Opinion of the European Central Bank of 30 September 2003 at the request of the Council of the European Union on a proposal for a directive of the European Parliament and of the Council on the harmonisation of transparency requirements with regard to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (COM(2003) 138 final) (CON/2003/21)
Date: 2003-09-30
Institutions: European Central Bank
Subjects: approximation of laws, dissemination of information, financial market, securities

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EUROPEAN CENTRAL BANK

OPINION OF THE EUROPEAN CENTRAL BANK

of 30 September 2003

at the request of the Council of the European Union on a proposal for a directive of the European
Parliament and of the Council on the harmonisation of transparency requirements with regard to
information about issuers whose securities are admitted to trading on a regulated market and
amending Directive 2001/34/EC (COM(2003) 138 final)

Introduction

General assessment

(CON/2003/21)

(2003/C 242/06)

from the Council of

the European Central Bank (ECB)
1. On 28 April 2003,
received a request
the European
Union for an opinion on a proposal for a directive of
the Council on the
the European Parliament and of
harmonisation of transparency requirements with regard
to information about
are
admitted to trading on a regulated market and amending
Directive 2001/34/EC (hereinafter the ‘proposed directive’).

issuers whose

securities

to ensure the integrity of

2. The ECB's competence to deliver an opinion is based on
the first indent of Article 105(4) of the Treaty establishing
the European Community, since the proposed directive is
essential
the Community
financial markets and to enhance investor confidence and
financial stability. In accordance with the first sentence of
Article 17.5 of the Rules of Procedure of the European
this opinion has been adopted by the
Central Bank,
Governing Council of the ECB.

securities

and debt

specifically,

3. The main objective of the proposed directive is to improve
investor protection and market efficiency by increasing the
transparency of information provided by the issuers of
admitted to trading on
shares
European regulated markets. More
the
proposed directive improves annual financial reporting of
in particular by harmonising the deadline for
issuers,
submitting annual
existing rules
revises
concerning half-yearly reporting, taking into account inter-
national accounting standards (IAS), and extends half-
introduces a
yearly reporting to debt securities issuers;
reporting;
for
new requirement
improves
for
existing
disclosure of changes to major shareholdings in securities
issuers and modernises the existing Community rules on
information provided by issuers.

harmonised

framework

quarterly

financial

reports;

the

the

and

financial

enhancing

integration

in Europe increases

4. The ECB generally welcomes and supports the proposed
directive, as it provides an effective means of improving
the efficiency of European financial markets, advancing
stability.
their
Moreover, the development of efficient and competitive
the economy's
financial markets
growth potential. The ECB notes
the proposed
directive is an essential component of a complex project
to modernise securities markets legislation in Europe, as
envisaged by the Financial Services Action Plan (1). The
Regulation on the application of international accounting
standards (2), the Market Abuse Directive (3) and the future
Prospectus Directive (4) constitute the basis for a funda-
mental
the
European financial markets. The proposed directive
the
complements
European regulatory framework on financial
reporting
and disclosure to shareholders.

said project by modernising

in the overall efficiency of

improvement

that

the

5. The introduction of harmonised and enhanced disclosure
standards will have beneficial effects on the European
economy as it will improve market efficiency, further the
integration of European financial markets and contribute
to the financial stability of the euro area. Market efficiency
will be improved as the disclosure of timely, complete and
information by issuers ensures better price
accurate

(1) Endorsed by the Heads of State and Government at the Lisbon

European Council in March 2000.

(2) Regulation (EC) No 1606/2002 of the European Parliament and of
the Council of 19 July 2002 on the application of international
accounting standards (OJ L 243, 11.9.2002, p. 1).

(3) Directive 2003/6/EC of the European Parliament and of the Council
of 28 January 2003 on insider dealing and market manipulation
(market abuse) (OJ L 96, 12.4.2003, p. 16).

(4) Common Position (EC) No 25/2003 of 24 March 2003 adopted by
the Council, acting in accordance with the procedure referred to in
Article 251 of the Treaty establishing the European Community,
with a view to adopting a directive of the European Parliament and
of the Council on the prospectus to be published when securities
are offered to the public or admitted to trading and amending
Directive 2001/34/EC (OJ C 125 E, 27.5.2003, p. 21).

