.jpg)
Madame la Présidente, Honourable Members,
Fresh from the meeting of the College, it gives me great pleasure to announce before this Committee that the Commission has today adopted the "Solvency II" Proposal. As soon as possible, it will be tabled before this House for your consideration. I would like to take the opportunity of this meeting to give you my views on this proposal.
I would also like to update you on where we stand on the implementation of the Code of conduct on clearing and settlement, on the latest developments in the field of retail financial services and on some international issues.
Earlier today, we discussed the Van den Burg report in detail. I have made it clear that I am very pleased with the main orientations of this report. This is a key contribution to the debate on the future of the EU policy in the field of financial services.
Solvency II
The Solvency II Proposal puts forward a comprehensive and far-reaching package to reform the prudential supervision of insurance in Europe. In line with the Commission's Better Regulation agenda, it will also codify and recast 13 existing insurance directives into one coherent text, a sort of a European insurance sourcebook.
This is a key proposal in our financial services policy. It will remove obstacles to the functioning of the internal market and improve the prudential supervision of insurers. Consumers, industry, the EU economy and financial stability will all benefit.
Let me take this opportunity to salute the commitment of rapporteur Peter Skinner and shadow rapporteurs Sharon Bowles and Karsten Friedrich Hoppenstedt on this file.
Our aim is to establish a modern, innovative and liberalising regime, based on sound economic principles. I believe Europe now has a real chance to set the global standard.
In preparing its Proposal the Commission has rigorously followed better regulation principles. Openness, consultation with the stakeholders, and strong evidence-based policy-making have been central. The robustness of the impact assessment accompanying this text is a testament to this.
We do not have the lowest common denominator. Our approach is ambitious. We must ditch old habits. And we need to be courageous.
This reform is long overdue. The current regime is over 30 years old. Techniques for risk management have undergone a revolution in the past three decades. So today there is a great gap between the way in which insurance firms measure and manage their risks, and the basis on which they are regulated.
This conspicuous disparity has to be eliminated. We need a greater focus on risk management. Capital alone is not enough to ensure the soundness of insurers.
Solvency II will also make full use of the Lamfalussy approach. We need a regime that is flexible enough to give room for innovation.
I count on your support so that the potential benefits for the European industry and the policyholders can be made a reality.
Code of conduct on clearing and settlement
Let me move to the implementation of the Code of Conduct on clearing and settlement.
How has the Code been faring so far?
The Code has already delivered significant tangible outcomes, in particular in the area of price transparency. The process has been an iterative one with market infrastructures delivering the first "cut" of the price transparency measures on time at the end of December last year. Since then, working with the users, they have further refined and improved the price transparency framework. The latest scoreboard shows very encouraging results with close to 80% overall compliance on discount schemes and the provision of examples, and nearly 100% on fees. On rebates some more work remains to be done but the lion's share of the task has been completed.
Undoubtedly the most challenging - and most significant - element of the Code pertained to access and interoperability. Despite very significant technical issues, at the end of June the signatories delivered its “heart”: the detailed guidelines for establishing access and interoperability between market infrastructures. These guidelines incorporate organization-specific principles, comprehensive definitions of the different market players, and of the different types of access and interoperability. The guidelines cover the 14 different scenarios that arise in vertical and horizontal access and interoperability relationships, the various models that apply, the general principles that must be applied for the establishment of a business case, the application standards and process, the mediation mechanisms and process, and the issues arising in respect of the legal, fiscal and regulatory arrangements and actions needed as and when identified.
I cannot stress too strongly my appreciation of the very substantial efforts and resources that the industry has committed - over the past three months in particular - to achieving this difficult but worthwhile result. It could not have been done without real commitment and the very substantial manpower and cost that I know has been invested in the process.
As with price transparency, the work of the Monitoring Group will continue and given the iterative process involved if improvements are deemed to be necessary on the access and interoperability issues I am confident that they will be made. Based on the work and commitment to date I believe we have good reason to be optimistic.
Now that the private sector has stepped up to the plate I expect Member State governments to focus more intently on eliminating the public sector barriers so that Europe will rid itself for once and for all of all remaining protectionist, regulatory or other impositions that impede competitive cross-border clearing and settlement.
Work on public sector Giovannini barriers is less advanced than for private ones. But progress is being made.
For instance, the FISCO group of experts is about to present its second report which will give concrete proposals on how to remove the fiscal barriers. These will be discussed at the FISCO conference on the 23rd of October in Brussels, to which you are welcome.
Once concrete solutions are found, we hope to be able to put proposals on the table. We look forward to working together with the Council, the Parliament and this Committee to dismantle the Giovannini barriers in full.
The Commission will be attentive to the way the access and interoperability guidelines will be used in practice. We have signalled to infrastructures that we will not accept any anti-competitive interpretation or application. Commissioner Kroes and I want to hear immediately if there is any anti-competitive behaviour. Immediately.
Let me conclude my comments on clearing and settlement by paying tribute to the industry for the diligent and determined way in which they have progressed the detailed implementation aspects of the Code of Conduct so far. It is a remarkable achievement that within 9 months of signing the Code they have tackled with such determination so many of the most significant issues that had to be addressed. I think it is fair to say that we are considerably further advanced today than we would have been had we gone down the route of introducing a directive. We also have a much more flexible arrangement that can be adapted as experience and circumstance dictates.
We now move on to the accounting and unbundling measures. We expect agreement on the precise measures in this area to have been completed by 31st December next with the result that accounting separation and unbundling will be in evidence in the accounts of all infrastructures for every quarterly, half yearly and annual accounting period – commencing from 1st January 2008.
I know that some Members of this Committee believe that I want to leave everything to the market and the private sector to decide. I want to assure you that this is not the case. Work is ongoing in a variety of areas:
Retail financial services
In May we published our Green Paper on Retail Financial Services. We outlined our objectives for a real Single Market for retail financial services and the actions we propose to take.
What are these objectives? First, we want to make sure that consumers can get a better deal. Second, we want to enhance consumer confidence in financial products and services. And third, we want to empower consumers to make appropriate financial decisions.
But of course, we will only pursue initiatives in this area where there is evidence of clear and concrete benefits for citizens and a strong economic rationale. The Green Paper is now open for consultation, and we are very interested in receiving your views.
Financial Education
One of the three pillars of the strategy set out in the Green Paper was empowering citizens to take appropriate decisions for their financial needs. And a key element of this empowerment is educating citizens on financial matters. Education will never be a substitute for appropriate consumer protection, but improving people's ability to make financial decisions is in everyone's interest.
For these reasons, we intend to come forward with a Commission Communication on Financial Education towards the end of this year.
On the external front we have discussed relations with the U.S. on various occasions. But we should also look east.
Trip to China and Japan
Recently I visited China and Japan. I was impressed by the continued fast-paced development of the Chinese financial services industry and the strong efforts of the Japanese authorities to revitalise Tokyo as a financial centre.
This will bring many new opportunities for the EU industry. And we will keep on pressing for more market opening in China to get rid of investment caps and licensing restrictions. Continued dialogue is the best way forward. The second EU-China roundtable will take place in Brussels on October 18.
I was also impressed by the efforts of both countries for more regulatory convergence. Chinese GAAP is moving towards IFRS. Japan is also working a lot to converge its accounting standards with IFRS. On top, MiFID has attracted a lot of attention in Tokyo. The new Japanese legislation on Financial Instruments and Exchanges adopted last year is of the same vein.
All this is, again, very good news for European business since third countries adopting standards similar to ours means more business opportunities, less cost and a competitive advantage for European companies.
Comitology
Finally,I want to say a few words on Comitology.
We need rapid progress in Council and in Parliament to adopt the 'Comitology alignment package'. As long as this is not done, Parliament will not be able to use its new formal controlling powers. The Commission will face an increased risk of seeing its implementing powers fade away because of the Sunset Clauses. This is already the case with the Conglomerates and Market Abuse Directives. The biggest risk is with the Prospectus Directive, where implementing powers expire by the end of the year. This might seriously affect our discussions on equivalence with our international partners. Without stabilised implementing powers and predictable, sound and well established working arrangements with the Parliament, we will be working suboptimally.
When the new Comitology Decision was negotiated the Commission, and I personally, went to great lengths to support Parliament's requests towards the Council. The result was positive. At the time of the agreement, Parliament undertook to remove all sunset clauses and to refrain from introducing new ones. We expect Parliament to honour this commitment.
To conclude, I would like to emphasise that we have moved forward with European financial integration thanks to the close working relationship between the European Parliament, the Council and the Commission. This co-operation has allowed us to make impressive steps forward. Our regulatory regime is being recognised as top class. We should continue in the same spirit.
