European Parliament resolution on further consolidation in the financial services industry (2006/2081(INI))
Date: 2006-07-04
Institutions: European Parliament
Subjects: competition, economic integration, financial institution, financial market, single market

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Official Journal of the European Union

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P6_TA(2006)0294

Consolidation in the European financial services industry

European Parliament resolution on further consolidation in the financial services industry
(2006/2081(INI))

The European Parliament,

— having regard to the Commission staff working document of 26 October 2005 on cross-border consoli-

dation in the EU financial sector (SEC(2005)1398),

— having regard to the Commission communication of 21 October 2005 on intra-EU investment in the

financial services' sector (1),

— having regard to the Commission communication of 11 May 1999,

‘Implementing the framework for

financial markets: action plan’ (FSAP) (COM(1999)0232),

— having regard to the Commission white paper of 1 December 2005 on Financial Services Policy

2005-2010 (COM(2005)0629),

— having regard to the Directive 2002/87/EC of

the Council of
16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and
investment firms in a financial conglomerate (2),

the European Parliament and of

— having regard to the Directive 2005/1/EC of the European Parliament and of the Council of 9 March

2005 (3) on a new organisational structure for financial services committees,

— having regard to Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a Euro-

pean company (SE) (4),

— having regard to Directives of the European Parliament and Council, both of 14 June 2006, 2006/48/EC
relating to the take-up and pursuit of the business of credit institutions (recast) (5) (Capital Requirements
Directive) and 2006/49/EC on the capital adequacy of
institutions
(recast) (6),

firms and credit

investment

— having regard to its resolution of 28 April 2005 on the current state of integration of EU financial

markets (7),

— having regard to its resolution of 21 November 2002 on prudential supervision rules in the European

Union (8),

— having regard to Rule 45 of its Rules of Procedure,

— having regard to the report of the Committee on Economic and Monetary Affairs (A6-0170/2006),

A. whereas the economy of the EU is facing diverse challenges at a global and domestic level, such as
intense competition, sluggish economic growth, population ageing and the growth of pension liability,

B. whereas the goal of stable and secure financial markets must be equal to the effort to reduce obstacles to

cross-border activities concerning financial activities,

C. whereas strong, stable and efficient financial markets and institutions are crucial to meeting the financing

needs of the EU's various economic actors and to boosting growth and employment,

(1) OJ C 293, 25.11.2005, p. 2.
(2) OJ L 35, 11.2.2003, p. 1.
(3) OJ L 79, 24.3.2005, p. 9.
(4) OJ L 294, 10.11.2001, p. 1.
(5) Not yet published in the OJ.
(6) Not yet published in the OJ.
(7) OJ C 45 E, 23.2.2006, p. 140.
(8) OJ C 25 E, 29.1.2004, p. 394.

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D. whereas a stable and competitive financial services sector enjoys consumer confidence if it is based on a

high level of consumer protection,

E. whereas consolidation creates a potential for economies of scale and scope, synergies, and cost efficien-
cies, and, if coupled with further market integration, can encourage growth and favour investment by
fostering the liquidity and efficiency of markets,

F. whereas the role of EU and national policy makers is to set up a regulatory and supervisory framework
that stimulates growth; improves the competitiveness of the EU's economy; guarantees a level playing
field; safeguards market efficiency, integrity, transparency and the stability of the financial system; and
protects depositors, investors and insured persons,

G. whereas consumer needs and diversity of choice between quality products should be the main aim of

any policy in this sector,

H. whereas adequate attention should be focused on the opinions and welfare of employees and customers,
both of which are important stakeholders in financial institutions undergoing merger and acquisition
(M&A) activity,

I. whereas unjustifiable national practices and protectionist and discriminatory measures should be tackled

because they fragment the market and deprive consumers of the benefits of consolidation,

General perspectives

1. Considers that consolidation in financial markets is an important market trend, although not the only
one, responding to growing competition at EU and global level;

2. Considers that consolidation in financial markets should not aim to reach a particular number of finan-
cial institutions and that it must be proportionate to competition in the financial markets;

3. Notes that M&A remains the most frequent growth strategy of financial institutions; notes also that, in
a modern economy, the effects of consolidation can be achieved in many different ways, such as through
commercial alliances between institutions, outsourcing or in-sourcing of back-office operations, back-office
cooperation, and the creation of common infrastructures with competitors (e.g. payment clearing and settle-
ment systems);

4. Welcomes the positive effects of the euro and the FSAP on the integration of wholesale financial
markets, on market transparency and liquidity, and on modernising and completing the EU's financial regu-
latory framework even though not all the consequences of the single currency to the integration of the
financial markets have yet been realised;

