White Paper - Financial Services Policy 2005-2010 {SEC(2005) 1574}
Date: 2005-12-01
Institutions: European Commission
Subjects: approximation of laws, consumer protection, financial institution, financial market, free movement of capital

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 1.12.2005 
COM(2005) 629 final 

WHITE PAPER 

Financial Services Policy 2005-2010 

{SEC(2005) 1574} 

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TABLE OF CONTENTS 

SYNOPSIS: INTRODUCTION / OBJECTIVES / LEITMOTIV …………………………….4 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

2.6. 

2.7. 

3. 

3.1. 

3.2. 

DYNAMIC CONSOLIDATION OF FINANCIAL SERVICES ................................ 5 

BETTER REGULATION............................................................................................ 5 

Open and transparent consultation ............................................................................... 5 

Impact assessments ...................................................................................................... 6 

Implementation and enforcement................................................................................. 6 

Ex-post evaluation........................................................................................................ 7 

Simplification, codification and clarification............................................................... 7 

Users of financial services: input, education and redress ............................................ 8 

Further reinforcing the interaction with other policy areas.......................................... 9 

ENSURING THE RIGHT EC REGULATORY AND SUPERVISORY 
STRUCTURES ............................................................................................................ 9 

Making the Lamfalussy process work.......................................................................... 9 

Supervisory challenges............................................................................................... 10 

3.2.1.  Greater clarity in roles and responsibilities of home/host supervisors ...................... 10 

3.2.2.  Explore delegation of tasks and responsibilities between supervisors....................... 11 

3.2.3.  Some practical steps to improve the efficiency of supervision.................................. 11 

3.2.4.  Developing a pan-European supervisory culture ....................................................... 12 

4. 

ONGOING AND FUTURE LEGISLATIVE ACTIVITIES (2005-2010) ................ 12 

4.1. 

Ongoing projects ........................................................................................................ 12 

4.1.1.  Retail Banking............................................................................................................ 12 

4.1.2.  Solvency II ................................................................................................................. 12 

4.1.3.  Review qualifying shareholdings............................................................................... 12 

4.1.4.  Clearing & Settlement................................................................................................ 13 

4.2. 

Reflections underway................................................................................................. 13 

4.2.1.  Eliminating of unjustified barriers to cross-border consolidation.............................. 13 

4.2.2.  E-money Directive ..................................................................................................... 13 

4.2.3. 

Insurance Guarantee Schemes.................................................................................... 13 

4.2.4.  Hague Securities Convention..................................................................................... 14 

4.2.5.  Optional instruments .................................................................................................. 14 

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4.3. 

4.4. 

Areas in which no new legislation is planned at this stage ........................................ 14 

Future initiatives......................................................................................................... 14 

4.4.1. 

Investment funds ........................................................................................................ 14 

4.4.2.  Retail financial services: bank accounts and credit intermediaries............................ 15 

5. 

6. 

THE EXTERNAL DIMENSION .............................................................................. 15 

MONITORING PROCESS........................................................................................ 16 

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Synopsis 

This  paper  presents  the  European  Commission’s  (Commission)  financial  services  policy 
priorities up to 2010. An overview of concrete tasks and activities is included (Annex I).  

The consultation on the Green Paper1 has shown broad support for these political priorities. 
This White  Paper also takes  into account the results of the ‘Exchange of Views’ of 18 July 
20052  and  parallel  initiatives  such  as  the  Report  on  financial  integration  by  the  Financial 
Services Committee3, the Ecofin Council Conclusions of 11 October 2005 and the Report by 
the  Economic  and  Monetary  Affairs  Committee  of  the  European  Parliament  on  the  current 
state  of  integration  of  EU  financial  markets4.  A  proportionate  Impact  Assessment 
complements this paper (see Annex II). 

The objectives of the Commission’s financial services policy over the next 5 years are 
to: 

•  consolidate  dynamically  towards  an  integrated,  open,  inclusive,  competitive, 

and economically efficient EU financial market; 

•  remove the remaining economically significant barriers so financial services 
can  be  provided  and  capital  can  circulate  freely  throughout  the  EU  at  the 
lowest  possible  cost  –  with  effective  levels  of  prudential  and  conduct  of 
business  regulation,  resulting  in  high  levels  of  financial  stability,  consumer 
benefits and consumer protection; 

• 

implement, enforce and continuously evaluate the existing legislation and to 
apply rigorously the better regulation agenda to future initiatives; 

•  enhance  supervisory  cooperation  and  convergence  in  the  EU,  deepen 
relations  with other  global  financial marketplaces and  strengthen European 
influence globally. 

Dynamic consolidation is the leitmotiv of the Commission’s approach – an approach that 
is practical, ambitious and reflective of stakeholder sentiment. 

1 

2 

3 
4 

Green  Paper  on  Financial  Services  Policy  (2005-2010)  published  3  May  2005.  It  remains  valid 
background for the policy choices made. See: 
http://europa.eu.int/comm/internal_market/finances/docs/actionplan/index/green_en.pdf.  Over 
150 
contributions were received during public consultation until 1 August 2005. A feed-back document has 
been published simultaneously with this Paper.  
See: http://europa.eu.int/comm/internal_market/finances/docs/actionplan/infosession/results_en.pdf 
Report for consideration by EU Finance Ministers on 2 June 2004, only in limited circulation. 
See: http://www.europarl.eu.int/meetdocs/2004_2009/documents/PR/553/553131/55311en.pdf 

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WHITE PAPER ON FINANCIAL SERVICES 2005-2010 

1. 

DYNAMIC CONSOLIDATION OF FINANCIAL SERVICES 

Financial  markets  are  pivotal  for  the  functioning  of  modern  economies.  The  more  they  are 
integrated,  the  more  efficient  the  allocation  of  economic  resources  and  long-run  economic 
performance will be. Completing the single market in financial services is thus a crucial part 
of the Lisbon economic reform process5; and essential for the EU’s global competitiveness. 

European  financial  market  integration  has  been  driven  forward  by  the  Financial  Services 
Action Plan 1999-2005 (FSAP). Its central philosophy has proved sound: financial industry’s 
performance  has  improved;  there  is  higher  liquidity,  increased  competition,  sound 
profitability  and  stronger  financial  stability  despite  much  external  turbulence.  With 
progressive implementation of FSAP measures in the coming years, these benefits will only 
increase. 

