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Ladies and gentlemen
Thank you for having me here today in his famous club. I will focus most my opening remarks on the current financial turmoil, sovereign wealth funds, and two issues likely to attract considerable attention in the coming years: mutual recognition in the field of securities and insurance.
The financial turmoil
As last year ended, we all hoped that the financial turbulence would be short lived. It is now clear that significant problems lie ahead of us. We have entered into a phase of uncertainty and volatility. No-one will be fully sheltered. What was initially a US issue has become a global issue.
There is inevitably the temptation to start a blame game. There is a real risk of a more protectionist, anti-globalization mood. My position has always been clear: open markets and fair competition are the only bedrock of economic stability and growth.
So as Commissioner in charge of coordinating the EU response at international level, my message will be threefold:
- First, our markets and our economies are inextricably linked. We cannot ignore each other. Not only because we have 80% of the world's capital markets. Also because so many US subprimes mortgages were funded in the EU.
- Second, we must work together full steam to tackle the causes of the turmoil. Addressing liquidity issues in interbank markets. Strengthening prudential requirements or risk management. On transparency. On credit rating agencies. On finding ways to develop early warning and crisis management tools at global level.
- Third, more integrated transatlantic economies are a powerful tool to enhance resilience against shocks. Deeper, cheaper capital markets – wider investment opportunities.
Our cooperation with the US is on the right track. We will need to reflect carefully on what is needed. Not rush. No automatic reaching for new regulation. The finance industry must also come up with solutions. They owe it to our economies. They caused the problem. Now sort it! I am looking for real corporate leadership.
Sovereign wealth funds
A notable feature of the financial turmoil has been the rise of sovereign wealth funds. Several major financial institutions have been recapitalised, not to say rescued, by them during the last weeks.
Public opinion is becoming more sensitive about their impact on the governance of firms. Of course there are issues of transparency, governance and accountability. But sovereign funds play an essential role. They provide necessary support at a time when access to more traditional sources of capital is severely curtailed. I welcome these new sources of liquidity and investment. This might make me unpopular with some elements here and in Europe, but I mean what I say. I am happy to see that we are on the same line with US authorities here.
Mutual recognition in the field of securities
Last year, the SEC signaled that under the right circumstances it might be prepared to allow foreign firms and exchanges to be active in US markets without the need for full SEC registration. In other words, the US SEC might be prepared for the first time, to look at foreign regulators and foreign rulebooks in the spirit of results achieved. This is a welcome evolution in their approach. And it has to be the way forward. Trading is global. Our exchanges are becoming global. Professional investors on both sides of the Atlantic are well used to dealing in US and Europe. So I support whole-heartedly this idea of ‘mutual recognition’. If we can get the conditions right, the rewards could be immense. This would also be for me a much needed show of confidence and would help to restore trust in the markets.
Insurance
When it comes to insurance as well, we believe the time has come to reach a point where we can rely on each other and get rid of unnecessary barriers. The world needs more insurance, not less.
I have to say that our experience over the past couple of years in dealing with the current state-based insurance system in the US has not been encouraging. In fact it has been desperately disappointing to see the US so protectionist at the State level. Whilst there are many insurance regulators in this country who recognise that change is required and that the US needs to engage effectively internationally, the system for getting standards agreed and adopted in the US as a whole currently remains unsatisfactory.
The discussion currently underway in the EU on our Solvency II proposal will eventually lead to the modernisation of regulation and Solvency requirements for the industry in the EU. I want all firms who do business in the EU to be able to benefit from this new approach. Sorting out the re-insurance issue here in the US will make this process so much easier with those US firms who are present on the EU's market.
But I want to end positively. Overall, reinsurance aside, our bilateral financial relationship is healthy and functioning. Deepening. Serious, based on trust. Mutual respect. Concrete delivery. That’s where I want it to stay – and I know my US counterparts fully agree.
Thank you.