5. Notes that M&A and restructuring activity, which is likely to have a positive effect on competitiveness,
is often accompanied by a negative perception of fear of loss of employment, which materialises at times,
particularly in certain regions;

Takes note of the intensive consolidation via cross-border M&A in the new Member States in the last
in this respect, also recalls the importance of sound and stable financial systems for small

6.
10 years;
economies;

7. Recalls that consolidation should not be a political objective per se, but should bring clear benefits to
the economy by stimulating growth, encouraging innovation, ensuring competition, improving access to
funding, allowing financial institutions to exploit synergies and cost efficiencies, and giving consumers a
greater choice and better quality, while ensuring an adequate level of consumer protection;

8. Asks for attention to be focused on the effects of consolidation in the financial sector on employment,
by restructuring ownership and activities, and by outsourcing in particular; urges the sector to take full
social responsibility and to provide for accompanying measures that lead to retraining and qualifying finan-
cial
institutions' staff to fit in with the Lisbon Strategy goals of becoming a more knowledge-intensive
economy;

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9.
Believes that the diversity of financial institutions, which better reflects the variety of financing needs of
corporate entities, SMEs and consumers, should be preserved and that, therefore, EC legislation should not
favour any single type of business model or corporate structure or any single type of product over another;

10. Considers that the architecture of financial services at EU level should be such as to guarantee the co-
existence of different structures and sizes in order to provide for efficient and competitive players both at
international level and within proximity networks;

Believes that the diversity of financial products must be ensured in order to meet the different and

11.
shifting needs of consumers;

Barriers to cross-border consolidation

12. Notes that due to various obstacles, the level of cross-border consolidation in the financial sector, and
in the banking sector in particular, is often less than the level of domestic consolidation in the EU; takes
note of the barriers identified in the Commission's survey;

13.
Points out that, within the internal market, economic synergies and cost efficiencies resulting from
consolidation should be achievable and should not be hampered by unjustifiable obstacles, such as tax
barriers and different supervisory regimes; supports the Commission's intention to tackle these obstacles;
notes the difficulties faced by financial institutions willing to achieve cost efficiencies and economies of scale
and scope by selling the same or identical products across countries and calls on the Commission to
examine these difficulties further;

14.
Points out that market participants should take into account their social responsibility during M&A
and restructuring activity; also points out that within the process of globalisation, the only way to win the
confidence of the citizens of the EU is to enhance a social market economy with more and better jobs;

15. Acknowledges the important role of national supervisors in conducting prudential supervision and
safeguarding the soundness of national financial markets and institutions;

Points out that divergent national supervisory practices and standards may reduce market efficiency,
16.
increase the operating costs of those financial institutions operating across borders, and thus mitigate the
beneficial effects of and ultimately fragmenting the single financial market;

17.
Is concerned that financial institutions seeking to develop their strategies at EU level are frequently
confronted with costly and time-consuming regulatory and supervisory practices and differing reporting
requirements;

18.
Believes that further convergence of supervisory practices and standards could diminish some of the
negative effects of diverging supervisory practices and improve market efficiency; welcomes the progress
achieved by the Committee of European Banking Supervisors and encourages its further work;

19. Welcomes the progress attained by Level 3 committees — the Committee of European Banking Super-
visors (CEBS), the Committee of European Securities Regulators (CESR) and the Committee of European
Insurance and Occupational Pensions Supervisors (CEIOPS) — in achieving greater supervisory convergence
and encourages their further work;

20. Notes that the integration on the wholesale markets has been nearly completed and, in particular, that
integration on the money markets is far advanced, and that announcements of increases and decreases in
interest rates are quickly and well reflected in the market prices;

21. Regrets that several tax obstacles, in particular inter-group VAT and the lack of neutrality as well as
the lack of legal certainty in the VAT treatment of financial services, diminish and often prevent synergies
and cost efficiencies and calls on the Commission to formulate proposals on how to overcome these
barriers;

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22. Notes that currently, substantial non-recoverable VAT costs in addition to inter-company charges to a
large extent limit any possible savings from cross-border consolidation;

23. Notes that the current tax treatment of dividends in some Member States favours payouts of domestic
rather than EU dividends;

Believes that further integration of the retail financial markets should bring greater choice of better
24.
quality products for consumers and should enable companies to sell their products across borders, without
hampering competition within the EU retail financial markets; calls on the Commission to present a clear
and concise strategy for integrating retail financial markets;

25. Urges the Commission and the financial services industry to discuss further the advantages and disad-
vantages of the ‘26th regime’ to financial services, which mobile EU citizens may need for their activities in
other Member States, so that they are able to use service providers familiar to them and need deal only with
a simple standard set of rules; urges the Commission,
in particular, to define a legal basis, to secure
consumer protection at a high level, and to define the required components of harmonisation and an appro-
priate supervisory regime;

Believes that the pluralistic structure of the European banking market is an asset to the European

26.
economy and should not be called into question;

Regulatory and supervisory system

Market structure

27. Notes that levels of market concentration in certain Member States raise concerns regarding the
market structure, conduct and behaviour of European banks and other financial institutions;

28. Asks that the concentration of financial markets and institutions is scrupulously examined by the
Commission and by national competition authorities in compliance with the EC Treaty and the case law of
the Court of Justice of the European Communities;

29. Calls on the Commission to ensure that the relevant legislation is consistently implemented by the
Member States;

30. Asks the Commission to examine the implications of consolidation in major regional financial centres
on the financing of small regions and SMEs;

Supervision

31. Welcomes the recently adopted EU measures regarding prudential supervision,
in particular the
Capital Requirements Directive, advancing the home country control principle and considerably changing
the current supervisory framework, which now includes new provisions on the cooperation between
national competent authorities, supervisory disclosure requirements, and enhanced powers for the consoli-
dating supervisor as regards the validation of risk measurement models; believes that, in the current legisla-
tion, this move should be complemented by a clear definition and a well-balanced allocation of powers and
responsibilities between home and host country supervisors, without prejudice to the review clauses
contained in the directive;

32. Notes that the transformation of the corporate structure of some major EU financial groups willing to
adopt the SE model might have significant implications on the supervisors concerned; calls on the Commis-
sion to monitor the situation and to examine whether there are any implications of the SE model on
prudential stability and crisis management structures;

33. Calls on the Commission to take due account in its proposals of the difficulties experienced by certain
national regulators in intervening in markets characterised by a very strong presence of foreign capital;

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34. Notes that in highly integrated financial markets, a crisis spilling over national jurisdictions cannot be
tackled individually by national authorities; in this respect, considers that the current networks of national
supervisors, the supervisory arrangements, and the non-legally binding memoranda of understanding may
not be sufficient to face a major crisis caused by a failure of markets or important cross-border financial
groups; considers that cooperation and mutual trust between supervisory authorities in a crisis event is
crucial and urges the Commission and responsible national authorities to develop jointly appropriate propo-
sals for effective crisis management for the further consideration of the Parliament;

35. Considers that the EU's authority in international negotiations, particularly as regards bank supervi-
sion, would be reinforced by the clarification of its internal functioning;

36. Notes that the question of the lender of last resort must be resolved in parallel to any further discus-
sions about EU financial supervision; in this respect, stresses that a clear decision on responsibilities is neces-
sary;

37. Notes that the current supervisory system leads to multiple reporting requirements for banks and that,
therefore, an important task for all supervisory institutions is to converge the standards;

38.
Believes that it is high time that the EU institutions, and particularly the Parliament, opened a debate
on the structure of supervision of EU financial markets; for this reason, calls for the setting up, by the end
of 2006, of a committee of ‘wise persons’ to study — and report back six months after the establishment of
the committee — the implications of the consolidation of markets and financial institutions, prudential
supervision, financial stability, and crisis management;
in this regard, asks the committee to propose
concrete ideas regarding the simplification of multiple reporting requirements and the improvement of the
current structures, and, ultimately, to reflect on the needs and structures of European financial supervisors;

39.

Instructs its President to forward this resolution to the Council and the Commission.

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P6_TA(2006)0295

Recent developments in and prospects for company law

European Parliament resolution on recent developments and prospects in relation to company law
(2006/2051(INI))

The European Parliament,

— having regard to the Communication from the Commission to the Council and the European Parliament
of 21 May 2003, entitled ‘Modernising Company Law and Enhancing Corporate Governance in the
European Union — A Plan to Move Forward’ (COM(2003)0284),

— having regard to the Commission's Communication to the spring European Council: Working together

for growth and jobs — A new start for the Lisbon Strategy (COM(2005)0024),

— having regard to the Communication from the Commission to the Council and the European Parliament
the Community Lisbon programme’

for Growth and Employment:

entitled ‘Common Actions
(COM(2005)0330),

— having regard to the Communication from the Commission to the Council and the European Parliament
the Legislator’

legislative proposals pending before

screening of

the

entitled ‘Outcome of
(COM(2005)0462),