But  efforts  have  to  continue.  The  EU  financial  services  industry  has  strong  untapped 
economic  and  employment  growth  potential.  A  further  boost  in  the  efficiency  of  pan-
European  markets  for  long-term  savings  products  is  needed  urgently.  The  EU’s  major 
structural  economic  challenge  –  its  huge  pensions  deficit  –  needs  to  be  financed.  The  retail 
internal  market  is  a  long  way  from  completion.  A  better  functioning  risk  capital  market  is 
needed to promote new and innovative firms and to raise economic growth6. 

So,  consolidating  progress;  completing  unfinished  business;  enhancing  supervisory 
cooperation and convergence; and removing the remaining economically significant barriers 
are the key axes of Commission policy for the next 5 years. 

2. 

BETTER REGULATION 

The Commission will deploy the most open, transparent, evidence-based policy-making based 
on a dual commitment to open consultation and impact assessments, so to ensure sound rules 
are drawn up, adding value to the EU’s financial services sector and consumers.  

2.1. 

Open and transparent consultation  

Open  consultations  (including  with  stakeholder  groups)  will  continue  to  play  a  central  role 
and  will  be  required  before  any  legislation  is  deemed  necessary.  The  Commission  will 
continue to publish responses received to its consultations, practical summaries and feedback 
statements. 

5 

6 

"Common  Actions  for  Growth  and  Employment:  The  Community  Lisbon  Programme",  COM(2005) 
330 final, 20.7.2005, See: http://europa.eu.int/growthandjobs/pdf/COM2005_330_en.pdf and "Working 
together  for  growth  and  jobs:  Next  steps  in  implementing  the  revised  Lisbon  strategy",  SEC(2005) 
622/2, 29.4.2005, See: http://europa.eu.int/growthandjobs/pdf/SEC2005_622_en.pdf. 
Although outside the scope of this Paper, the identification of priorities for any further initiatives in the 
area of  venture  capital  will be of  immense  importance  and  a  clear priority  for  the  Commission  in  the 
next 5 years. 

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2.2. 

Impact assessments  

Impact  assessments  will  accompany  any  new  Commission  proposal.  They  will  scope  each 
issue and determine the most appropriate option. They will focus on costs and benefits across 
the broad economic, social and environmental dimensions, and, where appropriate, the impact 
on financial stability, proper functioning of markets and consumer protection. 

Wherever  possible,  impact  assessment  methodologies  will  be  shared,  prior  to  publication, 
with  relevant  stakeholders.  The  Commission  will  also  assess  -  on  a  case  by  case  basis  – 
whether technical implementing (level 2) measures also require impact assessments. 

The  Commission  also  expects  the  European  Parliament  and  the  Council  to  honour  their 
commitments  to  improve  the  quality  of  Community  legislation  by  producing  impact 
assessments when tabling substantive amendment to Commission proposals7. So far this has 
not been put into practice and is a weak link in the better regulation chain8.  

2.3. 

Implementation and enforcement 

Regrettably,  the  rate  of  transposition  of  Community  law  by  Member  States  within  agreed 
deadlines  is  poor9.  Member  States  need  to  demonstrate  real commitment  and  deliver  proper 
implementation  on  time.  Enforcement  mechanisms  need  to  be  strengthened  and  joined-up 
across the Member States. This shared responsibility is a major challenge for EU-25 – with 
further enlargements in the pipeline. 

The  Commission  will  work  intensively  with  Member  States  to  monitor  progress,  ensure 
accurate  implementation  and  avoid  regulatory  additions,  so-called  ‘goldplating’.  The 
Commission will regularly update its online FSAP transposition matrix and install hyperlinks 
to the Member States’ own implementing texts. The overall state of transposition will also be 
covered in the annual Progress Report on financial services10. 

Transposition  workshops  with  Member  States  and  European  regulators  will  continue  to 
provide a forum for establishing consensus on the implementation of particular provisions of 
EC legislation and to iron out, ex-ante, any problems. The Commission will publish summary 
notes of the transposition workshops and additional interpretative guidance when needed. 

These  practical  processes  will  facilitate  effective  monitoring.  In  the  event  of  faulty 
implementation, the Commission will launch infringement proceedings swiftly. Stakeholders 
have  stressed  their  need  for  adequate  transposition  time.  The  Commission  agrees.  But,  as 
level-2  measures  evolve,  transposition  work  at  both  legislative  and  technical  implementing 
level (levels 1 and 2) should proceed in parallel where possible. 

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8 

9 
10 

See  the  Inter-Institutional  Agreement  on  Better  Lawmaking  (OJ  C  321/1  31.12.2003)  and  the 
Conclusions of the Competitiveness Council on Better Regulation (9501/05). 
Up  to  now,  the  Commission  has  provided  for  nearly  80  impact  assessments,  while  Parliament  and 
Council  have carried  out only  1. No  impact  assessment  has  been  carried out on  Member States’ own 
legislative initiatives in the field of internal or judicial affairs. 
See: http://europa.eu.int/comm/internal_market/en/finances/actionplan. 
The next Progress Report is foreseen for January 2006. 

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2.4. 

Ex-post evaluation 

A fundamental question is whether the rules actually achieve their objective. The Commission 
will  monitor  annually  the  overall  state  of  financial  integration  in  its  Financial  Integration 
Monitor  (FIM)  report11.  The  Inter-institutional  Monitoring  Group12  will  contribute  by 
evaluating the Lamfalussy process in all financial services sectors13. 

Ex-post evaluation of the  FSAP  and  of all new legislative measures is a top priority for the 
Commission  in  the  coming  5  years.  By  2009,  the  Commission  will  endeavor  to  have 
completed  a  full  economic  and  legal  assessment  of  all  FSAP  measures14.  A  study  will  be 
launched  in  the  course  of  2007-200815.  Evaluations  of  the  key  measures  will  take  place 
around 4 years after the implementation deadline of each measure. 

If  –  over  time  –  careful  assessment  and  analysis  reveal  that  specific  legal  texts  have  not 
worked, they will be modified or repealed in the framework of the legislative procedure16.  

