Opinion of the European Economic and Social Committee on the  Green Paper on Financial Services Policy (2005-2010) (COM(2005) 177 final)
Date: 2005-12-15
Institutions: European Economic and Social Committee
Subjects: ESC opinion, approximation of laws, consumer protection, entrepreneurship, financial institution, financial market, free movement of capital

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Opinion of the European Economic and Social Committee on the ‘Green Paper on Financial
Services Policy (2005-2010)’

(COM(2005) 177 final)

(2006/C 65/24)

On 3 May 2005 the European Commission decided to consult the European Economic and Social
Committee, under Article 262 of the Treaty establishing the European Community, on the Green Paper on
Financial Services Policy (2005-2010).

The Section for Single Market, Production and Consumption, which was responsible for preparing the
Committee's work on the subject, adopted its opinion on 20 October 2005. The rapporteur was Mr Ravoet.

At its 422nd plenary session, held on 14 and 15 December 2005 (meeting of 15 December), the European
Economic and Social Committee adopted the following opinion by 115 votes with 1 abstention.

1. Background

The Commission proposes strengthening financial relations
with the US, Japan and China.

1.1
The European Commission's Green Paper on financial
services policy launches ideas to further integrate EU financial
markets. It focuses primarily on implementing existing rules
agreed under the Financial Services Action Plan (FSAP) and on
cooperation, rather than on proposing new laws. It explores
ways of
financial
services and asset management.

improving cross-border access

to retail

1.2
The Green Paper emphasizes the short-term need to
complete unfinished business and finalise legislation currently
under negotiation in the European Parliament and the Council.
It also stresses that existing legislation must be implemented
effectively, in three phases: effective transposition of EU rules
into national law; more rigorous enforcement by supervisory
authorities; and continuous ex-post evaluation. At all stages of
any future regulatory process, the Commission has stated that
it will apply the rigorous ‘better regulation’ approach, with
thorough impact assessment and extensive consultation.

In a few areas, the Commission may propose new initia-
1.3
tives. Separate Green Papers on asset management and mort-
gage credit were published in July 2005.

the EU retail

The Commission notes that

1.4
financial
services market remains fragmented. It has therefore under-
taken to examine, among other things, ways to make cross-
border use of bank accounts more consumer friendly and to
break down barriers so that customers can shop around across
the EU for the best savings plans, mortgages,
insurance and
pensions, with clear information to facilitate product compar-
ison.

Other

issues covered in the Green Paper

1.5
include
ensuring that supervisory practices and standards converge
across Europe, encouraging cross-border investment and taking
advantage of the EU's strategic opportunity to influence the
regulatory parameters of the emerging global financial market.

2. General observations

2.1
The European Economic and Social Committee (EESC)
welcomes the opportunity to offer its opinion on the European
Commission's priorities for financial services policy from 2005
to 2010. As we move into a post-FSAP environment, it is right
for the Commission to take stock of what has been achieved
and what its future priorities should be.

2.2
The Commission rightly considers the FSAP to have
been one of the successes of the first phase of the Lisbon
strategy. During the strategy's crucial second and final phase
through to 2010, it will be more essential than ever to ensure
that financial services policy promotes the achievement of the
Lisbon goals of growth and jobs.

The EESC thus supports the Commission's aim of
2.3
encouraging depth,
liquidity and dynamism in financial
markets so as to enable capital and financial services to be
channelled efficiently to all parts of the economy. A stable,
integrated and competitive financial sector, in which consumers
have a high level of confidence inculcated through effective
consumer protection measures, is a necessary condition for the
EU economy to thrive.

The EESC also endorses the Commission's proposal to
2.4
refocus its efforts over the next five years and to concentrate
on bringing to fruition the initiatives taken so far. At this stage,
past initiatives should be monitored and evaluated, and any
new initiatives should be introduced with caution and due
consideration of the consumer angle. A cost/benefit analysis
should automatically become an integral part of new legisla-
tion;
legislation that must be drafted sufficiently clearly to
avoid subsequent ‘gold plating’ by the Member States.

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3. Specific observations

environment for capital-raising by SMEs, for example through
the Prospectus Directive (1). Non-regulatory initiatives may also
be appropriate.

