The European Commission’s latest Progress Report on the Financial Services Action Plan concluded that the FSAP has been one of the driving forces behind the developing European capital market, and has improved prospects for sustainable, investment-driven growth and employment. Progress towards adopting the legislative measures of the FSAP has been maintained. Nevertheless, the Report argues that given the European Parliament elections and EU Enlargement next year, it is crucially important that the remaining major FSAP measures are agreed in the next four months. The report also outlines the initiatives taken by the Commission to assess the current state of integration of European financial markets.
“I would like to pay tribute to all the EU institutions for their hard work to integrate European financial markets on time, which can involve some difficult compromises,” said Internal Market Commissioner Frits Bolkestein. “Without financial markets that function efficiently, the recovery of the ‘real’ economy will be greatly impaired. Now that we are coming round the final bend, we need to make one final sprint to ensure victory.”
The EC said the legislative timetable for adoption of FSAP measures has continued to be respected, as was the case in earlier Progress Reports: 36 of the 42 original measures have been finalized. Member States, the European Parliament and industry have constantly reaffirmed their overall support for the underlying objectives of the FSAP.
This broad-based commitment has not been thrown off course by depressed economic conditions and the steep negative correction in equity valuations since the fourth quarter of 2000. So far, the European financial system has itself been resilient to the recent shocks; the risks associated with increased volatility have been spread more effectively and equally over financial sectors, said the report.
The Report sets out recent successes in moving the FSAP towards completion. In June 2003, the Directive on Taxation of Savings Income was formally adopted, followed in July by the adoption of the Prospectus Directive.
Meanwhile, in October, another important milestone was passed: endorsement of the first technical implementing measures on the Market Abuse Directive by the European Securities Committee (ESC).
As a follow-up to the short-term priorities included in the Communication on Company Law and Corporate Governance of May 21, the Commission presented a new proposal for the 10th Company Law Directive on cross-border mergers on November 18.
A crucial adjunct to the FSAP has been the enhancement of arrangements for the effective supervision of financial institutions and the management of financial crises with a cross-border dimension. A key development in this regard is the emergence of structured arrangements to allow regulators and supervisors to organize their co-operation and mutual agreements.
On November 5, the Commission adopted a package of seven measures aiming to establish this new organizational architecture in all financial services sectors. The result will be that for each of the main financial sectors, there will be two committees: one composed of national regulators to assist the Commission in adopting technical implementing measures; a second one to bring together national supervisors to provide the Commission with technical advice on implementing measures, but also to ensure consistent implementation of EU law in Member States. The EC said this package is needed urgently if the FSAP is to be implemented and enforced effectively.
The report urges the Council and European Parliament to adopt promptly the proposals already issued on the revision of the Investment Services Directive, already scheduled for adoption by the Council of Ministers in early December 2003. Furthermore, it says adoption of the Transparency Directive, aiming at increasing the transparency of listed companies to improve investors’ trust and encourage a more rational and efficient allocation of resources is urgently needed. Finally, the proposed Takeover Bids Directive is currently under discussion in the Council and the European Parliament.
The Commission launched the FSAP in May 1999. At the Lisbon summit in March 2000, Heads of State and Government set a target date of 2005 for the FSAP to be completed. The target for the securities and risk capital markets is the end of 2003.