2.5. 

Simplification, codification and clarification 

Community  and  national  implementing  rules  on  financial  services  must  function  as  one 
coherent  corpus  of  law.  Although  the  Commission  has  tried  to  keep  FSAP  legislation  as 
simple and coherent as possible, there is room for improvement. Therefore, the Commission 
will carry out sectoral and cross-sectoral consistency checks, reading across the relevant law 
to ensure coherence of terminology and effect. Investigating legal coherence will necessarily 
involve  studying  the  approaches  taken  by  Member  States,  to  understand  better  how 
Community  law  is  applied  in  practice,  and  to  ensure  that  the  level  of  legal  coherence  that 
markets  need  is  in  fact  being  delivered.  The  natural  starting-point  of  the  exercise  is  to  be 
Community law, but with an immediate eye to its transposition and application at the national 
level. 

The Commission’s work, which will be a multi-year initiative, will start with these practical 
steps: 

•  Easy  access  to  Community  law  will  be  delivered  by  bringing  together  the  relevant 
Community instruments on Internet17 in a form convenient both to specialists and citizens 
at large; 

•  The first sectoral consistency check will be in the securities field. A group of practitioners 
and market experts will be set up to assist the Commission in analysing the main problems. 
A  related  exercise  is  already  underway  with  the  Commission’s  Legal  Certainty  Group, 
which deals with cross-border securities rights and transfers; 

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14 
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16 
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See http://europa.eu.int/comm/internal_market/finances/cross-sector/index_en.htm#monitor. 
See http://europa.eu.int/comm/internal_market/finances/cross-sector/index_en.htm#interinstitutional. 
The Lamfalussy process is applied in the Banking, Insurance and Occupational Pensions, Securities and 
UCITS sectors; horizontal issues like corporate governance, auditing and accounting are in principle not 
covered  by  the  Lamfalussy  process,  unless  initiatives  in  these  areas  specifically  address  financial 
services areas. 
Apart from those where the implementation deadline is later than 2005. 
The Commission envisages to organise a workshop with economic experts in autumn 2006 to prepare 
this work. 
The consultation on the Green Paper did not identify real candidates for immediate withdrawal . 
With hyperlinks to national implementing legislation. See Section 2.3. 

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•  Current variety and accumulation of information to be provided to a user may confuse both 
users and services providers. A broad study will be carried out in 2008 to review possible 
inconsistencies and appropriateness of information requirements in the existing EC rules;  

•  This  uncertainty  is  particularly  acute  in  the  area  of  collective  investments.  Here,  both 
sectoral and transversal rules apply along with residual local advertisement rules. Industry 
feedback  suggests  that  this  situation  is  hindering  the  effective  cross-border  marketing  of 
investment funds. It also leads to uncertainty over whether the fund promoter or distributor 
is responsible when marketing or providing services to investors. In order to clarify some 
of  these  matters,  the  Commission  will  issue  a  Communication/Recommendation  in  the 
course  of  2006.  This  work  may  serve  as  a  starting-point  for  comparable  work  in  other 
areas; 

•  In  the  context  of  the  insurance  Solvency  II  project,  a  major  codification  exercise  is  now 
underway. Without renegotiating the existing acquis, sixteen insurance directives will feed 
into  the  new  single  EC  Insurance  Directive.  This  could  serve  as  an  example  for  similar 
codification initiatives in other financial services areas; 

•  In  addition,  where  any  incorrect  implementation  of  Community  law  is  found,  the 
Commission will take appropriate action, including the use of infringement proceedings, to 
ensure a consistent and effective regulatory regime across the EU. 

2.6. 

Users of financial services: input, education and redress 

The FIN-USE forum of financial services users plays a very important role by conveying the 
user  perspective  about  EC  policy  development18.  In  addition,  the  Commission  will  ensure 
proportionate representation of users in all future advisory groups. 

As the public sector gradually withdraws from financing some aspects of social systems, there 
is  a  need  for  increased  awareness  and  direct  involvement  of  citizens  in  financial  issues.  To 
strengthen  the  demand  side  and  promote  good  investment  choices,  e.g.  for  pensions,  it  is 
essential  to  increase  transparency  and  comparability  and  to  help  consumers  understand 
financial  products.  Although  the  prime  responsibility  for  consumer  education  rests  with  the 
Member  States,  the  Commission  can  promote  not  just  a  pan-EU  exchange  of  views  on 
financial education, consumer literacy and best practice, but also facilitate common projects. 
It plans to organize a conference on this subject in early 2007. 

Furthermore,  to  spread  awareness  of  developments  in  financial  services  among  consumers, 
the  Commission  intends  to  publish  a  periodic  newsletter  emphasising  the  most  relevant 
user/consumer  aspects  of  its  ongoing  work.  Establishing  a  permanent  group  of  consumer 
representatives from across Europe is also planned, within which financial services issues of 
particular  relevance  to  consumers  will  be  discussed.  Regular  contacts  with  UNI-EUROPA 
representing employees in the financial services sectors will continue. 

18 

See: http://europa.eu.int/comm/internal_market/finservices-retail/finuse_en.htm. 

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FIN-NET19 plays an important role by providing users and consumers with easy access to out-
of-court  complaint  procedures  in  cross-border  cases20.  The  Commission  has  launched  a 
review of FIN-NET’s role with a view to further maximising its efficiency. The Commission 
will  also  conduct  an  investigation  of  the  national  redress  systems  in  the  area  of  financial 
services to identify any gaps. 

2.7. 

Further reinforcing the interaction with other policy areas 

Maximum use of policy synergies between financial services and other policy areas is key. In 
the next 5 years strong cooperation with other policy areas, particularly competition (sectoral 
enquiries21),  consumer  policy  (consumer  protection,  contract  law22)  and  taxation  will  be 
further strengthened. 

A  recent  Commission  survey  on  barriers  to  cross-border  consolidation23  in  Europe  has 
identified discrimination and uncertainty in tax rules as major obstacles for financial services 
integration, particularly VAT charges linked to restructuring24. The Commission intends, after 
a broad consultation process with all stakeholders, to present a legislative proposal to adapt 
the rules on VAT in financial services to the evolution of the single financial market25. The 
survey also highlighted the need for action in other policy areas which the Commission may 
wish to pursue26. 