3.1
The EESC congratulates the Commission for the high
quality of the proposals contained in the Green Paper and
broadly supports most of the proposals it sets out. This EESC
opinion on the Green Paper thus seeks to underline those areas
considered to be of particular importance for EU organised
civil society while at the same time asking the Commission for
more specific details on its planned proposals on a number of
key issues.

3.2 Key political orientation of the Green Paper

3.2.1
Commission policy over the next
proposed key political orientation.

The EESC agrees with the overall objectives of
five years and with the

3.2.2
The EESC supports the European Commission's overall
aim of creating an open and economically efficient European
financial market governed by adequate supervisory rules that
guarantee a sufficiently high level of consumer protection. The
Commission must be mindful that consumer protection and
consumer confidence go hand in hand. Therefore, while we feel
that the Commission's objectives are moving towards the right
balance between recognising the role of employers and
employees, or financial
in orga-
nised civil society, the central role of an effective consumer
protection policy should also be acknowledged. Competent and
sufficient personnel has a key role to play in creating consumer
confidence and in providing consumer education.

institutions and consumers,

integrity,

The EESC shares the Commission's view that

3.2.3
the
watchwords of cross-border competition, market access,
enhanced transparency, market
financial stability,
international competitiveness of the EU financial sector and
the Commission
efficiency are still valid today. However,
should also recognise that consumer needs must be considered
too as a determining criterion for any initiative it proposes.
Consumer confidence in financial services would be a good
yardstick by which the Commission could measure how
successful it has been in meeting consumers' demands.

Small

(SMEs)

3.2.4
are
and medium-sized enterprises
economic catalysts whose needs should be at the heart of EU
policymaking. The EESC strongly supports the notion that a
climate which encourages entrepreneurship, supported by a
for
risk capital market,
well-functioning
promoting new and innovative firms, thereby raising produc-
tivity and the sustainable rate of economic growth in the EU.
The EU's financial services policy has improved the legal

essential

is

Given the EESC's commitment

to the EU's global
3.2.5
competitiveness and competition, we agree with the Commis-
sion that the ‘better regulation’ approach must be rigorously
applied to all its initiatives. However, the EESC would strongly
advocate that a number of factors be taken into account before
the ‘better regulation’ approach is pursued. Firstly, the EESC
would expect impact studies to be carried out by independent
and competent organisations. There should be no overemphasis
on financial services integration per se without taking consu-
mers' interests into account: both sides of the coin have to be
considered. Social and employment aspects must be included
into all assessments. Extensive consultation before the impact
studies are finalised and a balanced, evidence-based approach
are needed.
It must also be borne in mind that consumer
groups usually have more limited resources than the industry.
For instance, participating in Forum Groups for specific retail
products might put serious strain on consumer organisations'
staff resources.

3.2.6
The EESC considers the stated evidence-based policy-
making approach to be the right one, provided it gives due
consideration to the consumer dimension.
It also asks the
Commission to state explicitly that this commitment not only
applies to the legislation emanating from DG Internal Market
and Services, but also to that proposed by the other directo-
the
rates-general. The EESC would also strongly support
Commission in calling for the European Parliament and, in our
view, the Council in particular, to apply the same ‘better regu-
lation’ principles as outlined above, as a safeguard against
Commission proposals emerging from the co-decision negotia-
tions as overly complex versions of the original Commission
text. Finally the EESC notes that the ‘better regulation’ approach
also needs to be applied by the Level 3 committees (2) and the
global standard setters (3).

3.2.7
The EESC notes that unless proposed regulations and
standards undergo a competitiveness test, the prospects of
the EU ever meeting the Lisbon objectives will be much dimin-
ished. This would undermine the EU's global competitiveness,
its financial stability and its ability to create jobs. The EESC
considers this too great an opportunity to be missed. At the
same time as testing the competitiveness of new initiatives, the
Commission must also test its ability to deal with issues that
consumers and providers might face in the market.

(1) Directive 2003/71/EC, OJ L 345, 31.12.2003.
(2) Level 3 committees refer to the Committee of European Securities
Regulators (CESR), the Committee of European Banking Supervisors
(CEBS) and the Committee of European Insurance and Occupational
Pensions Supervisors (CEIOPS) established under the Lamfalussy
process.