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issuers

reducing

and investors

investment opportunities in Europe,

in turn reduces hidden distortions by
discovery. That
to compare
allowing markets,
increasing
similar
competition and
uncertainty. A coherent
European Union (EU) framework for financial reporting,
properly and uniformly enforced, will also improve
investors' confidence in the integrity of
the European
financial system and in investing in a broader range of
European companies. This will yield a more efficient allo-
cation of resources to the companies that can best utilise
them.

increase

investors'

confidence

the provision of

6. Furthermore, enhanced disclosure requirements are likely
to lower companies' capital costs. Very important in this
regard are the proposals for stricter standards on interim
reporting and for
financial
reliable
financial
Increased
information on a periodic basis.
disclosure reduces the amount of uncertainty associated
with the present and future affairs of companies. This
will
companies'
announcements about their performance and will tend to
lower
justification for
relating availability of
funds to level of disclosure has
been provided by agency theory. In an environment in
which there
information between
management, shareholders and bondholders, the disclosure
of
adverse
selection and moral hazard problems, which will be
rewarded by a lower capital cost. In addition, disclosure
requirements have a beneficial effect on issuers by acting
as a disciplinary device on corporate managers.

information helps

asymmetry of

to alleviate

costs. The

companies'

additional

capital

in

is

7. The proposed directive will also further the integration of
European financial markets, therefore allowing the exploi-
tation of all
the euro. The
the potential benefits of
harmonisation of transparency standards across the EU
will encourage greater cross-border participation in the
market, especially for corporate securities. Investors who
seek reliable guidance for their decisions will be safe-
guarded by harmonised arrangements relating to trans-
parency,
listed
consistency
companies' financial statements.

comparability

and

of

8. Finally, the ECB expects that the proposed directive will
also have beneficial effects on financial stability. Firstly,
with the price of securities reflecting more accurately the
earning prospects of and risks faced by issuers, investors
will be better equipped to monitor issuers and to take
thus
corrective action in case of
the
reducing
to financial
improved
of
accuracy
information made available to investors will make the

imbalances,
Secondly,
consistency

risks
timeliness,

stability.
and

financial

in

However,

belated discovery of a serious misallocation of capital less
likely, thus reducing the need for sharp price corrections.
It cannot be ruled out that greater frequency and detail of
associated with more
information may be
financial
the
fluctuations.
short-term price
medium-term price fluctuations associated with sharp
corrections of expectations should be less pronounced.
Overall,
there should be a positive impact on market
volatility. Thirdly, the expected improvement in market
efficiency will also increase market liquidity, which will
allow markets to absorb shocks more effectively. Finally,
the greater degree of
cross-border diversification of
investors' portfolios will contribute to alleviating the
home bias in investment decisions. This will
in turn
enhance the overall resilience of the European financial
system to shocks emanating from individual
financial
markets.

9. However, as explained below the ECB considers that some
issues require further consideration.
the
application of some provisions of the proposed directive
to the ECB and the national central banks (NCBs), the rules
concerning half-yearly financial reports, consistency with
supervisory reporting requirements, the rules concerning
the competent authorities and the need to refer
to
European statistical standards.

In particular:

The application of the proposed directive to the ECB and
the NCBs

the ECB and the NCBs, as

10. The ECB notes that Article 8 of the proposed directive
sovereign debt
exempts
issuers,
from the rules concerning periodic information
(Articles 4 to 6) but not from other disclosure provisions.
This means that the proposed directive does not take into
account the special tasks of the ECB and, in particular, its
responsibility for the monetary policy of the euro area.
the proposed directive to the ECB
The application of
could have a negative effect on the fulfilment of
its
tasks. In fact, the implementation of the single monetary
policy may in certain circumstances rely on the issuance of
debt certificates as an instrument of monetary control,
which may take place with the aim of adjusting the
structural
the Eurosystem vis-à-vis
to create (or enlarge) a
the banking system so as
liquidity shortage in the banking system.
the
General documentation on Eurosystem monetary policy
instruments and procedures (1) states that it is competent
the
to issue debt certificates. The ECB considers that

liquidity position of

Indeed,

(1) Annex I to Guideline ECB/2000/7 of 31 August 2000 on monetary
policy instruments and procedures of the Eurosystem, OJ L 310,
11.12.2000, p. 1. Guideline as amended by Guideline ECB/2002/2
(OJ L 185, 15.7.2002, p. 1).

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special nature of the issuance of debt certificates as an
the
instrument
non-application of
the
proposed directive to itself.

control
the provisions of

of monetary

some of

justifies

In the light of the above, the ECB
Treaty and Statute.
believes that the proposed directive should not apply to
any of the members of the ESCB.

Half-yearly financial reports (Article 5)

11. The application of some provisions of

the proposed
directive to the ECB and the NCBs may also impair the
fulfilment of
their specific monetary policy tasks. For
instance, according to Articles 9 to 12 NCBs are under
the obligation to disclose
information about major
holdings. In this respect, the ECB notes that such rules
may subject central banks to disclosure duties in respect
of securities given to them as collateral when performing
their monetary policy tasks, with potentially negative
effects on the smoothness and efficiency of central
banking
disclosure
provisions in respect of securities received as collateral
may also affect the smooth functioning of the European
repo market, and may be seen as contravening the goal of
simplifying the use of financial collateral through the limi-
tation of administrative burdens pursued by Directive
the
2002/47/EC of
collateral
Council
arrangements (1). Therefore,
that
further reflection on this matter is necessary.

the European Parliament and of

ECB considers

of 6 June

application

operations.