3. 

ENSURING  THE  RIGHT  EC  REGULATORY  AND  SUPERVISORY 
STRUCTURES 

3.1.  Making the Lamfalussy process work 

EU  financial  market  integration  is  accelerating.  Although  some  retail  business  will  remain 
local,  firms  are  increasingly  seeking  pan-EU  economies  of  scale,  although  often  retaining 
physical  presence  locally:  through  centralisation  of  risk-management  and  back-office 
functions, cross-border mergers and the use of Internet. Regulatory and supervisory structures 
in the EU, therefore must adapt – and regulatory costs reduced where possible. The core of 
the EC’s regulatory and supervisory approach in financial services is now founded on the 4-
level  Lamfalussy  process27.  This  process  is  widely  supported  and  seen  to  be  successful. 
Decision making and supervisory arrangements are now much more efficient and flexible.  

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25 
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27 

http://europa.eu.int/comm/internal_market/finances/docs/cross-sector/mergers/cross-border-

See: http://europa.eu.int/comm/internal_market/finservices-retail/finnet/index_en.htm 
With an increasing volume of cases (in 2001: 335; in 2002: 601; and in 2003: 796). 
On 13 June 2005, the Commission decided to open enquiries in the financial services sector in the areas 
of retail banking and business insurance. The enquiries will examine whether competition (in particular, 
cross-border competition) functions fully in these sectors. 
The Commission is developing a Common Frame of Reference as a tool to improve the coherence of 
European contract law. 
See: 
consolidation_en.pdf. 
See: 
results_en.pdf: under B.1.2 Tax Barriers. 
Communication ‘The Contribution of Taxation and Customs Policies to the Lisbon Strategy’. 
In  the  area  of  investment  funds,  the  treatment  of  fund  mergers  as  a  ‘taxable  event’  is  the  biggest 
stumbling-block to this route of rationalisation of Europe’s over-crowded fund landscape.  
See: 
http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP/02/195&format=HTML&aged=1&lang
uage=EN&guiLanguage=en 

http://europa.eu.int/comm/internal_market/finances/docs/cross-sector/mergers/survey-

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The central policy of the Commission is to keep faith with this process and develop it over the 
next 5 years to fulfil its maximum potential. Key regulatory policy issues are: 

(1) 

The debate on comitology reform is particularly important; 

(2) 

(3) 

(4) 

Improving the accountability and transparency of the whole process, also vis-à-vis the 
European  Parliament  and  Council,  taking  account  of  the  defined  institutional 
boundaries and the fact that the committees of national supervisors are advisory bodies 
to the Commission; 

Developing  cross-sectoral  regulatory  cooperation  in  an  increasing  number  of  cross-
sectoral financial issues; 

thereby  ensuring  good 

Ensuring  that  all  4  levels  of  the  Lamfalussy  process  respect  the  better  regulation 
agenda, 
implementation  and 
enforcement.  Notwithstanding  the  good  work  carried  out  by  the  level-3  committees 
and recognising their resource constraints, the Commission considers that their advice 
which  may  add  significant  regulatory  costs  could  benefit  if  screened  additionally  in 
terms of impact and proportionality by a panel of expert economists; 

rule-making,  consistent 

(5)  Working with major partners towards global convergence of standards where practical. 

3.2. 

Supervisory challenges 

Obligations  to  cooperate  and  exchange  information  between  supervisors  have  to  be 
reinforced. Co-operation in crisis situations has to be secure. 

Some of the challenges for the next five years are: 

(1)  The  need  to  clarify  and  optimise  home-host  responsibilities  as  integration 

accelerates and to deal with potential spill-over effects (3.2.1); 

(2)  The  need  to  explore  delegation  of  tasks  and  responsibilities,  while  ensuring  that 
supervisors have the necessary information and mutual trust (3.2.2.); 

(3)  The  need  to  improve  the  efficiency  of  supervision  by  avoiding  duplicative 

reporting and information requirements (3.2.3); 

(4) The need for more consistent and timely cooperation and to develop a real pan-EU 

supervisory culture (3.2.4). 

3.2.1  Greater clarity in roles and responsibilities of home/host supervisors 

The  home-host  principle,  underpinned  by  mutual  recognition,  and  consolidated  supervision 
are  the  core  of  the  EC  supervisory  system.  Potential  spill-over  effects  must  be  effectively 
dealt  with  –  e.g.  in  the  event  of  failure  of  a  group  that  operates  on  a  pan-EU  basis  or  of  a 

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systemically important institution that operates in one Member State while the responsibility 
for group supervision resides in another28.  

Any  evolution  of  prudential  supervisory  structures  in  the  EU  away  from  the  current 
arrangements raises difficult issues of political and financial accountability, especially when 
support  from  the  public  purse  might  be  called  upon.  The  Commission  advocates  an 
evolutionary  approach,  responding  to  demonstrated  problems,  striking  the  right  balance 
between  more  efficient  and  consolidated  supervisory  arrangements  and  ensuring  financial 
stability all over the EU. 

Deposit guarantee schemes are also important in order to protect consumers. Further work is 
needed to ensure the existing arrangements work effectively on a cross-border basis and are 
compatible with other arrangements such as lender of last resort provisions and responsibility 
for  financing  financial  crises.  The  Commission  will  examine  the  key  interrelated  issues  and 
will come forward with a Communication on this issue in 2006. 

3.2.2  Explore delegation of tasks and responsibilities between supervisors 

Banking legislation already gives supervisors the possibility to delegate full responsibility for 
the supervision of a subsidiary to the supervisor of the parent company. This possibility has, 
however, not yet been put in practice. Similarly, securities legislation, such as that on market 
abuse and prospectuses, allows for certain functions to be transferred between regulators. But 
more can be done to share information and carry out their tasks more effectively29. 

Mediation mechanisms could be used for rapid and effective resolution of simple day-to-day 
cross-border disputes between supervisors. This would strengthen convergence of supervisory 
practices30. 