(3) Such as the Basel Committee on Banking Supervision (BCBS), the
International Organisation of Securities Committees (IOSCO), the
OECD's Financial Action Task Force on money laundering (FATF)
and the International Accounting Standards Board (IASB).

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3.2.8
The EESC is pleased to see that the Commission is
willing to make greater use of all its competition powers to
ensure that the broad FSAP objectives of furthering integration
it
are not hindered by anti-competitive behaviour. However,
would call on the Commission to provide legal certainty, for
example through the creation of a ‘safe harbour’, regarding the
conditions under which self-regulation is not deemed to breach
competition law.

clearly fail to pass such a test and looks forward to words
consistently being turned into action. Nonetheless, the EESC
feels that consumer interests need to be given high priority in
any such assessment. Account must therefore be taken not
only of economic benefits as such, but specifically of economic
benefits to consumers, including any potential harm they may
suffer.

3.2.9
The EESC supports the continued use of the Lamfa-
lussy approach. Thus, at Level 2 of the Lamfalussy process,
the EESC calls on the EU institutions to come to an (inter-insti-
tutional) agreement
to put the European Parliament in the
same position as co-legislator as it would have had under
Article I-36 of the Constitutional Treaty. Among other things,
this will prevent the sunset clauses from taking effect from
April 2007 (as would be the case in the Market Abuse Direc-
tive) (4).

3.2.10
However, while the Commission may well claim that
‘European decision-making and regulatory structures have
become more rational and efficient as a result of the Lamfalussy
process,’ questions have been raised as to the efficiency and
speed of that process. Lawmaking may not be faster and more
efficient since the consultation required for the implementing
measures impacts on the time it
takes to agree the final
package.
It is, therefore, up to all sides to strike the right
balance between sufficient consultation on the one hand, and
the EESC hesitates to
expediency on the other. Moreover,
express its support for applying the Lamfalussy process to retail
financial services issues if Member States' discretionary powers
in the field of consumer protection would thereby be called
into question.

3.3 Better

regulation,

transposition,

enforcement and continuous

evaluation

The EESC agrees

in principle with the priority
3.3.1
measures identified by the Commission.
It is now equally
important for the Commission to state explicitly how it will
seek to turn its well-intended language on better regulation
into practical and tangible steps to meet its own objectives. It is
especially important for the Commission to communicate these
ideas clearly so that its stakeholders have a very real picture of
how the Commission intends to deliver on its objectives and
how its stakeholders can become involved in the process.

3.3.2
The EU needs the most effective strategy to stimulate
growth and create jobs in a way that benefits society as a
whole. Excessively burdensome and inappropriate legislation
only serves to stymie economic growth and job creation. The
EESC thus notes with interest
the proposed evaluation of
whether existing directives and regulations are delivering the
It welcomes the Commission's
expected economic benefits.
those measures that
commitment

to modify or repeal

The

EESC welcomes

the Commission's

3.3.3
strong
emphasis on the proper transposition, implementation and
enforcement of the FSAP measures and considers this a sine
qua non for successful delivery of the FSAP's intended objec-
tives. The EESC notes however that the buy-in of the Member
States and of the Lamfalussy Level 3 committees is essential to
the process as without their unconditional and unequivocal
commitment nothing will be achieved, however well
inten-
tioned and determined the Commission may be.

3.3.4
The EESC therefore urges the Commission to keep the
momentum going and maintain the commitment of the heads
of state or government, the ECOFIN members and the Level 3
committees, as it is important that they take ownership of the
single market. Moreover, the EESC feels that in the current
mood of reflection on the role and destiny of the European
Union, the Commission must urge Member States to commu-
nicate clearly to their citizens the purpose of decisions taken
at European level, and the reasoning behind them. Importantly,
society should be made aware of how it could and should be
involved in European policymaking in general, and in building
the single market in particular.

