Cardiff European Council  ( 15/16 June 1998). 
COM (1998) 625.  28.10.98: "Financial Services: building a framework for action". 
Pt.  51,  Presidency conclusions from Vienna European Council (11112 December 1998). 

Financial  Services  Policy  Group  (FSPG)  met  on  three  occasions.  Its  deliberations, 
··'"'·-'"'-·'"'·- with  the  broad  consultation  undertaken  earlier for  the  Framework  for  Action  and  the 
of the European  Parliament4,  have greatly assisted the Commission  in  developing a 
perspective  to  its  work.  The  Commission  now  presents  this  Communication  which, 
not a report from  the  FSPG, is  based on  its work and  reflects the  broad discussions in 
The  Commission  tables  this  Communication  as  a possible  basis  for  a future  work 
proqramme  in  this  area,  building  on  agreed  Commission  policy  as  developed  in  discussions 

the FSPG and  in the European Parliament.  The Communication seeks to: 

• 

~ 

® 

confirm  the  objectives  which  could  guide  the  financial  services  policy  over  the  coming 
years; 

<.-}ssign  a relative order of priorities and an  indicative time-scale for their achievement; and 

identify a number of mechanisms which  may contribute to their realisation. 

financial  market.  . 

The  annexed  Framework for Action  is  an  aspirational  programme for rapid  progress towards  a 
lt  is  an  illustrative  plan  which  may  be  pursued  by  the  next 
Cornmlssion,  which  will  of course  need  to  decide  conditions  under which  the  different  actions 
initiated.  The  indicative timefrarne  reflects  the  priorities  as  suggested  by  discussions  in 
the  FSPG  and  the  European  Parliament.  The  European  Parliament  and  the  Council,  for  their 
part,  are  invited  to  confirm  the  content  and  urgency  of  the  Action  Plan.  To  the  extent  that 
political  support  at  the  highest  level  is  forthcoming,  the  European  Parliament  and  lhe  Council 
are invited to make every effort to ensure rapid  agreement and  implementation of the individual 
measures. 

11.  TACKLING URGENT ON·GOING BUSINESS: 

Several  proposals  of  immediate  and  significant  relevance  to  the  functioning  of  EU  financial 
markets have fallen  victim  to  protracted  political deadlock.  Their resolution  would  constitute  an 
immediate and tangible contribution to the functioning of the single financial  market and  a clear 
signal  of  the  political  commitment  to  make  progress  as  urgently  as  possible. 
In  February, 
ECOFIN  Ministers  agreed  to  intensify  efforts  to  reach  agreement  on  four  key  legislative 
initiatives 
(the  two  proposals  on  the  winding-up  and  liquidation  of  credit  institutions  and  of 
insurance companies;  the  proposal for a 13th Company Law Directive  (Tak~-over bids)  and  the 
European  Company  Statute).5  No  definitive  break-through  has  yet  been  recorded,  but 
progress has been made. 

4 

5 

Ref.  PE 229.721  fin,  EP.  15.04.99. 
The  Proposal for a Directive on the  winding-up and liquidation for credit institutions will  help to clarify 
and  contain  counter-party  risk.  As  such,  it  is  an 
important  firebreak  against  systemic  risk  and  an 
indispensable  component  of  a  blue-print  for  sound  and  stable  financial  markets.  The  Proposal  for  a 
Directive  on  the  winding  up  and  liquidation  for  insurance  for  insurance  would  offer  insurance 
companies,  their policy-holders,  employees  and  creditors  the  legal  security  and  confidence  needed  to  take 
advantage  of a single  financial  market.  The  European  Company Statute  (proposals  for a Directive  and 
Regulation)  will  contribute  to  increased  transparency  regarding  management and  ownership  structures,  as 
well  as  a rationalised  legal  template  for  pan-European  operations.  This  will  be  a useful  contribution  to  an 
integrated  primary  market  and  will  also  serve  as  an  important  step  towards  (market-driven)  emergence  of 
corporate governance patterns in  the  EU.  The proposal for take-over bids (13th  Company Law) Directive 
will  facilitate  the  restructuring  of the  financial  industry  - a process  which  is  gathering  pace  - and  mark  an 
important milestone in the emergence of an open market in EU corporate ownership. 

2 

, The  Council is invif$d to confirm the fundamental-importance of these initiatives for an effective 
single  financial market  and  to  seek  to  resolve  the  outstanding  difficulties  as  urgently  as 
possible ... 

Further initiatives were singled out as being a high priority for adoption  before the next century. 
In  the  annexed framework for action  plan,  both  sets of these initiatives are clearly identified as 
urgent. They include: 

• 

• 

• 

the  two  proposals  for  Directives  relating  to  Undertakings  for  Collective  Investments  in 
Transferable Securities (UCITS); 

the proposal fora directive on the distance selling of financial services; 

the proposal for a directive on electronic-money 

The  Council  and . the  European  Parliament are  invited to take all necessary steps to secure 
political agreement on these important proposals before 31.12.99. 

Ill. FRESH PRIORITIES FOR A SINGLE FINANCIAL MARKET: 

The  wide  consultations  undertaken  over the  past  12 months,  the  Resolution  of the  European 
Parliament  and  the  work  of  the  FSPG  have  confirmed  that  a fresh  impetus  is  called  for  to 
harvest  the  undeniable  opportunities  offered  by  the  single  financial  market  and  the  single 
European currency.  The present action plan consolidates the issues which  have emerged from 
the  Commission  communication,  as  fleshed  out by  the  FSPG discussions.  In  respect of most 
of the  following  actions,  he  Commission  has  already  the  occasion  to  confirm  or  announce  its 
intention  to  proceed  with  initiatives  as  they  have  emerged  from  these  discussions.  Essentially 
action  is  envisaged  under  three  headings:  wholesale  markets;  retail  markets,  and  sound 
supervisory  structures.  The  Framework  plan  (annexed)  provides  the  detailed  basis  for  this 
work,  which  should  build  on  efforts  undertaken  in  other  formal  or  informal  bodies  where 
appropriate.  Some  of  the  issues  relating  to  flanking  policies  signalled  in  the  Commission 
communication of October 1998 are dealt with in the last chapter of this paper. 

WHOLESALE MARKETS: 

The  euro  is  the  catalyst  for  a market-driven  modernisation  of  EU  securities  and  derivatives 
markets.  Profound  changes  in  the  organisation  of  the  EU  financial  marketplaces  are  already 
visible,  notably  in  the  relationship  between  different  exchanges  and  in  the  consolidation  of 
payment and  securities settlement systems.  These hold out the  prospect of cheaper and  more 
flexible 
innovative  start-up 
companies.  Similarly the present_ mass of legal and  administrative barriers  need  to be stripped 
away  lest  the  emergence  of  better _integrated  securities  trading  systems  driven  by  market 
forces  is  frustrated  and 
the  benefits  of  access  to  EU-wide  capital  markets  denied.  Broadly, 
action  is needed under five chapters: 

for  corporate  borrowers, 

financing  arrangements 

including 

1. 

Common rules for integrated securities and derivatives markets. 

The  Investment Services  Directive  (lSD)  is  in  urgent need  of upgrading  if it  is  to  serve  as  the 
cornerstone  of  an  integrated  securities  market.  We  must  pave  the  way  for  effective  cross 
border provision of investment services.  Even  though  the  lSD requires  Member States to  take 
into  account  the  extent  to  which  the  client/investor  is  sophisticated  enough  to  assume  full 

3 

determining  which  rules  should  apply,  tJbstacles  to  cross-border  business 
Despite  this  provision,  host  country  authorities  are  unwavering  in  applying  their 
of business rules.  However,  there  may ultimately be a need to  reconsider the extent to 
country  application  of business conduct rules  - which  is the  basic  premise of ISO -

with  the needs of an  integrated securities market. 

f ------------ ;munication  summarising  the  common  interpretation  between  national  supervisory 
I 
could be an important first step in  clarifying the  boundary between the sophisticated 
I 
(where  the  choice  of ~~conduct of business" regime  can  be  left to  the  two  contracting_  1 
and the  less professional'household' investor (where local rules  could continue  to  be  I 
I  ... ·. 
I applied). 

-

. 

- - - - -

L-.-----·--·--

.  - - -

regul01tory  issues:  New  developments  and  technologies  also  pose  a  major  new 
n.,-,.-,,,.,-,nr'!n  PI  modern  legal  framework  for  competitive  secondary  markets  requires  a common 
understanding on: 

fj) 

a; 

definitions of markets and exchanges (to ensure that responsibility for authorisation  and 

supervision is clearly allocated); 

the  conditions  under  which  brokers  and  dealers  qualify  automatically  for  remote 
membership  of  all  regulated  markets  and  the  elimination  of  any  other  restrictions  on 
exercise of related activities; 

11)  a common  approach to the authorisation and supervision of "alternative trading systems"; 

•  Stringent safeguards to counter market manipulation. 

Consultations  will  be  undertaken  with  all  interested  parties  (exchanges,  regulated  markets, 
supervisors,  intermediaries,  issuers)  on  the  basis on  a Commission  Green  Paper.  In  addition, 
possible  adaptation  of the  lSD  itself will  be  considered.  The  utility  of  proposals  for  specific 
legislation to counter market manipulation will also be given full consideration. 

2. 

Raising capital on an EU-wide basis. 

Producing  multiple  sets  of official  documentation  before  issuers  can  offer  securities_in  other 
Member States is costly and undoubtedly inhibits pan-EU  activity.  The  application  of additional 
national  requirements  has  thwarted  the  mutual  recognition  of  prospectuses  which  the  1989 
Public-Offer_Prospectus Directive aimed to achieve. 