3.2.3  Some practical steps to improve the efficiency of supervision 

Multiple reporting requirements expose cross-border groups to unnecessary costs. This needs 
to  be  replaced  by  streamlined  common  reporting,  without  national  ‘add-ons’.  The 
International  Financial  Reporting  Standards  (IFRS),  the  Markets  in  Financial  Instruments 
Directive  (MiFID)  and  the  development  of  new  prudential  rules  in  banking  and  insurance 
provide a unique opportunity to rationalise reporting formats. 

The Commission considers that the time has come  to  work  towards  truly  common  data  and 
reporting requirements – and where necessary – common supervisory databases. The level-3 
committees should now begin work in earnest to devise simplified common data and reporting 
templates,  underpinned  by  real  information  sharing  between  national  supervisors.  The 
Commission expects delivery of these important efficiency gains by 2008. From 2009 all EU 
banks,  insurance  and  major  investment  companies  should  be  able  to  fulfil  their  reporting 
requirements by sending only one complete reporting package to the competent supervisor at 
consolidated level. 

28 

29 
30 

The Commission will launch a study on liquidity management in banks and Member States’ prudential 
requirements.  
A conference on supervisory convergence in the banking sector will be organised in 2007. 
These  must  be  voluntarily,  based  on  a  shared  principle  of  a  duty  to  cooperate.  Confidentiality 
requirements and the limits of the European institutional framework must be respected. 

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3.2.4  Developing a pan-European supervisory culture 

To  deliver  common  decision-making  and  enforcement  practices  -  in  particular  for  multi-
country  or  cross-sectoral  groups  -  joint  inspections,  peer  reviews31  and  practical  measures 
such  as  staff  exchanges,  joint  training  between  supervisors,  exchange  of  information  and 
expertise should be developed ambitiously over the next 5 years.  

4. 

ONGOING AND FUTURE LEGISLATIVE ACTIVITIES (2005-2010) 

4.1. 

Ongoing projects 

4.1.1.  Retail Banking 

Three major retail initiatives are already underway: 

•  In  the  area  of  mortgage  credit,  a  White  Paper  will  be  released  in  2006,  announcing  any 
initiatives  necessary  and  economically  justified  to  integrate  the  EU  mortgage  credit 
market; 

•  On consumer credit, a modified proposal for a Directive has been published on 10 October 
2005  aimed  at  creating  a  genuine  internal  market  for  consumer  credit  and  improving 
consumers’ protection32; 

•  The proposal for a Payments Services Directive will enhance competition and clarify rules 
for users’ and providers’ rights and obligations. This initiative will facilitate and underpin 
industry’s effort to create a Single European Payment Area (SEPA) by 2010. By 2007, the 
Commission  will  examine  what  further  measures  may  be  necessary  to  ensure  that  the 
SEPA is successfully delivered on time. 

4.1.2. 

Solvency II 

The  Solvency  II  project  intends  to  overhaul  EC  regulation  and  supervision  in  the  insurance 
area. Risk-oriented calculations of the solvency requirements for insurance undertakings will 
be  introduced.  Calculation  of  insurance  liabilities  (technical  provisions)  will  be  more 
harmonised, while fostering the convergence of supervisory practices.  

This project, which is widely supported, is closely linked with international developments in 
accounting,  supervision  and  actuarial  science  and  will  take  account  of  the  important 
developments in the banking area under Basel II. 

The Commission plans to table its single text proposal in mid-2007; the structure will then be 
completed by level-2 measures adopted in comitology procedure. 

4.1.3.  Review qualifying shareholdings 

Supervisors  can  block  potential  investments,  mergers  and  takeovers  in  the  financial  sectors. 
There is a clear call for more clarity, transparency and disclosure on this supervisory task to 

31 
32 

Which could be made public. 
See: http://europa.eu.int/comm/consumers/cons_int/fina_serv/cons_directive/2ndproposal_en.pdf. 

EN 

12 

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review  qualifying  shareholdings.  The  Commission  and  the  supervisory  committees  (CEBS 
and CEIOPS) have already started their work to revise article 16 of the Banking and article 15 
of the Insurance Directives and to define common prudential criteria. In banking a proposal is 
expected  mid-2006;  in  insurance  this  work  is  expected  to  take  place  in  the  context  of 
Solvency II. 

4.1.4.  Clearing & Settlement 

Cross-border clearing and settlement infrastructures are far more costly than at the domestic 
level and their level of safety and efficiency is lower. The reasons for the high cost of cross-
border  transactions  are  technical,  legal  and  fiscal  obstacles33.  There  is  also  no  regulatory 
framework at EU-level.  

The Commission suggested in its Communication of 2004 that a framework Directive may be 
needed for an efficient, safe and cheap cross-border clearing and settlement industry. To test 
this  possibility,  the  Commission  is  carrying  out  a  very  thorough  consultation  and  impact 
assessment.  Once  this  process  is  finished,  while  taking  into  account  any  new  market 
developments, the Commission will decide during 2006 on the course to take and whether to 
come forward with a formal proposal. 

4.2. 

Reflections underway 

4.2.1.  Eliminating of unjustified barriers to cross-border consolidation 

The  Commission  has  identified  and  examined  the  potential  barriers  for  cross-border 
investment  and  economic  rationalisation  within  Europe34.  Also,  the  Commission  has  looked 
into  the  respect  of  Treaty  rights  on  the  free  movement  of  capital35.  Eliminating  or  at  least 
reducing unjustified barriers will strengthen the competitiveness of the financial sectors and 
of the economy at large – and foster growth and job creation. Follow-up action is expected to 
start in 2006 (see also 4.1.3). 

4.2.2.  E-money Directive 

An  evaluation  of  the  E-money  Directive  is  underway  amidst  signs  that  it  has  not  provided 
sufficient  legal  certainty  and  may  have  constrained  market  developments.  A  report  will  be 
published in spring 2006 together with appropriate policy recommendations. 

4.2.3. 

Insurance Guarantee Schemes 

The Commission will decide in 2006 whether to propose legislation in this area. 

33 

34 

35 

The  so-called  Giovannini  barriers.  The  Commission  will  continue  its  work  to  tackle  these  barriers 
impeding  cross-border  Clearing  and  Settlement  with  the  assistance  of  different  groups  (CESAME, 
FISCO). 
See:  http://europa.eu.int/comm/internal_market/finances/cross-sector/index_en.htm#obstacles  and  see 
paragraph 2.7. 
See: http://europa.eu.int/comm/internal_market/capital/docs/communication_en.pdf. 