3.3.5
In order to facilitate the global competitiveness and
financial stability which the single market is designed to create,
the EESC particularly endorses the Commission's recommenda-
tion 6 (5). In relation to what is commonly referred to as ‘gold-
plating’,
that Member States
should ‘refrain from adding to national implementation legisla-
tion conditions or requirements that are not necessary to trans-
pose the Directive concerned, where such conditions or
requirements may hinder attainment of the objectives pursued
by the Directive’.

recommendation states

this

3.3.6
That said, the EESC encourages the Commission to
make sure that the language used in the EU legislation is suffi-
ciently clear. Indeed, the EESC notes that what is sometimes
described as ‘gold-plating’ might simply be an attempt by
Member States to clarify EU texts, thereby saving a burden on
business rather than imposing one. Either way, whether it is a
case of EU Member States seeking ‘super equivalency’ with EU
legislation or an attempt to clarify EU legal texts, a burden does
accrue. Since such burdens often have a disproportionately
large impact on SMEs, the Commission must be mindful to
ensure that entrepreneurs and innovators in society are not
stifled by bureaucracy and legislation.

(4) Directive 2003/6/EC, OJ L 96, 12. 4.2003.

(5) SEC(2004) 918.

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the

single market must not

3.3.7 Moreover,
increase
consumer risk by removing existing, national-level protection.
National consumer protection rules and regulations grew up to
address issues relevant to national markets, and should not
therefore necessarily be viewed as barriers to an internal
market. The EESC is not convinced that current national
consumer protection provisions ordinarily distort competition
and innovation as such or restrict the development of a cross-
border market. It is not enough to assume that the removal of
perceived barriers will necessarily result in a functioning and
effective cross-border consumer market. Nonetheless, Member
States must be mindful not to introduce additional consumer
protection measures with the result that their respective local
markets are in some way protected from competition from
other European markets. The EESC considers full harmonisa-
tion of key retail banking elements (such as pre-contractual
information, Annual
etc.),
i.e. ‘targeted full harmonisation’, as the most effective means of
creating a genuine European internal market for retail banking
services while at the same time providing an adequate level of
consumer protection.

Percentage Rate of Charge,

3.4 Consolidation of
2010 period

financial services legislation over the 2005-

3.4.1 F i ni sh r e ma i ni ng me a su r e s

It

is

logical

that existing initiatives

3.4.1.1
should be
completed and consolidated before embarking on new under-
takings. The EESC thus agrees with the Commission that the
the next 12 months must be to
overriding priority for
complete the remaining elements of the FSAP. This means
completing negotiations
in the European Parliament and
Council, finalising the implementing measures that are in the
pipeline at the Commission and, subject to a conclusive and
thorough impact assessment, submitting a framework Directive
for securities clearing and settlement.

3.4.2 E ffi ci e nt a nd e ffe c ti v e su p e r vi si on

3.4.2.1 While the EESC welcomes an evolutionary approach
as recommended by the Commission, it strongly feels that the
Green Paper has missed an opportunity to set out clear and
ambitious policy objectives on banking supervision. We believe
it is essential to outline the critical path, i.e. to show how the
many separate but interrelated issues are to be dealt with in the
coming years. The EESC hopes therefore to see more concrete
proposals set out in the White Paper. Proposals put forward for
banking supervision should also read across to the insurance
sector.

In a bid to foster a proper culture of consumer
3.4.2.2
protection, where the most vulnerable consumers are afforded
more protection than experienced investors, thereby enabling
the EU to compete globally and to generate growth, the EESC

has identified a number of issues that need to be addressed in a
way that gives prime importance to consumer interests:

— the elimination of duplicative supervision;

— the elimination of inconsistencies between directives and

obsolete exceptions to the home-country principle;

— a review of the safety nets and possible examination of

supervisory models;

— supervisory convergence around best practice standards;

— cooperation between Level 3 committees (CESR, CEBS and

CEIOPS);

— cooperation between all stakeholders.

In line with its opinion (6) of 9 March 2005 on the
3.4.2.3
proposed Capital Requirements Directive the EESC welcomes
the Commission's acknowledgement that consolidated super-
vision is a legitimate demand from industry. Assuming that
consolidated supervision in no way encroaches on Member
States' ability to react if operators breach the rules to the detri-
ment of consumers active in their market, the EESC believes
that such supervision would provide an appropriate degree of
consumer protection while keeping any duplication of regula-
tory requirements to a minimum. This would in turn enhance
the efficiency of the EU financial sector. However, the EESC
feels that the Commission paper is not clear on whether super-
visory convergence is needed before consolidated supervision
can be delivered. The EESC believes that the objective and even-
tual implementation of consolidated supervision should, within
a short space of time, act as a catalyst for supervisory conver-
gence.