The  Commission  communication  entitled  "risk-capital:  a  key  for  job-creation  in  the  EU"o, 
endorsed  by  the  European  Council  at  Cardiff,  has  underlined  the  missed  opportunities  for 
Europe  in  terms  of investment  and  job-creation  stemming  from  the  urnterdeveloped  nature  of 
risk-capital  markets.  A  number  of  impediments  to  the  emergence  of  effective  risk-capital 
provision  relate  to  fragmented  approaches  to  the  regulation  of  securities  business.  These 
discrepancies prevent risk-capital  markets from  acquiring  sufficient critical-mass to  represent a 
viable  alternative  to  more  costly  and  inflexible  forms  of  financing  for  innovative  start-up 
companies.  Actions  identified  in  the  risk-capital  paper,  coupled  with  the  possible  measures 
presented  in  this document,  will  stimulate the emergence of deeper and  more liquid  markets at 

6  SEC (1998) 552 final, April98. 

4 

-· -~--«~·-'-·-··---.-· - - - - - - - - - - - - - - - - - - - - - - - - - - - - ·  

EU  level. Closer collaboration at the  level of securities supervisors will  also serve this objective. 
These  actions  have  now  been  integrated  within  the  Framework  Action  Plan.  and  thus  the 
pressure for change will be maintained .. 

To  secure  practical improvements  in  the  operation  of the  Public-Offer_Prospectus  Directive, 
collaboration  between  the  Commission  and FESC07 will be  intensified.  Building on  this  work,  . 
I 
the  Directives  on  prospectuses  may  be  upgraded.  These  adjustments  could  reinforce  the 
practical implementation of mutual recognition of prospectuses and provide for new streamlined 
procedures for raising subsequent instalments of capital (in particular,  laying down the basis for 
common acceptance of shelf-registration techniques). 

In  order to  sustain  the  political momentum  in  respect  of risk-capital markets,  an  interim  report 
on progress of Member States  in  the  implementation  of the  risk-capital action plan,  endorsed 
by the  European  Council  at  Cardiff,  will  be  published  in  the  coming  months.  This  report  will 
highlight the steps taken by Member States to harness the potential contribution of vibrant and 
dynamic risk-capital markets to job-creation. 

3. 

Financial reporting. 

Comparable,  transparent  and  reliable  financial  information  is  fundamental  for  an  efficient  and 
integrated  capital  market.  Lack  of  comparability  will  discourage  cross-border  investment 
because  of  uncertainty  as  regards  the  credibility  of  financial  statements.  FSPG  discussions 
pinpointed  the  urgent  need  for  solutions  which  give  companies  the  option  of  raising  capital 
throughout the  EU  using financial  statements prepared  on  the  basis of a single  set of financial 
reporting  requirements.  Capital-raising  does  not  stop  at  the  Union's  frontiers:  our  companies 
may  also  need  to  raise  finance  on  international  capital  markets.  Solutions  to  enhance 
comparability  within  the  EU  market must  mirror developments  in  internationally  accepte9  best 
practice.  At  the  present  juncture.  International  Accounting  Standards  (IAS)  seem  the  most 
appropriate  bench-mark  for  a single  set  of  financial  reporting  requirements  which  will  enable 
companies  (which  wish  to  do  so)  to  raise  capital  on  international  markets.  In  the  same  way. 
International  Standards  on  Auditing  appear  to  be  the  minimum  which  should  be  satisfied  in 
order to give credibility to published financial statements. 

financial  reporting  and  alignment  on 

Discussions  in  the  FSPG  have  triggered  an  important  debate  on  how the  twin  objectives  of 
international  best  practice  can  be 
comparable 
simultaneously  achieved.  Consideration  is  currently  being  given  to  a possible  solution  which 
would  provide  companies  with  an  option  (as  the  sole  alternative  to  preparing  financial 
statements in  accordance with  national laws transposing  EU  accounting Directives)  to  publish 
financial  statements on  the  basis of /AS  standards.  The  objective  of comparability in  financial 
reporting  will be  secured by excluding  national deviations  from  /AS  for companies  exercising 
this option.  A screening mechanism will be required in order to ensure that /AS output conforms 
with  EU  rules  and  corresponds  fully  with  EU  public  policy  concerns.  Securities  markets 
supervisors  could  be  associated to  this  task.  These  issues  will be  amplified in  a Commission 
Communication to be published by the end of 1999,  which  will prefigure amendments of the  4th 
and  7th  Company Law Directives.  Auditing issues will be addressed in  a separate  Commission 
Recommendation. 

4. 

A single market framework for supplementary pensions funds. 

7  The Forum of European Securities Commissions 

5 

1t  is  the  competence  of  the  Member  States  to  organise  pension  provisions  in  the  light  of 
national  circumstances  and  requirements.  However,  where  they  exist supplementary  pension 
funds  (employment  related)  should  be  able  to  operate  in  a coherent  single  market framework. 
The  establishment  of  such  a framework  was  regarded  as  such  a priority  by  FSPG  members 
that  it  warranted  a specific debate.  This  debate centred  on  the  extent to  which  an  appropriate 
prudential  framework  for  such  financial  services  can  enable  fund  managers  to  improve  fund 
performance  without  in  any  way  compromising  the  protection  of  fund  members.  With  the 
introduction of the  eurol  the  use  of currency  matching  rules  and  stringent asset-category rules 
can  increasingly - though  not exclusively- be  replaced  by  qualitative  prudential  rules.  In  this 
way  pension  funds  can  be  permitted  to  select  assets  that  better  match  the  real,  long  term 
nature  of their liabilities  and  thus  reduce  risk.  In  order  to  facilitate  the  development of funded 
pension  schemes,  a rigorous  prudential  framework  is  needed  in  order to  ensure  the  security of 
pension  fund  beneficiaries.  Providing  for  a  high  of  level  of  protection  and  improve  fund 
performance  to  the  benefit  of  their  members,  will  not  only  stimulate  employment  creation  by 
lowering  non-wage  labour  costs  but  also  alleviate  the  growing  burden  of  financing  old  age 
pensions  due  to  demographic change.  In  developing  new  thinking,  great care  has  been  taken 
to ensure the maintenance of a level-playing field on a For all providers of occupational pension 
schemes. 

By  providing  a ready  source  of long-term  capital,  pension  funds  will  also  stimulate  the  flow  of 
funds  available  for  private  sector  investment  (thus  promoting  job-creation  and  growth).  This 
approach  can  serve  as one  of a range  of measures  to  help  to  reduce  the  burden  of financing 
old  age pensions caused  by demographic change. The general lack of a Community framework 
aiso  discourages  labour mobility in  that  it  is  both  difficult to  transfer employee  rights  from  one 
Member State  to  another and  impossible for residents  of one  Member  State  to  join  a pension 
scheme in  another. 

The contours of a prudential framework for supplementary pension funds have been discussed 
with  the  FSPG  and  the  Insurance  Committee.  A Communication  which  consolidates  recent  . 
j  consultations and discussions is envisaged.  This Communication could serve as the basis for a l 
proposal  for  .Si'  Directive  on  the  prudential  supervision  of  pension  funds.  The  envisaged 
I 
prudentiAl framework  would take into account the diversity of pension funds currently operating 
I in  the  Et./  and will cover:  authorisation,  reporting,  fit  and proper criteria,  rules  on liabilities  and 
investments  with  a combination  of qual.itative  and quantitative  rules.  Co-ordination  of the  tax 
arrangements  governing  supplementary pensions  and  the  removal of the  obstacles  to  labour 
I 
1  mobilitY.__!9u!d also b_e_ex-'-p_Jo_re_d_. - - - - - - - - - - - - - - - - - - - - - - - '  

5. 

Collateral. 

Vvork  on  the  implementation  of the  Settlement  and  Finality  Directive  shows  the  importance of 
common  rules  for  collateral  pledged  to  payment  and  securities  systems.  Priority  should  be 
given  to  further progress  in  the  field  of collateral  beyond  this field.  The  mutual  acceptance  and 
enforceability  of  cross-border  collateral  is· indispensable  for  the  stability  of  the  EU  financial 
system  and for a cost-effective and  integrated securities settlement structure.  At present,  these 
conditions  are  not  fulfilled:  there  is  a higher  risk  of  invalidation  of  cross-border  collateral 
arrangements  ;::1d  uncertainty  as  regards  enforceability  should  the collateral  provider  become 
insolvent.  If  such  difficulties  are  not  resolved,  cross-border  securities  transactions  will  be 
subject to higher costs and  risks. 