2002 on

financial

The

the

of

securities

regulation. More

12. More generally, the ECB notes that both itself and the
NCBs, have been assigned, either by the Treaty and the
Statute of the European System of Central Banks and of
the European Central Bank, or by their statutes in the case
of non-participating NCBs, specific monetary policy tasks,
which may be difficult to reconcile with the application of
the proposed directive to central banking activities which
are related to the implementation of monetary policy. The
ECB notes that the special characteristics of the central
banks have already been acknowledged in the directives
particularly,
concerning
securities issued by the ECB and by NCBs are to be
abovementioned future Prospectus
exempt
Directive (2).
the application of harmonised rules on
disclosure to securities issued by the ECB and the NCBs
is not requested when they are offered to the public, for
the sake of consistency the rules on ongoing disclosure
envisaged by the proposed directive should also not
apply to them. This is not to deny that in specific cases
NCBs may have to disclose information to investors, as
their shares are in some cases admitted to trading on
regulated markets.
In those cases, appropriate national
laws should provide for such disclosure by NCBs, taking
into account their specific situation. In accordance with
the Treaty, the ECB would have to be consulted on these
laws, to allow it to assess their compatibility with the

from the
If

13. The ECB notes that according to Article 5 of the proposed
directive issuers will have to disclose half-yearly financial
reports, which will
include a condensed set of financial
statements and an update of the last management report.
The ECB welcomes in principle this Article, which will
improve and harmonise price discovery across the EU
and takes into account
IAS. The reference to IAS is
welcomed as it supports the ECB's statistical tasks. IAS
are broadly consistent with European and international
statistical standards. In this context, the ECB underlines
the advantages of ensuring that European and international
statistical and accounting standards are as consistent as
possible. Such harmonisation will enable the same data
source to be used for several purposes. In turn, the relia-
bility of statistics will be increased and the reporting
burden on issuers reduced. However, the ECB notes that
the proposed directive does not make half-yearly financial
reports subject to a mandatory auditors' review. Article
5(5)(c) provides
adopt
implementing measures, under the comitology procedure,
to make such auditing mandatory ‘if there is evidence of
an urgent need to enhance investor protection throughout
reports are
the Community’. As half-yearly financial
already subject to a mandatory auditors' review in some
Member States, the ECB is in favour of making auditing
mandatory EU-wide in order
to avoid differences at
national
that could lead to an uneven level of
quality of financial and statistical data, and their reporting.

the Commission shall

level

that

Quarterly financial information (Article 6)

14. The ECB notes that Article 6 imposes an obligation to
disclose quarterly financial information on issuers whose
shares are admitted to trading on regulated markets. As
noted above the ECB generally welcomes moves towards
higher levels of disclosure, in terms of both frequency and
quality, for issuers of financial assets. As highlighted by the
Commission (3), many publicly-traded European companies
already disclose quarterly information. The ECB welcomes
the proposed rule, which will harmonise standards for
such reporting. In practice, this has already become an
important reference for investors in their monitoring of
companies. Timely disclosure of periodic information
ensures that all financial market participants have access
to relevant financial information, thus helping the efficient
price discovery of financial assets. However, the quarterly
reporting should only include information deemed most
important
to a
and thereby
investors
minimum the burden imposed on issuers.

reduce

for

(1) OJ L 168, 27.6.2002, p. 43. See recital 9.
(2) Article 1(2)(a) and (b) of Common Position (EC) No 25/2003.

(3) Explanatory memorandum, page 14.

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Consistency with supervisory reporting requirements

15. The ECB notes that

the

to observe

institutions have

issuers of securities,

following its revision.

in Directive 2000/12/EC of

institutions (1) and both credit

in particular
regulated entities, will not only be subject to the rules
on disclosure contained in the proposed directive, but
will also have to comply with the reporting requirements
set out in other EU directives. For instance, publicly-traded
disclosure
credit
requirements set out
the
the Council of 20 March
European Parliament and of
the
2000 relating to the taking up and pursuit of
insti-
business of credit
tutions and investment firms will be subject to the rules
on disclosure that will be included in Pillar III of the
Capital Adequacy Directive (2)
In
the overall reporting burden on
order to ensure that
listed
the
institutions
financial
Commission might wish to check whether
improved
consistency could be achieved between EU reporting
requirements with different purposes.
instance,
according to Article 9(1) of the proposed directive, an
issuer must be notified where a security holder holds, as
the result of an acquisition or disposal, a minimum of 5 %
of voting rights or capital. According to Articles 1(10) and
16(1) of Directive 2000/12/EC, the supervisory authority
must be notified of an intention to hold major holdings so
that the proportion of voting rights or capital held would
reach 10 % or more. In the same vein, the Commission
might also consider whether further uniformity should be
sought between the disclosure requirements for
listed
companies set out in the proposed directive and those
for
currently being
developed in the context of the revision of the Capital
Adequacy Directive.

institutions which are

excessive,

financial

not

For

is

The rules concerning the competent authorities (Articles
20 and 21)

16. As regards the provisions concerning the competent auth-
orities, the ECB has two comments. Firstly, Article 20(1)
requires Member States to designate a single competent
administrative
authority. According to Article 20(2)
Member States may allow this competent authority to
delegate tasks to other entities, such as to operators of
regulated markets. Any delegation of tasks is subject to
certain conditions. In particular, the entities in question
are required to be organised in a manner such that
possible conflicts of interest are avoided. As expressed in
for the Prospectus
the ECB's opinion on the proposal
Directive (3),
the ECB considers that effective measures

(1) OJ L 126, 26.5.2000, p. 1. Directive as last amended by Directive

2002/87/EC (OJ L 35, 11.2.2003, p. 1).

(2) Council Directive 93/6/EEC of 15 March 1993 on the capital
adequacy of investment firms and credit institutions, OJ L 141,
11.6.1993, p. 1. Directive as last amended by Directive 2002/87/EC
of the European Parliament and of the Council (OJ L 35, 11.2.2003,
p. 1).

(3) CON/2001/36.

against possible conflicts of interest will gain importance
as more and more exchanges are transformed into
‘for-profit’ entities while they remain entrusted with
listing and other ‘public functions’. Consequently, there is
a need to find appropriate regulatory means to address and
solve potential conflicts of
interest resulting from the
changing nature of exchanges. The ECB would therefore
welcome it if the Commission clarified better the measures
that could mitigate the risks of such conflicts. In addition,
further precautions against conflicts of interest could be
taken by requiring entities not only to be organised in
such a way as to avoid possible conflicts of interests, but
also to establish mechanisms that would allow for the
management of such conflicts if they did arise.

for

responsible

enforcing the prudential

17. Furthermore, the ECB holds the view that the proposed
directive might envisage a broader scope for cooperation
between relevant authorities. It refers solely to cooperation
between the ‘competent authorities’ of the home and host
Member States responsible for checking compliance with
its requirements. However, cooperation with national auth-
orities
and
conduct of business supervision of regulated entities may
also be warranted,
and
investment firms whose securities are admitted to trading
on regulated markets. This would be particularly appro-
some information concerning listed
priate given that
financial
institutions will have to be disclosed both to
the public and to the relevant supervisory authorities.
Therefore,
the Commission could consider including a
provision foreseeing the possibility of close cooperation
between supervisory authorities within the meaning of
the proposed directive and prudential and conduct of
business supervisors, as long as this is compatible with
the obligation of professional secrecy.

institutions

such as

credit

The need to refer to European statistical standards

if

18. As regards Article 9 concerning the notification of the
acquisition or disposal of major holdings, the ECB would
welcome it
the proposed directive stipulated that
information on the acquisition or disposal of major
holdings had to be provided in accordance with the
European statistical standards as laid down in the ESA
95 (4). This would increase the transparency and quality
of the information, as it would be based on harmonised
separate
definitions

and concepts.

In addition,

the

(4) Contained in Annex A to Council Regulation (EC) No 2223/96 of
25 June 1996 on the European system of national and regional
accounts in the Community (OJ L 310, 30.11.1996, p. 1). Regu-
lation as last amended by Regulation (EC) No 1267/2003 (OJ L 180,
18.7.2003, p. 1).

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collection of these data by the ECB and the participating
NCBs within the framework of
statistical
reporting requirements would be made redundant.

the ECB's

collected by the ECB and the NCBs of the participating
Member States within the framework of the ECB's stat-
istical reporting requirements.

electronic network, or platform of

the ECB would welcome the setting-up of a
19. Similarly,
single
electronic
networks, across Member States to facilitate public access
of information to be disclosed under the future Prospectus
Directive and the proposed directive, as suggested in
Article 18. The ECB would however encourage the
inclusion of information on the sectoral classification of
the issuer and the instrument classification of the securities
issued that would otherwise have to be additionally

20. This opinion will be published in the Official Journal of the

European Union.

Done at Frankfurt am Main on 30 September 2003.

The President of the ECB

Willem F. DUISENBERG