EN 

13 

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4.2.4.  Hague Securities Convention 

The  legal  assessment  requested  by  the  Council  on  some  aspects  of  the  Hague  Securities 
Convention36  will  help  the  Council  decide  whether  to  accept  the  Commission’s  current 
proposal for signature. 

4.2.5.  Optional instruments 

Consultation has shown widespread scepticism about the feasibility and usefulness of optional 
instruments  ('26th  regimes')  in  the  area  of  financial  services.  Its  promoters  need  to  explain 
their ideas and the legal and practical feasibility and advantages of such optional instruments 
in  more  detail.  The  Commission  remains  open37,  but  is  yet  to  be  convinced  that  optional 
instruments can bring significant benefits to market participants. 

4.3. 

Areas in which no new legislation is planned at this stage 

The main areas where  no new  legislation is planned are: rating agencies;  financial analysts; 
level-2 measures for the Takeover Bids Directive on requirements in the offer document; and 
capital requirements for regulated markets. The Commission considers that for the time being 
existing  regulatory  requirements  (or  those  already  in  the  pipeline  such  as  MiFID  level-2 
measures)  are  sufficient  and  that  Member  States  are  better  placed  and  self-regulation  by 
market  participants  better  fit  to  find  the  most  appropriate  additional  responses  to  market 
developments. 

4.4. 

Future initiatives  

The Commission has identified two areas where carefully targeted, evidence-based initiatives 
might bring benefits to the EU economy: investment funds and retail financial services. Work 
in these areas will be bottom-up, based on extensive consultations, working with the grain of 
the  market,  taking  into  account  the  interaction  between  existing  legislation  and  new 
initiatives. 

4.4.1. 

Investment funds 

The EU regulatory environment should enable the fund industry, currently managing over 5 
trillion euro of assets, to develop soundly structured, well-administered collective investments 
which  deliver  the  highest  possible  returns  consistent  with  the  individual  investors’  financial 
capacity  and  risk  appetite,  while  giving  investors  all  the  necessary  information  to  evaluate 
risks and costs. 

Work to ensure consistent implementation of UCITS law is already well underway; inter alia 
on  the  delivery  of  a  smoother  functioning  UCITS  passport;  a  clearer  understanding  of 
investment limits; and more consistent transposition of existing UCITS legislation. 

36 
37 

A multilateral Treaty on conflicts of law for securities held with an intermediary. 
In  the  October  2004  Communication  on  ‘European  Contract  Law  and  the  revision  of  the  acquis’,  the 
Commission announced that it will undertake an impact assessment on optional instruments. 

EN 

14 

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The  Commission’s  Green  Paper  of  July  2005  on  enhancing  the  framework  for  investment 
funds  assesses  the  existing  UCITS38  framework  in  the  light  of  current  developments  in  the 
funds industry. 

The responses to the Green Paper39 and ongoing work will provide the Commission with the 
elements needed to take a firm, evidence-based, view on the content and form of any further 
steps.  The  Commission’s  views  will  be  outlined  in  a  White  Paper,  to  be  published  by  the 
second half of 2006. 

4.4.2.  Retail financial services: bank accounts and credit intermediaries 

Further  action  is  needed  to  open  up  the  fragmented  retail  financial  services  markets.  The 
Commission will take a targeted and consultative approach, involving all market participants 
at  every  stage  of  its  policy  making.  The  Commission  has  decided  that  the  following  retail 
areas merit further consideration: 

Accessing  a  bank  account  is  the  entry  point  for  most  consumers  to  financial  services  and 
markets and increasingly important for citizens to participate in the market and society; even 
more  so  within  the  context  of  using  electronic  payments  within  a  Single  Payments  Area. 
Undue  barriers  associated  with  all  types  of  bank  accounts  (current,  savings,  securities 
accounts)  must  be  removed40,  consumer  choice  widened  and  competition  between  service 
providers improved. 

The Commission will create an expert group, consisting of industry and user representatives, 
to  identify  existing  problems  associated  with  user  mobility  (e.g.  cross-border  opening  of 
accounts  (including  online),  closing  fees  and  transfers  between  banks)  and  consider  the 
usefulness  of  an  optional  standard  bank  account.  The  results  of  the  expert  group  should  be 
available  in  early  2007.  The  Commission  will  study  the  business  case  for  taking  initiatives, 
building  on  the  ongoing  sector  enquiries  in  the  competition  field41.  Without  prejudging  the 
outcome  of  the  legislative  process  on  the  Consumer  Credit  Directive,  the  Commission 
believes  that  further  investigation  is  needed  in  the  area  of  credit  intermediaries.  The 
Commission will launch a study to be available in 2008 in order to gather information about 
the  applicable  national  rules  and  identify  any  problems  caused  either  by  divergent  or 
overlapping  rules.  Available  experience  from  the  existing  legislation  on  insurance  and 
securities intermediation will be taken into account. 

5. 

THE EXTERNAL DIMENSION 

Increasingly, standards and best practices are set and defined at global level, for example on 
accounting, auditing and banking capital requirements. Considering the size of the EU market, 
and Europe’s experience in pragmatically uniting the legitimate call for harmonised rules and 
the diverging needs of different markets/cultures/players, the EU must have a leading role in 
standard setting at global level. 

38

39

40

41

See: http://europa.eu.int/comm/internal_market/securities/ucits/index_en.htm 
Responses will be published in autumn 2006. 
Beyond the aspects already dealt with in the initiative on payments. 
See Section 2.7. 

EN 

15 

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The EU has the most open financial market in the world, which is an emerging strength. The 
introduction of the euro, supported by free movement of capital, sets the standards world-wide 
in  terms  of  openness  and  transparency.  Other  countries  should  follow.  The  EU  is  fully 
committed to an ambitious opening of global financial services markets. This commitment is 
driven  forward  in  the  GATS  negotiations  in  the  WTO  Doha  round  and  other  trade 
negotiations. 