3.4.3 E na b li n g cr oss-bor de r i n ve st me nt a nd c omp e -

ti ti on

3.4.3.1
Removing unjustified barriers to consolidation will
indeed bring economic benefits. These economic benefits will
translate into increased dynamism in the European economy,
which will mean an EU that can better create jobs and raise the
standards of living for its citizens. The EESC therefore supports
the Commission's objective of eliminating or reducing unjusti-
fied barriers to cross-border transactions, such as consolidation
through mergers and acquisitions (M&A).
In recent years,
cross-border activity has grown significantly, yet we have seen
a relatively low level of M&A in EU banking, although a
number of such transactions have been completed in recent
months or are in the pipeline. The reason lies partly in struc-
tural obstacles within the European banking market, many of
which cannot be justified on grounds of enhancing customer
value or financial stability, and could be removed or alleviated
by policy action. A restructuring of the industry will lead to
great changes for all parties involved — employees, companies
and customers. An overall strategy is needed on how to tackle
the effects of change.

(6) OJ C 234, 22.9.2005.

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3.4.3.2
The EESC agrees with the view expressed in the
Green Paper that consolidation is not an end in itself, but a
means to achieve economies of scale and scope. These in turn
enable banks to offer their customers, whether individuals,
SMEs or larger players, a wider range of services at a better
price. It should also be noted that consolidation and realising
synergies does not automatically imply a reduction in staff
numbers across a merged banking group; in fact the opposite
is often true. Therefore, the EESC considers this to be an impor-
tant factor for employment since the financial sector is already
an important employer in Europe. Banks will not take on the
costs and risks associated with M&A unless they see that these
economic benefits, or synergies, are achievable. In this context,
the EESC looks forward to the up-coming European Commis-
sion study of barriers to cross-border M&A in Europe.

3.4.3.3
It is logical therefore that the EESC should call on
the Commission to publish a ‘roadmap’ of intended measures
in this area with specific reference to a timeframe within which
these measures will be addressed.

3.4.4 T h e e x te r n a l di me n si on

3.4.4.1
The EESC broadly endorses this section and fully
agrees with the Commission that the EU's financial sector must
be competitive in global markets. The EESC thus welcomes in
particular the Commission's initiatives to deepen the EU-US
financial markets dialogue, to strengthen financial relations
with Japan, China and India and to widen the agendas of the
above-mentioned dialogue. The EESC feels that this is of crucial
importance, not least given the increasingly prominent role
played by China and India in the global economy.

3.4.4.2
The globalisation of capital markets and financial
services and the absence of truly international decision-making
bodies have resulted in global standard setters playing a very
important role in policymaking. The EESC believes that the EU
does not sufficiently speak with one voice in some of these
fora. In some cases, this may affect the EU's ability to influence
these standards and may thus run counter to European inter-
ests.

Given the different nature and role of these fora, ad-
3.4.4.3
should be preferred over a one-size-fits-all
hoc solutions
approach whilst ensuring that Europe speaks with one strong
single voice in international standard setting. The EESC high-
lights that the objective in this arena is to arrive at single global
standards, especially appropriate in accounting, where Europe's
views are well represented and not to develop separate Euro-
pean standards that are at odds with the global norm. This
approach would not only ensure that Europe's financial services
industry and its consumers have a single strong voice on the

global stage but would help to create a global
level playing
field with all the economic advantages that this development
would imply.

3.5 Possible, targeted new initiatives

3.5.1 With regard to possible, targeted new initiatives, the
EESC would draw particular attention to those in the field of
retail financial services, as it is convinced that the quality of
choice matters as much as — if not more — to consumers
than the quantity of choice. The ESSC therefore feels that adap-
tation to local markets is a key issue for retail service providers,
irrespective of the method of distribution adopted.