~--,n-close cooperation  with  the financial serVices sector and. national authorities,  the  Commission 
! :~~!.'L ber;Jn  ~~~~ on __ E!_!}PC!_S!!_(~ for legisl?five action on._c_o,_'la_te_ra_l. __  ~--

6.  A secure and transparent environment for cross-border restructuring. 

The  EU  is  currently  in  the  throes  of widespread  industrial  restructuring.  The  financial  sector is 
to  the  forefront  of  this  development.  Early  adoption  of  the  Take-Over  Bids  Directive  and  the 
European  Company  Statute  will  provide  much-needed  legal  underpinning  for  protection  of 
minority shareholdings and  a more  rationalised organisation of corporate legal structures in  the 
single market.  Early progress on  the European  Company  Statute will  also pave the way for the 
Commission  to  come  forward  with  long  overdue  and  important  proposals  for  Directives  on 
cross-border mergers of public limited companies,  and on  the transfer of company seat 

Ensuring  a secure  and  transparent  environment  for  restructuring  is  of  particular  importance 
when  it  involves  the  financial  services  industry.  Prudential  considerations  must  of  course  be 
fully  taken  into  account.  At  the  same  time,  arriving  at  configurations  that  bring  about  greater 
efficiency  is  crucial  given  the  key  role  that  financial  services  play  in  ensuring  an  efficient 
allocation  of  resources  throughout  the  EU  economy.  Therefore,  the  supervisory  authorities, 
while  taking  prudential  considerations ·fully  into  account  when  dealing  with  the  restructuring 
process  (mergers,  acquisitions,  take-over  bids  etc.),  should  do  so  in  full  respect  of  the 
principles  of  transparency  and  non-discrimination. 
that  prudential 
considerations  - left  unspecified  - could  result  in  unjustified  actual  or  potential  obstacles  to 
restructuring  operations,  it  would  be  appropriate  that  any  required  authorisation  process  be 
·  based  on  a set of objective and  publicly disclosed  criteria,  stable over time.  Such  an  approach 
has been  set out by the  Commission  in  its Communication on  certain  legal  aspects concerning 
intra-EU  investmentss  in  particular  to  ensure  free  movement  of  capital  and  freedom  of 
investment. 

to  avoid 

In  order 

RETAIL MARKETS: 

Fundamental change in  the  EU  financial  markets is  clearly being  driven by wholesale  services. 
However, the retail sector is itself in the process of considerable adaptation.  Action  at EU  level 
for retail  markets and for the protection of consumers thus remains a high priority. 

The  policy for the  single market in  financial  services  has  already introduced  a legal  framework 
that  allows  financial  institutions to  offer  their services  throughout  the  Union  and  established  a 
bulwark against institutional failure  and  systemic risk.  Depositors,  insurance policy  holders  and 
are  already  well-protected  against the  financial  trauma  of default.  Yet many  hurdles  to  cross 
border provision  of services remain.  In  particular _the  conditions  under which  financial  products 
are sold  (e.g.  marketing rules)  should be  addressed.  Member States continue  to  apply  national 
rules  as  a  defence  against unfair trading  practices  and  to  ensure  the  soundness  and  integrity 
of financial  services  and  their providers.  This  situation  prevents consumers  and  suppliers  from 
reaping  the  single  market  benefits  of  increased  choice  and  competitive  terms.  Cross-frontier 
trading  will  only  flourish  if  consumers  are  confident  about  the  integrity  of  the  service  being 
provided  and  the  selling  methods  used  by  suppliers;  the  credentials  of  the  supplier,  the 
availability  and  efficacy  of  redress  procedures  in  the  event  of  a dispute.  Similar  factors  may 
also  deter suppliers  from  supplying  services  to  consumers  resident  in  another  Member State 
because  of  the  increased  costs  and/or  risks  that  such  transactions  entail  for  the  supplier. 
Rather  than  attempting  harmonisation  of  financial  products,  mutual  recognition  of  essential 
requirements should be pursued. 

Regulatory  and  structural  problems  which  prevent  financial  service  suppliers  and  consumers 
from  mutually  benefiting  in  a climate  of  trust  and  legal  security  must  be  tackled  head  on. 

8  OJ C 220, 19.07.97. 

7 

Appropriate  and  progressive  harmonisation  of marketing  and  information  rules  throughout  the 
Union  together  with  a pragmatic  search  for  non-legislative  solutions  offers  the  prospect  of  a 
truly  integrated  retail  market  fully  respecting  the  interests  of  consumers  and  suppliers.  The 
Commission has identified six key areas for action. 

1. 

Information and transparency 

Clear and  understandable information for consumers is vital when they are investing significant 
savings  in  another  country.  Consumers  need  information  to  assess  the  characteristics  of  the 
contract,  the  service  provider,  and  the  proposed  investment.  Industry  must  do  everything 
possible to meet such  needs.  Clear understanding of what information is required will also be of 
benefit  to  service  providers  in  facilitating  effective  action  to  partner  country  markets.  The 
Commission  will  encourage  a constructive  dialogue  between  suppliers  and  users  whilst  itself 
remaining fully prepared to respond  to citizens' concerns,  if necessary by legislative action. 
-The  Commission  will pursue  the  policy of Dialogue  between  financial  seNices  providers  and  I 
consumers,  initially by issuing a Recommendation  to  follow-up  on  a code  of good practice  on 
r
. information provision in  the area of mortgage credit.  lt will also seek to develop an over-arching 
i policy in this area.  This will be reflected in a Communication to be published which will examine 
I possible guiding principles for the full range of cross-border fi'nancial seNices,  taking account of 
I provisions laid down in existing EU and national provisions. 

2. 

Redress procedures 

1

Amongst the  most significant stumbling-blocks to  the  single  financial  market is  the  consumer's 
uncertainty  about  the  possibilities  of  redress  in  the  eventuality  of  cross-border  contractual 
dispute,  We  need  to  find  an  efficient  and  effective  judicial  and  extra-judicial  settlement  of 
disputes to provide the necessary confidence in cross-border activity. 

l On  the basis of the  Commission's policy of administrative cooperation within the Single Market,  . 

1  the  Commission could consider the development of a Union-wide complaints network (including  ' 
the  use  of  an  ombudsman  for  financial  ·seNices).  In  the  field  of  consumer  disputes,  the 
1  Commission  will  .base  its  action  on  its  Recommendation  on  the  principles  applicable  to  the 
bodies  responsible  for  out-of-court  settlements  of  consumer  disputes9  and  will  follow  the 
I 
, methodology foreseen in  that text.  Thus,  in order to promote co-operation between these extra-
1  judicial  bodies  in  charge  of consumer  disputes,  the  European  Commission  will  encourage 
I networking  between  these  bodies  with  a view  to  resolving  cross-border disputes.  Ultimately, 
I consumers  should  be  able  to  refer  cross-border disputes  to  the  extra-judicial  body  which  is 
1  competent and which respects the criteria of the Recommendation in the foreign country via the 
corresponding  extra~udicial body in  their own  country.  lt goes without saying that recourse  to 
1  extra-judicial  bodies  can  never preclude  the  right  of consumers  to  bring  their  action  before 
In  addition,  the  Commission  policies  of  Dialogue  with  Citizens  and  with 
1  judicial  courts. 
Business  could  also  be  developed  to  provide  advice  and  help  on  complaints  procedures 
throughout the  Union. 
I 

1 

·------------------------------------------~ 

3. 

A balanced application of consumer protection rules: 

9  Recommendation 98/257 of 30.03.98. 

States  have  the  same  basic  level  of  protection  in  place,  national  authorities 
more  ready  to  allow  financial  services  providers  authorised  in  other Member States 
their clients without setting additional requirements on those providers. 
-- -----a·~~.;n?ber-of specific financial products,  the  Commission  could  analyse national consumer  1 
that  affect  other  Member  States; 

(including  general  provisions 

rules 

produc!;/suppliers).  Detailed  work  could  be  undertaken  to  establish  possible  equivalence  I 
between  clearly similar rules.  This  work  could  culminate  in  detailed  report  to  the  Council and 
EP  on  the  basis  of which  conclusions  for  future  policy  will  be  drawn.  The  Commission  has 
already  announced  its  intention  to  issue  a communication  on  the  application  of the  general 
1  good in_  the insurance sector. 

4. 

Paving the way for e-commerce based retail financial business 

E-commerce  is  already  revolutionising  retailing  and  distribution  of  many  financial  services. 
Suppliers  - EU  and  non-EU  - will  be  able to  make contact with  potential  users  across  national 
boundaries  at  minimal  distribution  cost.  Users  will  benefit  from  a wider  range  of  innovative 
products.  The  overall  impact will  be  to  reinforce  and  cement  market  integration.  Proposals  for 
E-Commerce  and  Distance  Selling  Directives  are  on  the  table,  which  will  facilitate  the 
emergence  of  these  activities.  However,  discussions  in  the  FSPG  highlighted  the  need  for 
clarification  and  coherence  in  certain  areas  (e.g.  existing  differences  in  prudential  procedures 
and  notification  arrangements).  Many of the  issues,  already identified  for cross-border sales  in 
retail financial markets, will  be thrown into even sharper relief. 

The  Commission . envisages publishing  a Green  Paper to  establish  whether the  provisions  of 
existing  financial  legislation  contain  coherent  provisions  on  prudential  procedures  provide  a 
propitious  legal  environment  in  which  e-commerce  based  financial  services  business  can 
I thrive,  while ensuring that consumers' interests are fully safeguarded. 

5. 

Insurance intermediaries 

Member  States  have  developed  consumer  protection  safeguards  in  relation  to  insurance 
intermediaries,  but  varying  national  legislation  has  been  drawn  up  along  very  different  lines 
which  acts  to  hamper  the  free  provision  of services.  Given  their  key  importan~e in  enhancing 
the  functioning  of the single  insurance market,  there  is  a need to  provide  a clear and  common 
approach  to  regulation  of  insurance  intermediaries,  thus  facilitating  the  free  provision  of 
services while strengthening consumer protection at a high level. 

The  Commission is working towards tabling a Directive: 

I 
, 1) 
l 2) 
L_ 

to update the  1976 Directive on insurance intermediaries and 
to  strengthen  consumer  protection  by  establishing  common  requirements  on  inter  alia 
registration,  financial security and information disclosure to the consumer. 