There is much support for the Commission’s approach to regulatory dialogues – exchanging 
information,  identifying  potential  regulatory  problems  upstream  and  seeking  mutually 
acceptable solutions. The Commission will therefore further deepen the successful problem-
solving  EU-US  financial  markets  dialogue  –  keeping  Member  States,  the  European 
Parliament, the private sector and other relevant stakeholders closely informed. 

Furthermore, the Commission intends to widen dialogues and cooperation on financial issues 
with  other  countries,  such  as  Japan,  China,  Russia  and  India,  reflecting  as  far  as  possible 
industry priorities. 

Likewise, the EC needs to be represented strongly in international bodies, where it needs to 
speak with one voice in the fight against corporate and commercial fraud, money laundering, 
terrorist  financing,  tax  evasion,  corruption  and  other  malpractices.  Cooperation  and 
information  exchange  must  be  effective,  also  vis-à-vis  offshore  financial  centres.  European 
coordination  in  international  fora  such  as  the  Basel  Committee,  IAIS,  IOSCO,  UNIDROIT 
needs  to  be  stepped  up  prior  to  meetings  in  order  to  define  precise  European  negotiating 
positions. Furthermore, the Commission must also participate in the Financial Stability Forum 
where it is presently excluded for no good reason. 

6. 

MONITORING PROCESS 

A detailed Report covering progress and developments in the areas outlined in this Paper will 
be published by the Commission on an annual basis. 

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16 

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Annex I: Concrete tasks or activities contained in White Paper Financial Services 

  What 

Who  

When 

BETTER REGULATION – CONSULTATION AND IMPACT ASSESSMENTS (2.1 / 2.2) 

1)   

2)   

3)   

4)   

Transparent consultation procedures 

European Commission 

ongoing 

Ex  ante  evaluations  (impact  assessments)  in  preparation  of 
all new proposals 

European Commission 

ongoing 

Ex  ante  evaluations  (impact  assessments)  in  preparation  of 
significant level-2 measures 

European Commission 

ongoing 

Ex  ante  evaluations  (impact  assessments)  in  preparation  of 
substantive amendments to European Commission proposals 

European 
and Council 

Parliament 

ongoing 

IMPLEMENTATION AND ENFORCEMENT (2.3) 

5)   

6)   

7)   

8)   

9)   

10)  

11)  

Improve  timely  and  accurate  transposition  and  enforcement 
of EC Directives 

Member States 

ongoing 

Update transposition matrix of FSAP measures (web-site) 

European Commission 

ongoing 

Complete  transposition  matrix  with  hyper-links  to  national 
transposing legislation 

European Commission 

10/2005 
until 
02/2006 

Convene and run transposition workshops 

European Commission 

ongoing 

Publication  summary  notes  of  transposition  workshops  and 
interpretative guidance for transposition 

European Commission 

ongoing 

Launch 
transposition and incorrect enforcement 

infringement  procedures 

in  case  of 

faulty 

European Commission 

ongoing 

Set  adequate  (aligned)  transposition  time  for  level-1  and 
level-2 measures 

European  Commission, 
European 
Parliament 
and Council 

ongoing 

EX-POST EVALUATION (2.4) 

12)  

Publication of Financial Integration Monitor Report 
13)   Assistance to the Inter-Institutional Monitoring Group  
14)  

External study on impact of FSAP (measuring empirical and 
economic effects) 

European Commission 

annually 

European Commission 

2005-2007 

European Commission 

2007-2008 

EN 

17 

   EN 

 
 
15)  

16)  

Workshop  with  economic  experts  (as 
evaluation of FSAP measures) 

input  for  full 

European Commission 

Ex-post evaluations of all new legislative measures  

European Commission 

SIMPLIFICATION, CODIFICATION AND CLARIFICATION (2.5) 

17)  

Setting up and running an Advisory Committee to assist the 
European Commission in the Economic and legal evaluation 
of securities legislation  

18)   Running  of  Legal  Certainty  Group  in  the  area  of  Clearing 
and  Settlement,  consisting  of  practitioners  and  market 
experts: support work of the network and ensure secretariat  

European Commission 

European Commission 

autumn 
2006 

4  years  after 
transposition

2005 
beyond 

and 

2005 
beyond 

and 

19)  

20)  

21)  

Consistency  check  on 
requirements  and 
marketing and distribution requirements in financial services 
legislation: launch of external study 

information 

European Commission 

2008 

Communication/Recommendation 
investment funds 

on  marketing 

of 

European Commission 

2006 

Solvency  II  –  codification  of  Insurance  Directives  + 
technical work on modernising solvency requirements 

European Commission 

ongoing; 
proposal 2007 

USERS OF FINANCIAL SERVICES: INPUT, EDUCATIONS AND REDRESS (2.6) 

22)  

23)  

24)  

FIN-USE: support work of the group and ensure secretariat 

European Commission  Ongoing 

6/7 meetings 
per year 

Conference  to  discuss  financial  education  and  consumer 
literacy 

European Commission  Early 2007 

Periodic  newsletter  pointing  to  ongoing  work/initiatives  of 
relevance for consumers/users/SME’s 

European Commission 

2006 
beyond; 

and 

twice a year 

25)   Establishment  and  running  of  Financial  Services  Consumer 

European Commission 

2006; 

Group (representatives from all MS)  

2/3 meetings 
per year 

26)   Continuation of regular contacts with UNI-EUROPA (Trade 

European Commission  Ongoing; 

Unions – financial services employees) 

twice a year 

EN 

18 

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27)  

28)  

29)  

30)  

FIN-NET:  support  work  of 
secretariat 

the  network  and  ensure 

European Commission  Ongoing; 

2  meetings 
per year 

FIN-NET: Task Force with a view to maximise FIN-NET’s 
efficiency 

European Commission  Ongoing; 

2-3 
meetings 

Dolceta  project:  web-based  tool  for  educational  institutions, 
governments to use for financial training 

European Commission  Ongoing 

Investigation  of  redress  systems  in  the  area  of  financial 
service in place in Member States  

European Commission 

2006 

FURTHER REINFORCING THE INTERACTION WITH OTHER POLICY AREAS (2.7) 

31)  

32)  

Reinforcing 
competition, consumer policy and taxation. 

interaction  with  other  policy  areas,  e.g. 