3.5.2 With regard to the recommendations produced by the
Forum Group on mortgage credit, the EESC is persuaded that
instead of harmonising mortgage products, a competition-
based approach would be more appropriate since this would
lead to a better choice as well as to a better quality of product.
The EESC also recognises the sound preparatory work under-
taken by the Commission to review current
legislation
governing the asset management industry. As for whether this
work should give rise to concrete initiatives on mortgage credit
and/or asset management in 2006, following consultations by
the Commission earlier this year, the EESC feels there is a need
for a meaningful
including a
cost/benefit analysis.

impact assessment beforehand,

The EESC remains to be convinced about merits of a
3.5.3
so-called 26th regime, especially for consumers. It agrees with
the Commission that the benefits of such 26th regime remain
to be proven and that it will be difficult to agree on optional
European standards designed only for certain products. Consu-
mers may also be confused by national information norms and
regulations and those that apply elsewhere. A 26th regime is
likely to be as complicated to establish as common European
civil law, including procedural law, court layout etc. Neverthe-
less, the idea of the 26th regime is challenging and worthy of
exploration.

3.5.4 What is clear, however, is that any additional, alterna-
tive or optional regime should not lead to or result in straight-
jacketing providers into product standardisation as this would
be detrimental to the competitive and innovative capacity of
the financial services industry to meet the evolving needs of its
customers.

Given the ongoing debate, therefore, the EESC would
3.5.5
welcome any further clarification that the Commission can
bring to the better understanding of the 26th regime. The EESC
welcomes the feasibility study that has been announced.

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3.5.6
The greater use of Forum Groups is on the whole
positive. However, as noted earlier, the establishment of Forum
Groups for specific retail products could place a significant
strain on consumer organisations' resources.

domestic marketing and distribution rules than to launch new
initiatives on conduct-of-business rules.

3.5.7 A r e a s of p ossi b le fu t u r e a cti on

3.5.7.1
The EESC is pleased that the European Commission
is willing to codify and possibly simplify the existing rules on
information requirements. It would, however, argue the case
more strongly for simplification rather than codification. The
EESC takes the reference to simplification as an indication of
the Commission's intention to improve the quality as opposed
to the quantity of the information provided to consumers. To
enhance quality requirements,
the EESC would ask the
Commission to look into the current legal requirements (both
at EU and national level) in order to streamline the relevant
information obligations and standardise information provision
(even by way of codification) bearing in mind the medium
chosen by the consumer.

3.5.7.5
As for the role of professional and independent
advice, the Committee feels that a clear distinction should be
made between (i) providing advice as a separate, paid-for
service at the request of the client and (ii) providing informa-
tion that the consumer needs to be able to make a conscious
choice.

Above all else,

it is of the utmost importance to
3.5.7.6
have clear rules and standards for financial intermediaries, who
play a key role in the field of investment products in particular,
but also in loan intermediation as well. Intermediaries also need
to prove they have a solid knowledge of
their trade and
products. Brokers and independent agents should be liable for
giving clients appropriate,
fair and reliable advice. Arrange-
ments must also be in place to resolve disputes rapidly and
effectively. The expertise needs to be specific — i.e. it could be
split up into sections: savings,
insurances, mort-
gages/credits. Dealing with these issues would also be in line
with developments at national level.

investment,

3.5.7.2
The EESC considers that consumers could benefit
from better standards of essential information, in the shape, for
instance, of understandable, structured, comparable data on all
crucial aspects of a contract. A high level of consumer protec-
tion must thereby be guaranteed in order to ensure that the
information is adequate and informative and secures the appro-
priate legal protection.

The EESC notes with interest

3.5.7.7
the Commission's
desire to examine in more detail the perceived obstacles to
opening bank accounts cross-border and issues regarding the
transferability and closure of bank
handling, portability,
accounts. On these latter points, the influence of existing elec-
tronic and IT systems must not be overlooked.

As for financial mediation and the relations of
3.5.7.3
financial
institutions and consumers with intermediaries, the
EESC notes, in the first place, that financial intermediation is
subject to varying degrees of regulation at EU level. The Insur-
ance Mediation Directive (7) and the Markets in Financial Instru-
ments Directive (MiFID) (8) set out different concepts and levels
of regulation for the intermediation of financial services and
products. Greater coherence and convergence in this area
should be encouraged, but the EESC believes that the MiFID
regime, as the more comprehensive approach, should be given
time to prove its efficiency before any fresh conclusions are
drawn as to the potential need for further regulation in the
area of credit mediation.