6. 

Cross-border retail payments 

Without  impetus  at  the  highest political  level,  there  is  a danger that  the  individual  customer of 
financial services will be deprived of some of the tangible benefits of a single currency. 

In  particular, low value credit transfers between euro-zone countries will continue to  attract high 
charges  until  such  time  as  a modern  payments  infrastructure  which  is  capable  of  supporting 

9 

efficient, secure and  low-cost cross-border payments is  put in place.  The current relatively low 
volumes of cross-border credit transfers  combined  with  a range of structural  and  administrative 
factors  stand  in  the  way  of  "state-of-the-art"  linkages.  However,  citizens  are  unwilling  - and 
rightly so- to tolerate a situation where cross-border payments incur charges which  far exceed 
those  charged  by  domestic  transfer  systems.  If  charges  could  be  reduced  to  a  level 
comparable  to  domestic  credit  transfers,  savings  of  several  billion  euro  could  be  made. 
Remedying  the  infrastructural  gaps  requires  a concerted  strategy,  supported  at  the  highest 
political  level  and  including  the  EU  institutions,  the  ESCB  and  the  private  sector  to  surmount 
the technical and commercial hurdles. 

Likewise,  charges  for  cross-border  card-payments  are  higher  (and  often  more  opaque)  than 
fees  for  domestic  card  payments  - although  the  differences  are  less  marked  than  for  credit 
transfers.  In  this  area,  the  Commission  believes  that  a combination  of  efforts  to  increase 
transparenc  , reduce fraud  and  reinforce corn  etition disci  lines erode such differentials. 
There  is  a clear need  for  integrated  retail  payments  systems,  which  provide  for  secure  and 
competitive  sma/luvalue  cross-border  transfers  comparable  with  the  service  provided  within 
domestic payment systems,  to  be put in place before the end of the euro  transitional period.  A 
concerted effort involving the  ESCB,  EU institutions and the private sector should be  lau17ched 
to  deliver a technically  secure  and  operational  solution  as  a matter of utmost  urgency  . The 
Council  and  the  European  Parliament  are  invited  to  endorse  this  as  a  foremost  political 
. objective  in 
financial  services  field  and  to  play  their  full  part  in  supporting  the 
\ implementation of a solution which will serve the needs of citizens.  The  Commission intends to 
publish a Communication mapping out a strategy for ensuring progress towards this objective. 

the 

SOUND SUPERVISORY STRUCTURES: 

The  EU's supervisory and  regulatory  regime  has provided  a sound  basis for the  emergence of 
a  true  single  financial  market  which  goes  hand  in  hand  with 
prudential  soundness  and 
financial  stability.  Steady  EU-Ied  convergence 
in  regulatory  requirements,  has  been 
underpinned  by  a comprehensive  system  of  informal  bilateral  memoranda  of  understanding 
between  financial  supervisors.  This system  has  provided  common  ground-rules  and  pragmatic 
mea:1s  of  implementing  and  applying  the  EU  Directives  for  a  single  market  for  financial 
services.  However, 
tempo  of 
consolidation  in  the  industry,  and the  intensification of links between  financial  markets  because 
of the euro call for careful consideration of structures for containing  and supervising  institutional 
and  systemic  risk.  In  an  environment  characterised  by  strong  and  immediate  transmission 
effects  between  EU  banking  and  securities  markets,  there  are  reasons  to  believe  that  the 
status  quo  may  not  tenable  over  the  longer-term.  There  is  now  a  greater  need  and  a 
willingness  to  engage  in  an  open  discussion  on  the  structures  that  will  be  needed  to  ensure 
appropriate regulation and supervision of a single financial market. 

fresh  challenges..  The  heightened 

the  future  will  bring 

As  regards  regulation,  the  Union  should  strive  to  maintain  tAe  highest standards  of prudential 
regulation  for  its  financial  institutions.  These  standards  must  be  kept  up-to-date  with  market 
developments  and  capital  requirements  must  accurately  reflect  the  risks  run  by  banks, 
insurance  undertakings  and  securities  firms  in  the  Union.  Combined  financial  operations  may 
also  create  new  prudential  risks  or  exacerbate  existing  ones.  Capital  requirements  must  be 
adequate  and  proportionate  to  meet  the  risks  undertaken  in  financial . groups  that  straddle 
traditional sectoral  boundaries. The Commission  will continue to exercise  its right of initiative in 
promulgating proposals to  address new regulatory issues.  lt would  however, draw great benefit 
from  cross-sectoral  strategic  input  of  the  type  which  could  be  delivered  by  the  mechanism 
presented  in  section  IV.1  of this  paper.  This  perspective  would  be  valuable  in  defining  broad 

10 

for  appropriate  regulatory  approaches  in  areas  such  as  conglomerates  The  EU 
assume  a key  role  in  ensuring  that its  voice  is  clearly  heard  in  international financial 
fora  to  ensure  that  sound  and  coherent  regulations  are  promulgated  that  guarantee 
fields.  The  global  dimension  to  regulation  of financial  services  is  set  to  acquire 
importance as international liberalisation gath~rs pace under the aegis of the WTQIO 

In 
area  of  supervision,  closer  market  integration  has  pushed  the  issue  of  reinforced  EU 
collaboration  to  the  forefront.  The  continuing  process  of internationalisation,  disintermediation, 
and  globalisation  of  financial  services  challenges  the  way  in  which  we  have  structured  the 
present  means  of co-operation  and  co-ordination  between  authorities.  The  following  practical 
steps,  which  build  on  existing  arrangements,  could  take  account  of  the  greater  cross-border 
and cross-sectoral dimension to ensuring financial stability. 

1. 

2. 

Increasing  cross  sectoral  complexities  underline  the  need  for  clarity  in  supervisory  roles. 
Many  themes  that  are  discussed  within  a banking,  insurance,  or  securities  perspective  in 
reality  cut  across  all  financial  sectors.  There  is  therefore  a pressing  need  for  increased 
collaboration,  monitoring  and  better understanding  of experiences  and  risks  in  all  sectors, 
including  those  that  would  normally  go  beyond  individual  banking,  insurance  or securities 
supervisory perspective.  At present, there is no focal point for forging  common  approaches 
across  sectors  to  the  day-to-day  application  of  prudential  rules  to  individual  cases.  The. 
Commission  would  see  great  merit  in  developing  .. ad  hoc"  and  streamlined  arrangements 
for close coordination between front-line authorities.  Such  an  arrangement could draw from 
the  membership  of  existing  structures.  In  this  way, 
it  would  avoid  duplication  and 
proliferation  of  structures.''  Although  the  Commission's  vocation  in  the  financial  services 
field  is regulatory,  it stands ready to assist Member States in  developing these·ideas. 

In  the  field  of securities  markets,  closer cooperation  between  securities  has  taken  a step 
forward following  the creation of FESCO.  As cross-border trading  and  issuance becomes a 
common-place,  policy  concerns  such  as  market  integrity  will  assume  the  properties  of  a 
common  good.  In  time,  the  option  of  a single  authority  to  oversee  securities  markets 
supervision may emerge as a meaningful proposition  in the light of changing  market reality. 
The  EU  has  also  been  hamstrung  by  the  absence of a committee  of appropriate  standing 
to  assist  the  EU  institutions  in  the  developing  and  implementing  regulation  for  investment 
services and securities markets. 

3.  EU 

legislation  provides  a  legally  binding  underpinning  for  cross-border  cooperation 
between  banking  supervisors.  These  rules  are  managed  through  bilateral  Memoranda  of 
Understanding  between  national  supervisors.  Recently,  some  have  argued  that  these 
arrangements  are  no  longer sufficiently robust to  contain  cross-border effects  of failure  of 
large 
the  view  that  present 
arrangements are unsuitable for the present state of the single banking market.  However, it 
considers  that  there  is  a  need  for  high-level  political  assessment,  encompassing  all 
national  and  EU  level  institutions with  an  interest in  banking  supervision,  of the  conditions 
under which  a review of present arrangements for banking supervision could be required . 

institutions.  The  Commission  does  not  subscribe  to 

. At  present,  decisions  on  appropriate  supervisory  arrangements  are  determined  at  national 
level,  and  the  supervision  of  the  banking,  insurance  and  securities  sectors  is  predominantly 
conducted  at that level.  Member States have  developed  different models for  performing  these 

1 0  Ratification  of  the  1997  Agreement  is  proceeding  and  attention  is  turning  to  a  second  round  of  GATS 

liberalisation. 

1 i  E.g.  Groupe de  Contacte,  FESCO  and  Conference  of insurance  supervisors  and  their  parent committees  -

BAC,  HLSS and IC. 

11 

tasks.  Mutual  confidence  in  the  effectiveness  of  partner  country  financia!  supervision  Emd 
regulation  - whether that  be  undertaken  by  a consolidated  authority for  the  entire  sector o!'  by 
separate sectoral  authorities that co-operate  and  co-ordinate effectively - is  the  ke;t  ingredient 
for successful cross-border supervision .. 

The  ~011]1j1i~sion1~~~nd$lo pre~entproposals to maintain ~iQh standards of_ banking,  insurance 
andrsecuritiespr~dentiallegislation. To  this  end the  work.ot existing bodies  will be  taken  into 
account. as  much  as  possible  (Basle  Committee,  FESCO  etc).  Work  on  the  prudential 
supervision  of" finaf}cial. ·.conglomerates  . will  be  taken  in.  hand.  Appropriate  and  efficient 
arrangerpeot$  wi/{  be put in  pl~ce  to  increase  cross-sectoral  discussion  and  co-operation 
between"aJJteoritl~s on  issues  of common  concern.  In  the  securities  field,  the  Commission 
envisag~~':tpe,,creayon ·of a Sequritie~ Committee,  in  the  light of any  future  inter-institutional 
/t  also  advocates  the  initiation  of  high-level  consideration  of  the 
de~ision g~ ':~comltology'1• 
conditions ·under which  present supervisory arrangements in  the banking sector might need to 
be reviewed. 

GENERAL CONDITIONS FOR AN  EFFICIENT EU  FINANCIAL MARKET: 

1. 

Corporate governance: 

Investors  in  the  single  market  may  experience  unnecessary  uncertainty  due  to  differences  in 
corporate governance arrangements.  Differences in  corporate governance  arrangements could 
give  rise  to  legal  or  administrative  barriers  which  might  frustrate  the  development  of  an  EU 
financial  market (e.g.  practical arrangements for the exercise of voting  rights  by shareholders  in 
partner countries).  However,  the  term  "corporate  governance"  covers  a wide  series  of  issues 
whose ramifications for the single financial  market are at present unclear.  Furthermore,  national 
arrangements  spring  from  long-standing  legal  and  socio-economic  traditions.  At  the  present 
juncture,  any  EU  involvement in  this  area  should  be  confined  to  identifying  any  barriers  to  the 
development of the EU  financial market resulting  from corporate governance arrangements. 

A review  of existing  national codes  of corporate  governance  will be  launched  with  a view  to 
identifying any legal or administrative barriers which could frustrate the development of a single 
EU financial market. 

2. 

Taxation: 

For the  sake  of a smoothly  functioning  single  market  for  financial  services,  contributing  to  an 
efficient  allocation  of  resources  throughout  the  European  Union,  the  further  integration  of 
financial  markets  must  proceed  broadly  in  parallel  with  an  adequate  process  of  tax  co 
ordination. 

The  liberalisation  of capital  movements  in  1988 - a key  step,  inter alia,  for  ensuring  a single 
market for financial services - was due to  be  accompanied  by parallel  measures in  the  area of 
savings  taxation  in  order to  eliminate  or  reduce  the  risks  of distortion,  tax  evasion  and/or  tax 
avoidance.  In  fact,  the  Council  was  unable  to  reach  agreement  on  the  Directive  proposed  in 
1989. 

A second  key  step  in  financial  liberalisation  took  place  with  the  adoption  of  specific  sectoral 
financial  services  directives,  again  without  progress  in  the  field  of  taxation.  For  example, 
barriers arising from the tax treatment of insurance premium continue to act as a serious barrier 
to  a single insurance market. 

12 

This  framework  action  plan  is  intended  as  the  third  key  step  towards  a single  market  for 
financial  services. A number of-Member States,  together with  the  Commission,  consider that it 
would  be  technically  unbalanced  and  politically difficult to  implement this  third  stage  while  the 
process of tax co-ordination in financial markets is still less developed. 

The  Council is invited to adopt the .1998 proposal for a Directive to ensure a minimum effective 
taxation  ofcross-bordersavings.income.  The  Commission  will continue its efforts to  tackle  tax 
barriers to  a fully functioning  single market for financial services.  The  Commission  will present 
proposals,  in the light of the  Taxation Policy Group discussions,  as regards pension funds  and 
insurance. 

IV.  DELIVERING THE FRAMEWORK ACTION PLAN: 

FSPG discussions have permitted a long overdue stock-taking of our approach to legislating for 
financial  markets.  lt took  more  than  a decade  to  agree  the  Single  Market  financial  services 
legislation  which  gave  effect  to  the  guiding  philosophy  of  the  "single  passport/home-country 
control".  We  are  now  embarking  on  a qualitatively  more  challenging  process  which  aims  to 
target  a broader range  of policy  objectives  against the  backdrop of a faster-changing  financial 
world.  If we are successfully to implement the  regulatory blue-print set out in  the annex,  we will 
need  to  overhaul  the way  we  develop financial  services  legislation  and  achieve  high  levels  of 
international cooperation. 

Mechanisms are required which avoid the following pitfalls: 

{ 1) 

{2) 

{3) 

A piecemeal  and  reactive  approach  to  proposing  and  designing  actions  is  inadequate 
in  a situation  where  financial  conglomerates  are  common-place  and  the  boundaries 
between  financial  services  are  being  steadily blurred.  A holistic,  cross-sectoral  view  is 
required  in  setting  regulatory  priorities,  in  avoiding  tensions  between  policy  objectives 
in  different  segments  of  the  financial  markets  and  in  expanding  the  range  of  policy 
solutions.  Such considerations militate in favour of a high-level strategic input in  policy 
sett!ng; 

Protracted  decision-making  processes  (witness  the  debates  on  winding-up  and 
liquidation  of  credit  institutions  and  insurance  companies).  A  more  inclusive  and 
consensual approach in  shaping policies from  an early stage and in advance of drafting 
legislation  will  deliver  dividends  when  it  comes  to  completing  formal  (eo-decision) 
procedures.  This  inclusive  approach  should  extend  to  all  EU  institutions,  but  also  to 
representatives of market practitioners, consumers,  users and employees; 

EU  solutions  must  be  characterised  by  a degree  of  flexibility  so  that  they  are  not 
immediately rendered obsolete by the relentless pace of chang~ in  the markets.  Overly 
prescriptive  EU  measures  often  only  serve  to  ossify  market structures  and  behaviour. 
This  risk  is  exacerbated  by  the  length  of  time  needed  formally  to  agree  legislative 
solutions. 

The  way  in  which  we  set about  implementing  the  new  framework  agenda  will  be  critical  to  its 
achievement. The following  mechanisms can be considered. 

1. 

Updating cross-sectoral priorities: 

New  regulatory  challenges  will  emerge  as  a potential  threat  to  the  stability  of  EU  financial 
markets.  To  meet such  challenges  a fresh  look  at  the  present  organisation  of  the  Union's 
structures and procedures for financial services is needed. 

13 

Without  prejudice  to  the  Commission's  legal right  of initiative,  a mechanism  to  identify future 
challenges and to frame priorities in a broad context could comprise the following elements: 

•  A forum  to forge consensus on emerging challenges between national ministries involved in 
financial  services  regulation.  The  Commission  would  derive  great  benefit  from  access  to 
strategic input similar to that provided by the FSPG for the period of its short-lived mandate. 

•  Appropriate  arrangements  could  be  made  to  allow  policy  orientations  to  be  discussed 

infomal/y with EP representatives at an early stage. 

•  A high  level  forum  could  be  created  to  take  soundings  from  bodies  representing  the 
principal EU ·interest groups which have an interest in  the smooth and efficient operation of 
financial markets.  Chief amongst these would be representatives of all segments of financial 
markets,  exchanges,  consumers and (business) users,  and employees. 

•  The  recently  developed  process  of economic  reform  provides  essential  information  and 
analysis of the  functioning of product,  service and capital markets.  The  Cardiff process will 
serve as a valuable input in the selection of priorities. 

•  The  Commission should  report regularly to  the  Council on  the progress made in  achieving 
the  deadlines  set  in  the  Framework  Action  Plan  and,  following  a  high  level  group 
examination,  in  considering  major  new  cross  sectora/  challenges  (such  as  financial 
conglomerates). 

2. 

Selecting the best available technical solutions: 

The  Commission  intends,  at  as  early  a stage  as  possible,  to  engage  the  other EU  institutions 
and  relevant  EU-Ievel  interest  groups  in  discussions  on  the  broad  contours  of  any  initiative. 
Such consultations could include the following: 

(1) 

(2) 

Input  from  national  authorities  engaged  in  the  regulation  and  supervision  of  markets 
could be integrated at an early stage when  Community initiatives are being prepared; 

EU  representative  bodies  could  designate  a  short-list  of experts  to  help 
Commission in assessing the implications of more technical solutions. 

the 

3. 

Speedy implementation of agreed solutions: 

At  present,  the  adaptation  of EU  prudential  rules  to  cope  with  new  sources  of instability  or  to 
align  it on  state-of-the-art regulatory/supervisory practice is painstakingly slow (it is not unusual 
for  legislative  procedures  to  take  three  to  four  .years  to  complete).  The  resolution  of  the 
European  Parliament  highlights  the  dangers  inherent  in  these  delays,  whilst  underlining  the 
need  to  respond  effectively  to  concerns  about the  democratic legitimacy of the  EU's  decision 
making process. 

All  agree  that  we  need  greatly  to  minimise  the  time  needed  to  conclude  agreement  on 
individual  actions.  The  Commission  could  explore  with  the  Parliament  and  the  Council  how 
best to  ensure the possible  acceleration  of eo-decision  procedures  provided  for under Art.  251 
of the Treaty (as introduced by Amsterdam Treaty) can  be used. 

However,  a more  wide-ranging  rethink  of  the  way  in  which  policy  for  financial  markets  is 
processed  is  required.  Any  more  radical  procedural  approach  must  provide  for  rigorous 
oversight by  the  EP  and  Council  and  must ensure that rules  are,  as far as  possible,  uniformly 

14 

interpreted  and  applied  across  the  EU;  that greater flexibility  in  regulatory  policy  is  introduced 
so  that  where  necessary  it  can  be  more  promptly  adapted  (subject  to  political  oversight)  to 
changing circumstances. 

The  Commission could initiate informal discussions with the European Parliament and Member 
States  on  the  way in  which  Article  251  can  be  used  to  accelerate  the  legislative  process  for 
financial services.  In  addition,  ways of drafting legislation in  order to  minimise over complexity 
will be explored. In particular,  the framing of single market legislation in this area (based on Art. 
1 OOa)  could  enshrine  ''essential  requirements"  which  have  as  their  basis  a high  level  of 
consumer protection.  The  core concepts at the  heart of EU legislation could be fie shed out in 
greater  detail  through  the  use  of  agreed  comitology  procedures,  thus  providing  for  legal 
certainty  as  regards  ·detailed  implementing  provisions.  Additional  clarification  on  technical 
issues,  to  assist supervisors and other agencies in  day-to-day application of framework  rules, 
would be provided in the form of Commission communications. 

The  Council  and  EP  are  invited  to  lend  their  support  to  the  implementation  of  this  new 
approach  to  elaborating  and  finalising  proposals  for  EU  level  action  in  respect  of  financial 
markets. 

15 

FINANCIAL SERVICES ACTION  PLAN 

Based  on  the  extensive  consultations  around  the  Commission's  Framework  for  Action,  the  following  plan 
confirms  the  work  that must be  set in  hand  to  reap  the  full  benefits of the euro and  ensure continued  stability 
and  competitiveness  of  EU  financial  markets.  The  future  Commission  will  need  to  decide  conditions  under 
which  different actions will  be taken forward. The optimal timeframe reflects the  priorities which  have emerged 
from  discussions in the FSPG, with the European Parliament and with other interested parties. 

~ 

The  European  Parliament  and  the  Council  are  invited  to  endorse  the  content  and  urgency  of the  Financial 
Services Action  Plan. The European Parliament and the Council are also invited to make every effort to ensure 
rapid  agreement and implementation of the individual legislative measures.  Commitments are also called for to 
ensure the  investment of political  will  and  concentration  of the necessary  resources  to  achieve  the  ambitious 
deadlines that are  set in  response  to  the  changing  demands of the  market,  the  need  to  safeguard  consumer 
interests and to enhance the competitiveness of EU  industry as a whole. 

Three indications of priority have been set for each measure identified in the Action Plan: 

Priority 1 actions: 

There  is  broad  consensus  that these  actions call  for immediate  attention.  These  measures  are  are crucial  to 
realisation of  the full  benefits of the euro and  to ensuring the competitiveness of the Union's financial  services 
sector and industry whilst safeguarding consumer interests. 

I 

~  Where  legislative proposals  are  already on  the table  European  Parliament and  Council  are invited  to  take 

all steps necessary to secure the maximum possible agreement before January 1, 2000. 

· 

~  The  Commission  confirms  that  where  an  initiative  is  required,  it  will  come  forward  with.  the  neces~ary 

action  without delay. 

);.- Based on  any necessary preparatory work by the  Commission,  the  Council  and  European  Parliament  are 
invited  to  ensure  rapid  agreement  within  two  years,  or  at  the  latest  by  the  end  of  the  euro-transitio~al 
period,  and to expedite implementation of agreed measures without delay. 

Priority 2 actions: 

The  Commission  regards  these  priorities  as  important  to  the  functioning  of  the  Single  Market  for  Finan~ial 
Services  - in  particular,  by  amending  existing  legislation  or  adapting  present  structures  to  meet  n~w 
challenges. 

1 

Prioritv 3 actions: 

These  actions concern  important areas where  a clear and general consensus exists that new work  should lbe 
set in  hand  with  a view to finalising a coherent policy by the end of the euro-transitional period. 

: 

STRATEGIC OBJECTIVE 1 
A SINGLE EU,WHOLESALE MARKET 

(VERSION: 07-05-1999) 
Speedy  adoption  and  implementation  of the  following  actions1  in  order  to  achieve  this  strategic 
objective will: 
•  enable corporate issuers to raise finance on competitive terms on an EU-wide basis; 
•  provide investors and intermediaries with access to all markets from single point-of-entry; 
•  allow  investment  service  providers  to  offer  their  services  on  a  cross-border  basis  without 

encountering unnecessary hindrances or administrative or legal barriers; 

•  establish a sound and well integrated prudential framework within  which  asset managers can  put 

funds at their disposal to their most productive use; 

•  create  a  climate  of  legal  certainty  so  that  securities  trades  and  settlement  are  safe  from 

unnecessary counter-party risk. 

Optimal 
Timeframe 
For issue by mid 2000  I 
· 

upon  Adoption:  2002 

I 

Commission, 
building 
work by  FESC02 

Raising capital on an EU-wide bas1s: 

Action 

Priority 

Objective 

Actors 

Upgrade the Directives on 
Prospectuses  through  a 
possible 
legislative 
amendment 

1 

Update  the  Directive  on 
Regular 
Reporting 
(82/121/EEC) 

3 

to 

so 

that 

Overcoming  obstacles 
the 
effective  mutual  recognition  of 
prospectuses, 
a 
prospectus  or  offer  document 
approved  in  one  Member  state 
will be accepted in  all.  In  addition, 
incorporating  "shelf  registration" 
will  provide  for  easier  access  to 
capital  markets  on  the  basis  of 
streamlined 
prospectuses, 
derived from  annual accounts. 
More  frequent  and  better  quality 
information  will  enhance  market 
confidence and attract capital 

Commission, 
following 
consultation  with 
the 
FESCO  and 

consultation 

Launch 
by mid 2000 
Proposal: 2001 
Adoption:  2002 

l..------------~------L------------'--.:..:..m=ar:..:..:.ke=-=t ___  _L .  __________  I 

E  t  bl'  h. 

sa  1s  mg a common  ega /~ 

ramewor  or mtegrate d secunt1es an dd  . envatives markets: 

k(! 

. 

Action 

Priority 

Objective 

Actors 

1 

a  Commission 
Issue 
on 
Communication 
between 
distinction 
"sophisticated"  investors 
and retail investors. 

'--· 

of 

rules, 

common  Commission, 

Summary 
interpretation  of  use  of  investor  building 
protection 
conduct  of  business 
to 
determine conditions  under which 
host country business  rules  apply  MS. 
to 
transactions. 

upon 
including  work  by  FESCO 
and 
after 
rules 
consultation  with 

cross-border 

securities 

Optimal 
] 
Timeframe 
Draft  for  issue  by  en1 
1999 

1 The proposed actions are structured in accordance with the presentation in the introductory paper. 
2  Forum of European Securities Commissions 

--------·---------------------------

integrity  by  Commission:  after  Proposal by end 2000 

for  consultation  with ..  Adoption~ 2003 
and  MS and markets. 

j Directive 

to 

address 

2 

market manipulation. 
I 

Paper 
Green 
upgrading the lSD 

on 

2 

l-........ 

I 

to 

the 

enhance 

investors 

possibility 

Enhance  market 
reducing 
institutional. 
intermediaries  to  rig  markets.  Set 
trading 
common  disciplines  for 
investor 
floors 
confidence in an  embryonic single 
securities market. 
Wide-ranging  review  of  ISO  as  Commission, 
basis  for  integrated  and  efficient 
market  for  investment  services. 
to 
Tackle  remaining  obstacles 
for 
market 
brokers/dealers, 
to 
and 
remote 
restrictions on  trading  in  T -bonds. 
regulatory 
Address 
new 
challenges  such  as  Alternative 
Trading systems. 

membership, 

obstacles 

access 

Towards a smgle set of financial statements for listed compames: 

Action 

Priority 

Objective 

Actors 

Amend  the  4th  and  7th 
Company  Law  Directives 
to 
value 
allow 
1  accounting 

fair 

rcornmission 

Communication  updating 
the 
accounting 
strategy 

EU 

of 

the 
Modernisation 
accounting  provisions  of 
the  4th  and  71h  Company 
Law Directives 

2 

1 

2 

issued 

Directives 

value, 
in 
International 

Enabling  European  companies  to  Commission, 
for  certain 
account 
financial  Council,  EP 
assets 
fair 
at 
accordance  with 
Accounting Standards 
Map  out  strategy  for  enhancing  Commission. 
comparability  of  financial  reports 
issued  by  llsted  EU  companies, 
based  on  combination  of  EU 
and 
accounting 
in 
financial  statements 
accordance 
agreed 
with 
accounting 
international 
standards. 
should 
prefigure  mechanism  for  vetting 
international 
benchmark 
standards  so  that  these  can  be 
used  (with  no  national  variations} 
by EU listed companies. 
Bringing  the  41h  and  71h  Directives  Commission, 
in 
the  needs  of  the  Council, EP 
Single  market  and  to  take  into 
account 
in 
international accounting standard-
setting 

developments 

line  with 

Strategy 

Publish  Green 
mid-2000 

J 
--~-- .. -
Paper:  ; 
I 
I 

Optimal 
Timeframe 
Proposal autumn-99 
Adoption:  2001 

For issue by end-99 

Proposal end-2000 
Adoption: 2002 

1 

I 

I 

i. 

1 

~C-om~m~ls-s-~-n~~-~~~~~2~-~~U~pg~m~d-~-g-t-he_q_u_a_hl_y_of~~~~~ry  Comm~~on.  -~~~r~sue~nd-~--- 1
Recommendation  on  EU 
the 
I 

auditing practices  L  recommending  specific  measures 

1
in  the  areas  of quality  assurance 
1 
and auditing s!a.:.-n_..:..d_ar....:...ds:....:... ___  ...~..-________ _:. ____ . ____ . _______ _] 

j 
!__ 

______ 

audits 

EU 

by 

in 

, 

~~~nta_ining_ systemic risk in securities settlement: 

Action 

j  Priority 

Objective 

1 

Actors 

; :n:··dpr;-1ontation  of the --r-- --r·--+--Co_m_m __ o_n_a-nd·-_c_o_h-er-e-nt _____ i-Member States 

Optimal 
Timeframe 

Commission 

tc·  : 

~~---~~-------------------

i  Settlement Finality 

Directive 

application of the Directive 
throughout the EU is 
important for a smooth 
functioning of systems. 

Directive on cross-border 
use of collateral. 

1 

continue  monitoring  of 
implementation 
in  a 
working Group. 
Commission  report  to 
Council end 2002 
Launch 

consultation 
proposal 

Legal  certainty  as  regards  Commission 
validity  and  enforceability  of  consultation  with  autumn-99: 
to  back  MS  and  market  end-2000. 
collateral  provided 
securities  experts 
cross-border 
transactions. 

in 

Adoption:  2003 

Towards a secure and transparent environment for cross-border restructurmg: 
,-----------r--!:-~~--r-----:--:-::--:--------,,---:---:------'-----.----::--:---:::--- --·· 
Objective 

Priority 

Actors 

Action 

~--~~--------~~+---~----1-~:--~~~~~-~~-~~---~~~------------·-

Optimal 
Timeframe 

Mid-99 
Adoption:  2000 

Political  agreement  of the 
proposed  directive  on 
Take Over Bids 

1 

Political agreement on the 
European 
Company 
Statute 

Review  of  EU  corporate 
governance practices 

Amend  the  1 Qth  Company 
Law Directive 

Company 

14th 
Directive 

Law 

1 

3 

3 

3 

Council, EP 

take-over 

Create  EU-wide  clarity  and  Council, EP 
transparency 
respect  of 
in 
legal  issues  to  be  settled  in 
bid. 
event  of 
Prevent 
of  EU 
pattern 
corporate  restructuring  from 
being  distorted  by  arbitrary 
differences 
in  governance 
and management cultures. 
Create optional legal structure 
to 
to 
facilitate  companies 
place 
pan-European 
operations  on  a  rationalised 
single  legal  umbrella.  Within 
this  context  clarify  scope  for 
participation  by  employees  -
thereby 
further 
create 
common  ground  in  respect of 
corporate 
governance 
practices. 
Identification  of 
legal  or 
administrative  barriers  and 
resulting 
in 
corporate 
governance 
regimes. 
for 
Create 
companies  to  conduct  cross 
border mergers 
Allow  companies  to  transfer 
their 
to 
corporate 
another Member State 

the  possibility 

differences 

seat 

Commission, 
Member 
markets. 

Commission 

Commission 

States, 

Mid-1999 
Adoption:2000 

Launch 
2000 

review 

early 

Proposal in autumn  1999 
Adoption:  2002 

Proposal in autumn  199~ 
Adoption:  2002 

I 

Optimal 
Timeframe3 
Issue by May 1999 

As· 

I  M  k  t  h.  h 

mgJe  ar  e  w  1c 
Action 

wor  s  or mves  ors: 

t 

Priority 

Objective 

Actors 

Commission 
on 
Communication 
Funded pension Schemes 

1 

Commission 

Consultation  on  prudential 
for  second-pillar 
framework 
pension 
fund  schemes 
to 
rights 
beneficiary 
protect 
through  stringent  prudential 
rigorous 
safeguards 
supervision. 

and 

,,,_, -·--····-----

·--------------.o...-------·~~-· ........ o:o  R ' .   I 

El..,..... 

1 

1 

Political agreement on the 
proposed  directives  on 
UCITS 

on 

the 
Directive 
prudential  supervision  of 
pension funds 

I 
I 

to 

passport 

of 
units 
investment 

remove  eouncii,EP 

cross-border 
of 
by 
in  which 

Proposal  1  will 
barriers 
marketing 
collective 
widening  assets 
funds can invest. 
Proposal  2 would  provide  a 
European 
for 
management companies,  and 
wk:Jen 
the  activities  which 
they are abed to  undertake 
(also be authorised to provide 
individual 
portfolio 
manaaement services). 
F allowing  the  policy  outlined  Commission 
the 
its  CommtJnication, 
in 
Commission  will  propose  a 
the·  prudential 
Directive  on 
supervision  of pension  funds. 
lt  will  take  into  account  the 
diversity  of  pension 
funds 
currently  operating  in  the  EU 
and  will  cover  authorisa6on, 
reporting,  fit  & proper  criteria 
and  rules  on  liabilities  and 
invesbnents 

End-1999 
Adoption: 2000 

I 

Proposal: Mid 2000 
Adoption:  2002 

STRATEGIC OBJECTIVE 2 
OPEN AND SECURE RETAIL-MARKETS 

b,y EU institutions and all interested parties,  along the lines listed below,  are needed 

to: 
I)  Equip  consurners  with  the  necessary instruments  (information)  and  safeguards  (clear rights  and 
effective  dispute  settlement)  to  permit  their  full  and  active  participation  in  the  single  financial 
market: 
Identify  and  roll  back unjustified insistence  on  non-harmonised  consumer-business  rules  as  an 
obstacle to cross-border provision of services; 

• 

•  Promote the  emergence of effective mechanisms for overcoming fault in  the single retail financial 

market which have their origin in differences in private law: 

•  Create  legal conditions in  which  new distribution  channels  and distance  technologies  can  be  put 

to  work on a pan-European scale; 

•  Encourage  the  emergence of cost-effective and secure payment systems  which  enable citizens  to 

effect small-value cross-border payments without incurring exorbitant charges. 

Action 

Priority 

Objective 

Actors 

agreement 

Political 
on 
proposal  for  a Directive  on 
the  Distance  Selling  of 
Financial· Services 

: 

1 

r Commission 

2 

communication 
codifying 
clear  and  comprehensible 
information for purchasers 

I 

I 

Optimal 
Timeframe 

End 99 
Adoption: 2000 

to  begin 

Review 
end 99: 
Communication: 
mid 2000 

Proposal aims to bring about  Council, EP 
convergence ofrules on 
business .. to;;consumer 
marketing and sales 
techniques. This will·limit 
exposure ofconsumers to 
undesirabiemarketing 
techniques (inertia and 
pressure-selling) through 
inclusion of appropriate 
provisions (generous right of 
withdrawal rights, 
prohibitions). Once in place, 
distance selling via remote 
technologies should be free 
from this category of 
impediment. 
Establish over-arching view  Commission, 
of basic information 
requirements consumers 
need in order to assess 
credential of (cross-border) 
service suppliers, 
security/performance of 
services otfered by latter 
(plus redress).  Examine 
extent to which  these 
requirements are complied 
for range of retail financial 
services. 
Building on  discussions in 
Consumer Dialogue,  the 

Member States. 

I 
- - - · - - - - - - - · ·  
1~-----
to 
1 
i  Recommendation 
i support  best  practice 
in 
:  ra~pe(:t 
information 
of 
lpPi?!i.~~on {mortgage credit). 

Commisston will publish a J representative .. ~s. 

. and consumer 

~~_!nunication to endorse 

__ 

··-·---·--1---------t-------~ 

Commission, bank 

For issue by end-99 

1 

_ ______ j _____  ____.J 

Z1 

understanding in respect of 
information to be provided in 
event of cross-border 
provision of mortgage credit 
services. Commission 
involvement in monitoring of 
compliance. 

~----------------~--=-~~~----~~--~-----.----~-------.----~~~·----

Action 

Priority 

Objective 

Actors 

Optimal 
Timeframe 

report 
on 
differences 
national 
to 

relating 

Commission 
substantive 
between 
arrangements 
consumer-business 
transactions. 

Interpretative 
Communication 
the 
freedom to provide services 
and  the  general  good  in 
insurance 

on 

Proposal  for amendment of 
Intermediaries 
Insurance 
Directive 

3 

2 

2 

Commission 
Communication  on  a single 
market for payments 

2 

4 Insurance Committee 

Commission, 
Member States. 

to  begin 
Review 
autumn 
1999: 
status  report  - mid-
2000: 
Discussions 
Council, 
begin end-2000. 

with 
to 

EP 

Commission 

For 
issue 
summer 1999 

by: 

Commission (IC4) 

Proposal mid-2000 
Adoption: 2002 

Commission, 
ESCB, 
consumers. 

markets, 

issue 
For 
summer 1999 

by 

for 

basis 

equivalence 

The  report  will  catalogue 
obstacles 
to  cross-border 
business-to-consumer 
relevant 
transactions 
financial  services.  This  will 
provide analysis of whether, 
how  and  why  host-country 
consumer  rules  apply  and 
determine  conditions  under 
which 
of 
national rules does/does not 
exist.  Provide  objective  and 
for 
empirical 
discussion  with  MS  and  EP 
on  how  to  facilitate  cross 
border  provision  of  retail 
financial  services  without 
consumer 
jeopardising 
safeguards. 
Greater  legal  certainty  and 
clarity  for  Member  States, 
insurance  undertakings  and 
citizens,  contributing  to  the 
creation  of 
single 
market 
Facilitation  of 
free 
provision  of  services  by 
insurance 
intermediaries 
and  enhanced  consumer 
protection  by  updating  and 
intraqucing  safeguards  on 
professionalism 
and 
competence.  By  creating 
stringent  common  ground· 
rules  for  intermediaries  can 
facilitate  placing  on  market 
insurance  premia  by 
of 
partner 
country 
underwriters. 
Will  provide  a road-map  for 
public  and  private  agencies 
with  a  role 
in 
ensuring  that  secure  and 
retail 
cost-effective 
payments  can  be  effected 
on  a cross-border  basis.  At 
present,  such  transactions 

to  play 

the 

the 

r·--·-~--,---

I 
I 
l 
I 

-· 
Commission  Action  Plan  to 
prevent 
and 
counterfeiting  in  payment 
systems 

fraud 

Commission  green  paper 
on  an  e-commerce  policy 
for financial services 

2 

1 

incur  charges  which  are 
in  average 
much  higher 
than  those  within  domestic 
payments  systems  - a 
situation  which  is  untenable 
within  a  single  currency 
zone.  The  Communication 
will  focus  heavily  on  credit 
transfers  but  will  also 
address  card  payments, 
cheques and cash. 
Agree  on  ways  to  prevent  Commission, 
fraud,  e.g.  in  organising  the 
exchange  of 
increasing  the  security  of 
technical systems 
A clear  and  coherent policy  Commission 
financial 
for 
sector,  which  takes account 
rules,  wider 
of  existing 
international  developments, 
and technological progress. 

the  whole 

or  MS 

data 

industry,  users  and 

for 
Communication 
issue by: end·1999 

For  issue  by:  mid-
2000 

j 

STRATEGIC OBJE~TI'\7~,~: 

STAT.E .. OF-THE!"ARTPRUDENTIAtli)R,UQa$\~NOSUPERVISION 

Urgent headway must be made in  order to: 
1.  Eliminate any lacunae in EU prudential framework,  arising from  new forms  of financial business or 

globalisation,  as a matter of utmost urgency. 

•  Set  rigorous  and  appropriate  standards  so  that  the  EU  banking  sector can  successfully  manage 

intensification of competitive pressures 

•  Contribute  to  the  developing  of  EU  supervisory  structures  which  can  sustain  stability  and 

confidence in an era of changing market structures and  globalisation: 

•  Develop  a regulatory  and  supervisory  approach  which  will  serve  as  the  basis  for  successful 

enlargement; 

•  Enable  the  EU  to  assume  a  key  role  in  setting  high  global  standards  for  regulation  and 

supervision, including financial conglomerates . 

...-----------..-------,------------r--------.----·----·-····-···-·-··-

Objective 

Actors 

Action 
the 

Adopt 
proposed 
directive  on  the  winding 
up  and 
liquidation  of 
insurance undertakings 

Priority 
1 

1 

1 

the 

proposed 
Adopt 
directive  on  the  winding 
up  and 
liquidation  of 
banks 

Adopt 
the  proposal  for 
an  Electronic  Money 
directive 

Amendment of the  money 
laundering directive 

and 

proceedings 

liquidation  of 

legal  Council, EP 

Provide  a  coherent 
framework  for  the  winding-up 
and 
insurance 
companies  in  the  single  market 
through  the  mutual  recognition 
of 
the 
principles  of  unity,  universality, 
publicity and non-discrimination 
Common  rules  on  winding-up  Council, EP 
liquidation  will  establish 
and 
common 
for 
principles 
procedures  to  be  followed  in 
event  of  bank 
insolvency, 
identify  responsible  authority. 
As  such  will  safeguard  against 
continued  activities  by insolvent 
institutions 
could 
represent source  of counterpart 
risk. 
Ensure  market  access  and  Council , EP 
adequate regulation of e-money 
providers:  clarify  the  prudential 
institutions 
rules  under  which 
other 
traditional  credit 
than 
institutions  can  provide  e-
money 
Enable 
services. 
provision  of  this  activity  on 
cross-border basis. 
Combat 
laundering 
financial 
system  to  widen  definition  of 
predicate  offences  and 
to 
extend 
('suspicious 
reporting 
transactions')  requirements  to 

fraud  and.  money  Commission. 

which 

the 

in 

Timeframes 
New  first  reading  in 
EP 
1999 
end 
Political  agreement 
as soon as possible 
Adoption:  2001 

Common  position 
end-99 
Adoption:2001 

Common  position: 
autumn 99 
Adoption: 2000 

Proposal mid  1999 
Adoption: 2001 

1

2 

to 

non-financial 

Commission. 

on 
financial 

Communication  mid 
1999 

Commission 
Recommendation 
disclosure  of 
•  instruments 

relevant 
professions. 
Enhanced  disclosure  of 
the 
activities  of  banks  and  other 
institutions 
financial 
to  allow 
informed 
take 
investors 
decisions,  and  to  foster  market 
transparency  and  disciple  as  a 
complement 
prudential 
to 
supervision 
Work  on  a review  of  the  bank 
capital 
reflect 
market developments is running 
in  parallel  with  that of the  G-1 0 
Basle  Committee  on  Banking 
Supervision.  This  work 
is 
expected to result in  a overhaul 
of 
and 
investment canital framework. 
~----------------~--------~~--~~·~~·--~~--~----------~------------J 

the  directives 
Amend 
governing 
capital 
framework  for  banks  and 
investment firms 

Proposal 
directive: 
2000, 
developments 
Basle 
Adoption:2002 

Commission 
(BAC, 
HLSSG) 
Member  States, 
markets 

for 
spring 
pending 
in 

the  EU's 

framework 

bank 

the 

to 

2 

" Banking Advisory Committee, High Level Securities Supervisors Committee 

Action 

Priority 

Objective 

Actors 

Optimal 
Timeframe 

Amend 
the 
margin  requirements 
the insurance directives 

solvency 
in 

to 

lSD 

Proposal  to  amend  the 
insurance  directives  and 
permit 
the 
information 
exchange 
with third countries 
Development  of 
prudential rules for 
financial conglomerates 
following the 
recommendations of the 
'Joint Forum' 
Creation  of  a  Securities 
Committee 

3 

3 

2 

Commission  (IC),  Proposal 
Member  States, 
markets. 

for 
directive: mid  2000 
Adoption: 2003 

Commission 

Proposal autumn 
1999 
Adoption:  2001 

Proposal: end- 2000 
Adoption:  2002 

Commiss1on: 
BACIIC/HLSS, 
Member States, 
supervisors and 
markets. 

Commission, 
Council, EP 

Proposal end 2ooo  · 
Adoption: 2002 

Protection  of consumers  in  the 
single  market  by  ensuring  that 
insurance  undertakings  have 
adequate  capital  requirements 
in  relation  to  the  nature  of their 
risks. 
Basis for international exchange 
of 
to  underpin 
information 
financial stability 

in 

loopholes 

Addressing 
the 
present sectoral  legislation  and 
additional  prudential  risks 
to 
supervisory 
sound 
ensure 
arrangements. 

A formal  regulatory  committee 
in  this field  will  contribute to  the 
elaboration  of  EU  regulation  in 
the  securities  area.  Requires 
willingness  on  part  of  EU 
agree 
institutions 
an 
to 
comitology 
appropriate 
procedure. 

L..-________  .__  ____  ..J....,I;,..;....;..;...,;;_,;;;,;;.......;;.,;.. ______  ....J-___ __  __._ __ __  _:__ _______ . __ 

GENERAL OBJECTIVE 
WIDER CONDITIONS: FOR AN· OPTIMAL SINGLE FINANCIAL MARKET 

•  Addressing disparities in tax treatment 
•  An efficient and transparent legal system for corporate governance 

Optimal 
Timeframe 
Political  agreement  by 
November 1999 
Adoption:  2000 

...------------.r-------.r------------.--:-------r--·--·--·--'"-"""" ........ 

action 

Priority 

Objective 

Actors 

1 

in 

1 

-of 

Adopt  a  Directive  on 
Savings Tax 

The objective of the  proposal  is  Council 
to  remove  disparities 
tax 
treatment  of  private  savings  to 
complement 
removal  of 
the 
obstacles  to  the  free  movement 
of capital  and  financial  services 
will benefit the financial sector 
l----------:----:-t-----:---t-::-----:~-::-:-----~-1-=---:--:------1r-:--:---~--- ..... -·------. 
Implementation 
the 
Ongoing  examination  in 
Counter harmful tax competition  Commission, 
December  1997  Code  of 
the  Code  of  Conduct 
which  may  significantly  affect  Member States. 
Conduct  on  business 
group 
the  location  of business  activity 
taxation 
in  the Union 
Lower 
Review  of 
taxation  of 
financial service products 
disincentives  for  cross-border  Member  States, 
business 
1----------r------t---~--------- ------~---------------..  --------·--
Building  on  discussions  in  Tax  Commission 
Commission 
proposals 
Policy  Group,  proposal 
for  co-ordination  of  the 
for 
action  will 
legislative 
tax 
arrangements 
be 
to 
prepared 
governing  supplementary 
address 
tax 
cross-border 
of 
treatment 
pensions 
contributions of migrant workers 
pension 
to 
funds.  Will 
as  a 
contribution to labour mobility. 
Identification 
administrative 
resulting 
corporate governance regimes. 

Review  of  EU  corporate 
governance practices 

Proposals  ~nlt 1 w'' 
Adoption:  :lUUl 

of 
barriers 
differences 

and  Member  States,  2000 

supplementary 
serve 

Discussions 
·--P-olicy Gro_ up 

remove  Commission, 

or  Commission, 

in  markets. 

markets. 

Launch 

costs 

legal 

and 

2 

3 

3 

in --·fax .. J 
I 

review  early  I 

1 

1