European Commission 

ongoing 

Fiscal  Compliance  Experts’  group  in  area  of  Clearing  and 
Settlement: support work of the group and ensure secretariat 

European Commission 

ongoing 

ENSURING  THE  RIGHT  EC  REGULATORY  AND  SUPERVISORY  STRUCTURES  –  MAKING 
THE LAMFALUSSY PROCESS WORK (3.1) 

33)  

34)  

35)  

36)  

Aim at permanent inter-institutional stability to maintain the 
Lamfalussy arrangements 

Improve  the  accountability  and  transparency  applied  in  the 
Lamfalussy process 

Develop cross-sectoral regulatory cooperation 

European 
Council, 
Parliament 
and 
European Commission 

Ongoing 

Ongoing 

Supervisory 
Committees: 
CEBS, 
CEIOPS,  CESR,  while 
the 
informing 
European Commission 

Regulatory 
Committees: 
EIOPS, ESC 

Ongoing 

EBC, 

Consultation  +  ex  ante  evaluations  (impact  assessments)  in 
preparation of draft advice to the European Commission 

Supervisory 
Committees: 
CEIOPS, CESR 

CEBS, 

2006 
beyond 

and 

SUPERVISORY CHALLENGES (3.2) 
37)   Assessment  of  roles  and  responsibilities  of  home/host 

supervisors 

European  Commission 
in 
with 
co-op 
respective  Supervisory 
CEBS, 
Committees: 

Ongoing 

EN 

19 

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38)  

39)  

40)  

41)  

42)  

43)  

44)  

CEIOPS, CESR 

Study on liquidity management in banks and Member States’ 
prudential requirements 

European Commission 

2006 

Communication  on  Deposit  Guarantee  Schemes  (including 
impact assessment) 

European Commission  mid-2006 

Explore  delegation  of  tasks  and  responsibilities  between 
supervisors 

Conference  on  Supervisory  Convergence  in  the  banking 
sector 

Mediation mechanisms at supervisory level  

Improving  efficiency  of  supervision  by  common  data  and 
reporting templates 

Supervisory 
Committees: 
CEIOPS, CESR 

CEBS, 

Ongoing 

European  Commission 
in  co-op  with  CEBS 
and banking industry 

2007 

Ongoing 

Supervisory 
Committees: 
CEBS, 
CEIOPS, CESR; in co-
op  with  the  European 
Commission 

Supervisory 
Committees: 
CEIOPS, CESR 

CEBS, 

By 2008 

Deliver common decision-making and enforcement practices 
(joint  inspections,  peer  reviews,  staff  exchanges,  joint 
training, exchange of information/expertise) 

Supervisory 
Committees: 
CEIOPS, CESR 

CEBS, 

By 2010 

FUTURE INITIATIVES – ONGOING PROJECTS (4.1) 

45)  

46)  

47)  

White Paper on mortgage credit 

European Commission  End 2006 

Concrete actions in mortgage credit (follow-up White Paper)  European Commission 

2007and 
beyond 

Modified proposal for a Consumer Credit Directive 

European Commission 

2005 

48)   Proposal for a Payments Directive 
49)   Examination  if  further  measures  are  necessary  to  ensure  a 

European Commission  End 2005 

European Commission  By 2007 

Single European Payments Area 
50)   Proposal for a Solvency II Directive 
51)  

Revision of Art. 16 Banking Directive 

European Commission  Mid-2007 

European Commission 

52)   Revision of Art. 15 Insurance Directive 

European Commission 

EN 

20 

proposal  by 
mid-2006 

In parallel to 
revision  Art. 
in 
16  BD; 

   EN 

 
context 
of 
Solvency  II 
work 

53)  

(possible) initiatives on Clearing and Settlement 

European Commission 

2006 

REFLECTIONS UNDERWAY (4.2) 

54)  

55)  

56)  

57)  

58)  

59)  

(possible) follow up actions after ECOFIN discussions on x-
border consolidation  

European Commission 

2006 
beyond 

and 

Report on the functioning of the E-money Directive 

European Commission 

spring 2006 

(possibly) Insurance Guarantee schemes 

European Commission  A  decision 
will be taken 
1st half 2006 

Legal assessment on the Hague Securities Convention 

European Commission  Ongoing 

Optional instruments ("26th regime"): ongoing work on CFR 
and impact assessment on optional instruments 

European Commission 

2005 
beyond 

and 

Optional instruments ("26th regime"): possible forum group, 
once  more  groundwork  has  been  done,  based  on  a  specific 
product 

European Commission  Possibly 

in 

2006 

FUTURE INITIATIVES (4.4) 

60)  

61)  

62)  

63)  

White Paper on investment funds 

European Commission 

Regulation  to  clarify  the  definitions  of  eligible  assets  for 
UCITS 

European Commission 

Communication on marketing of UCITS 

European Commission 

Other concrete actions in investment funds (follow-up White 
Paper) 

European Commission 

autumn 
2006 

2006and 
beyond 

2006 
beyond 

and 

2007 
beyond 

and 

64)   Expert group on Bank Accounts 
65)   External  study,  assessing  whether  EU-level  action  on  bank 

European Commission 

early 2007 

European Commission 

end 2007 

accounts is advisable  

66)  

Studying access to banking services throughout the EU  

European Commission 

2006 
beyond 

and 

67)   Work  on  Credit  Intermediaries,  building  on  evaluations  of 

European Commission 

2008 

insurance and securities intermediation: study 

EN 

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THE EXTERNAL DIMENSION (V) 

68)  

69)  

70)  

71)  

Strive  for  an  ambitious  opening  of  global  financial  services 
markets in the WTO 

European Commission   ongoing 

Further  deepening 
Dialogue with the US 

the  Financial  Markets  Regulatory 

European Commission 

ongoing 

Widen  dialogues  and  cooperation  with  other  countries, 
including Japan, China, Russia and India 

European Commission 

ongoing 

Improve  representation  and  manage  co-ordination  of  EU-
positions in international bodies 

European Commission 

ongoing 

MONITORING PROGRESS (VI) 

72)  

Publication  of  annual  Progress  Report  to  monitor  progress 
and main developments in financial services 

European Commission  December 

2005 
every year 

+ 

-o- 

EN 

22 

   EN