Given the need for further alignment of rules on
3.5.7.4
conduct of business and sales advice, consideration could be
given to establishing a level playing field for all providers of
financial services to retail customers whilst
taking different
national conditions into account. It would, however, be more
to secure the convergence or harmonisation of
beneficial

(7) Directive 2002/92/EC, OJ L 9, 15.1.2004.
(8) Directive 2004/39/EC, OJ L 145, 30.4.2004.

3.5.7.8
The EESC strongly feels that Commission's Green
Paper should have explicitly tackled tax issues. Since the adop-
tion of the 6th VAT Directive (9) and particularly over the last
decade, the lack of neutrality of the VAT treatment of finan-
cial services and the lack of legal certainty under the current
system have become increasingly problematic.

3.5.7.9
In its report on the state of financial integration in
the EU, the Expert Group on Banking (10) points out that ‘a less
punitive application of VAT on outsourcing is a key condition
for a further integration of functions in centres of excellence
that will provide services to different parts of EU banking
groups’. It should now be officially recognised that the current
VAT system for financial services prevents efficient implemen-
tation of a single European market. The Commission's post-
FSAP agenda should be the framework for such an official
statement. The EESC therefore urges the Commission to set out
its forward agenda in this area.

(9) Sixth Council Directive 77/388/EEC, OJ L 145, 13.6.1977.
(10) ‘Financial Services Action Plan: Progress and Prospects’, Expert

Group on Banking, Final Report, May 2004.

C 65/140

EN

Official Journal of the European Union

17.3.2006

3.5.7.10
Finally, the EESC would stress that consumers can
handle financial products more effectively if they receive more
professional and independent, high-quality advice. Consumers
should get the best possible advice on products and services
that are best suited to their needs and (financial) circumstances.
However, consumers cannot completely shirk the responsibility
that choice brings with it
(whether in relation to product
features or the expert providing advice on those features).
Consumer should also be equipped to make a conscious choice
and to understand the consequences of that choice.

3.5.7.11
The EESC thus supports the principle of consumer
education and of raising standards of financial literacy across
the EU. In particular, the EESC considers that the notion of risk
and return must be a key theme of investor education. It also
advocates intermediaries' obligation to provide appropriate, fair
and reliable advice. This is all the more necessary as workers
increasingly have to make their own arrangements for
will
much of their retirement income. Consumers must be given
sufficient information empowering them to compare different
products and make informed choices
from a range of
competing products and across a range of risk profiles.

4. Conclusion

The EESC feels that this stocktaking exercise of what has
4.1
been achieved and what still remains to be done in the field of
financial services is an opportunity for the EU to make substan-
tial progress towards invigorating Europe's economy, reducing
red tape, creating jobs and boosting not just prosperity but also
confidence in the financial system for all Europeans. In other
words,
it is an opportunity to make real progress towards
meeting the objectives the EU set itself in the Lisbon Agenda.

Brussels, 15 December 2005.

4.2
In financial services, the EU can take significant steps
towards meeting the Lisbon goals by tackling a number of key
issues. The EESC feels that these issues include:

— rigorously applying a better regulation framework to all

new and existing legislation;

— measuring consumers' confidence by their readiness to buy

into a given proposal;

— having the EU institutions and Member States work
together to transpose and implement legislation on time
and in the spirit in which it was conceived;

— focusing on completing remaining FSAP measures applying
targeted fully harmonised measures where appropriate;

— working towards removing the obstacles to the optimal
supervisory framework for Europe: consolidated supervi-
sion;

— removing the unjustifiable impediments to increased M&A
activity in Europe, especially in the banking sector; and

— recognising that, for consumers, quality is as — if not more
— important than quantity of products on the market.

The external dimension of the EU's financial services
4.3
policy over the next five years is also of paramount importance
for its long-term global competitiveness. Hence,
the EESC
vigorously backs efforts to strengthen and deepen regulatory
dialogue with the EU's global competitors, such as the United
States, Japan, China and India.

4.4
Reflection on the future priorities for financial services
in 2005 gives organised civil society as a whole an opportunity
to participate in efforts to achieve the Lisbon objectives. There
is too much at stake here both for Europe's economy and,
importantly, for the consumers of the services provided by that
economy, to let this opportunity slip away.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND