Select Committee on Treasury Appendices to the Minutes of Evidence


APPENDIX 29

Further memorandum submitted by HM Treasury

EU FINANCIAL SERVICES ACTION PLAN

  When Treasury and DTI officials gave evidence to the Committee on 2 July, the Committee asked for a note explaining Departmental responsibilities for the various EU legislative and other initiatives which bear on the issue of financial reporting and corporate governance.

  Such initiatives form part of the Financial Services Action Plan (FSAP), a programme of legislative and non-legislative measures to put in place a single European market for financial services. In the spring of 2000, the Lisbon European Council set a deadline of 2005 for completion of the FSAP as a whole (and for the capital markets elements, of 2003). These deadlines were subsequently endorsed by the Barcelona European Council in March 2002.

  The European Commission publishes six monthly progress reports on the FSAP. (An Explanatory Memorandum on the latest report was submitted by HM Treasury to the scrutiny committees on 3 July.) Of 42 measures in the original action plan, 26 have now been fully completed.

  I attach the annex from this latest report (pages 12-24) which sets out information on the action plan measures envisaged by the Commission but not yet completed. We have added a further column to denote, for your information, the UK Department taking the lead responsibility for each measure.

  I hope that the Committee finds this helpful.

PROGRESS ON THE FINANCIAL SERVICES ACTION PLAN

  This table (the annex to the European Commission's six monthly FSAP progress report) provides an overview of progress on the individual actions in the Financial Services Action Plan (COM(1999) 232). It shows the present state of play and provides the Commission's assessment of the degree to which Community institutions and Member States are achieving the objectives set out in the Action Plan. Of the 42 original measures 26 have now been completed: they are listed at the beginning of this Annex.

  A further five measures have also been prepared in response to wider market developments over the past three years. These measures, which are not included in the original Action Plan, are mentioned separately in the Annex under each of its four strategic objectives. They are included to provide a complete overview of the Union's present workload.

  The progress reports remain available on the following web-page:

http://europa.eu.int/comm/internal_market/en/finances/actionplan/index.htm

+  Plus sign: progress has been achieved in meeting the targets set in the Action Plan.

-  Minus sign: indicates no progress.

COMPLETED FSAP MEASURES (Legislative proposals in bold)

  (1)  Commission Communication on the Application of Conduct of Business Rules Under Article 11 of the Investment Services Directive (ISD) (distinction between professional and retail investors). Issued on 14 November 2000, COM(2000)722.

  (2)  Commission Communication on upgrading the ISD. Issued on 15 November 2000, COMM(2000)729.

  (3)  Amendments to the 4th and 7th Company Law Directives to allow fair value accounting: Directive 2001/65/EC adopted on 31 May 2001.

  (4)  Commission Communication updating the EU accounting strategy. Issued on 13 June 2000, COM(2000) 359.

  (5)  Recommendation on quality assurance. Issued on 21 November 2000, C(2000) 3304.

  (6)  Political agreement on the European Company Statute. Directive 2001/86/EC and Regulation (EC)2157/2001 adopted on 8 October 2001.

  (7)  Review of EU corporate governance practices. The final report of the Comparative Study was published on 27 March 2002 (available on DG Markt's website).: http://europa.eu.int/comm/internal_market/en/company/company/news/index.htm

  (8)  Commission Communication on Funded pension Schemes. Issued on 11 May 1999 Com (1999)134.

  (9)  Adoption of the two Directives on UCITS. Directives 2001/107/EC and 2001/108/EC adopted on 21 January 2002.

(10)  Commission Communication on clear and comprehensible information for purchasers. The work on the communication has been integrated in the context of the Commission Communication on an e-commerce policy for financial services (COM(2001)66—07/02/2001).

(11)  Recommendation to support best practice in respect of information provision (mortgage credit). Issued on 1 March 2001, COM(2001)477.

(12)  Commission report on substantive differences between national arrangements relating to consumer-business transactions. Discussions with industry ("Forum Group") and consumers are concluded. Information gathered is used for further Commission initiatives in the field of retail financial services.

(13)  Interpretative Communication on the freedom to provide services and the general good in insurance. Issued on 2 February 2000, C(1999)5046.

(14)  Commission Communication on a single market for payments. Issued on 31 January 2000, COM(2000)36 final.

(15)  Commission Action Plan to prevent fraud and counterfeiting in payment systems. Issued on 9 February 2001, COM(2001)11.

(16)  Commission Communication on an e-commerce policy for financial services. Issued on 7 February 2001, COM(2001) 66.

(17)  Adoption of the proposed Directive on the Reorganisation and Winding-up of Insurance undertakings. Directive 2001/17/EC adopted on 19 March 2001.

(18)  Adoption of the proposed Directive on the Winding-up and Liquidation of Banks. Directive 2001/24/EC adopted on 4 April 2001.

(19)  Adoption of the proposal for an Electronic Money directive. Directive 2000/46/EC adopted on 18 September 2000.

(20)  Amendment to the Money Laundering Directive. Directive 2001/97/EC adopted on 4 December 2001.

(21)  Commission Recommendation on disclosure of financial instruments. Issued on 23 June 2000, C(2000) 1372.

(22)  Amendments to the solvency margin requirements in the Insurance Directives. Directives 2002/12/EC and 2002/13/EC adopted on 5 March 2002.

(23)  Amendment of the Insurance Directives and the Investment Services Directive to permit information exchange with third countries. Directive 2000/64/EC adopted 7 November 2000.

(24)  Creation of two Securities Committees. Decision of 6 June 2001 setting up the European Securities Committee—ESC (C(2001)1493) and Decision of 6 June 2001 setting up the Committee of European Securities Regulators—CESR (C(2001)1501).

(25)  Commission Recommendation 2001/6942 of 16 May 2002 on Statutory auditors' independence in the EU: A set of fundamental principles (C(2002)1873).

(26)  Review of taxation of financial service products. This action has been taken care of in the context of the initiative on taxation on supplementary pension funds as set out below.

STRATEGIC OBJECTIVE 1: A SINGLE EU WHOLESALE MARKET

ActionInitial FSAP optimal Timeframe Present TimeframeState of Play/Follow-up UK Department Lead
Raising capital on an EU-wide basis
Directive on ProspectusesAdoption 2002 Adoption 2003Proposal for a directive on prospectuses adopted by the Commission. COM(2001)280, 30.5.2001. The Barcelona European Council (March 2002) has asked the Council and the European Parliament to adopt the Directive as early as possible in 2002. HMT
Updating the Regular Reporting Requirements Proposal 2001

Adoption 2002
Proposal December 2002

Adoption December 2003
Work continuing in the Commission in close co-operation with parties concerned. First consultation summer 2001. Second consultation April 2002. HMT
Establishing a common legal framework for integrated securities and derivatives markets
Directive on Market AbuseAdoption 2003 Adoption in 2002Proposal for a directive on insider dealing and market manipulation (market abuse) adopted by the Commission COM(2001)281, 30.5.2001. Opinion of European Parliament adopted on 14 March 2001. Political agreement reached in Ecofin on 7 May 2002. The Barcelona European Council (March 2002) has asked the Council and the European Parliament to adopt the Directive as early as possible in 2002. HMT
Directive to upgrade the Investment Services Directive   Proposal December 2002

Adoption June 2003
Follow-up to: Communication on upgrading ISD issued: COM(2000)729 final (15.11.2000). First consultation process concluded in first quarter 2001. Second consultation in April 2002. HMT
Towards a single set of financial statements for listed companies
Regulation on International Accounting Standards   Adoption June 2002 Follow-up to the Communication on International Accounting Standards issued by the Commission on 13 June 2000 (COM(2000) 359 final). Proposal for Regulation on IAS (COM(2001)80) adopted by the Commission on 13 February 2001. Opinion of the European Parliament on 12 March 2002 opens up for adoption in a single reading. The Barcelona European Council (March 2002) has asked the Council and the European Parliament to adopt the Directive as early as possible in 2002. Adoption foreseen at ECOFIN Council of 4 June 2002. DTI
Modernisation of the accounting provisions of the 4th and 7th Company Law Directives Proposal end 2000

Adoption 2002
Proposal May 2002

Adoption early 2003
Communication on accounting strategy (see above) adopts this action as part of its implementation program. Possible general orientation as early as October 2002. DTI
Containing systematic risk in securities settlement
Implementation Settlement Finality Directive Commission report to Council end 2002 Commission report to Council December 2002 Implementation date 11 December 1999. All Member States have implemented the necessary measures. Commission report to Council end 2002. HMT
Directive on financial collateral arrangements Adoption 2003Adoption June 2002 Adopted by the Commission on 27 March 2001—COM(2001)168 FINAL. The Council reached a Common Position on 5 March 2002. Second reading ongoing in European Parliament. The Barcelona European Council (March 2002) has asked the Council and the European Parliament to adopt the Directive as early as possible in 2002. HMT
Towards a secure and transparent environment for cross-border restructuring
Directive on Take Over BidsAdoption 2000 New Proposal June 2002

Adoption April 2003
The European Parliament and the Council reached an agreement on a compromise text of the Directive on 6 June 2001. The EP rejected the compromise text on 4 July 2001. New proposal will consider the recommendations of the High Level Group of Company Law Experts. DTI
Follow-up: Report of the High Level Group or Company Law Experts   2002-03 Follow-up to: the Recommendations of the High Level Group of Company Law Experts on takeover bids. The second report of the Group will address such issues as cross-border voting (including use of new technologies), capital maintenance, the functioning of companies and groups of companies. The Group will also examine the conclusions of the review of EU corporate governance practices and come forward with recommendations in this respect, in particular in the light of discussion in the informal ECOFIN in Oviedo on 12-13 April 2002. Presentation of the second report in September 2002. DTI
Proposal for a 10th Company Law Directive Proposal Autumn 1999

Adoption 2002
New Proposal September 2002

Adoption 2003
A first proposal was tabled in 1985 but remained blocked on the issue of workers' participation. The new proposal will take account of the solutions adopted within the framework of the European Company Statute. DTI
Proposal for a 14th Company Law Directive Proposal Autumn 1999

Adoption 2002
No proposal before 2003Reassessment is expected on the basis of the report of the new Group of High Level Company Law Experts and the awaited decisions of the European Court of Justice. DTI
A Single Market which works for investors
Directive on the Prudential Supervision of Supplementary Pension Funds Adoption January 2002Adoption December 2002 Proposal adopted on 11 October 2000 (COM(2000)507 provisional). Opinion of European Parliament adopted on 4 July 2001. The Barcelona European Council (March 2002) has asked the Council and the European Parliament to adopt the Directive as early as possible in 2002. HMT
(MEASURES IN RESPONSE TO WIDER MARKET DEVELOPMENTS SINCE THE ADOPTION OF THE ACTION PLAN, BUT NOT INCLUDED IN THE ORIGINAL PLAN)

Communication on Clearing and Settlement
Issue in May 2002 Efficient cross-border clearing and settlement in Europe is essential to realise the full benefit of an integrated financial sector. The Commission will launch a consultation which will run until the end of August 2002 with the aim of identifying what action is needed in this area and what the priorities are. HMT


STRATEGIC OBJECTIVE 2: OPEN AND SECURE RETAIL MARKETS

ActionInitial FSAP optimal Timeframe Present TimeframeState of Play/Follow-up UK Department Lead
Directive on the Distance Marketing of Financial Services Adoption end 2000Adoption June 2002 Amended proposal was adopted by the Commission on 23 July 1999 (COM(1999)385). Political agreement was reached at the Internal Market Council on 27 September 2001. Second reading in the European Parliament ongoing (vote on 14 May 2002). The Barcelona European Council (March 2002) has asked the Council and the European Parliament to adopt the Directive as early as possible in 2002. HMT
Directive on Insurance IntermediariesAdoption 2002 Adoption 2002Proposal for a Directive was adopted 20 September 2000 (COM(2000)511 final). Common Position in Council 19 March 2002. Second reading commenced in European Parliament 8 April 2002. The Barcelona European Council (March 2002) has asked the Council and the European Parliament to adopt the Directive as early as possible in 2002. HMT
EU legal framework for payments in the Internal Market   Proposal 2003 Wide consultations of all interested parties has started. Evaluation of deficiencies in present legal acts is ongoing. HMT
Follow-up to FIN-NETOngoing PermanentFollow up to: the Commission Communication on an E-commerce policy for financial services COM(2001)66 final. FIN-NET was established in 2001 as an EU network of out-of-court redress bodies in the Member States for financial services. The present follow-up includes:

—publication and dissemination of a brochure (1.5 million copies) in order to inform better the wider public

—further widening of the geographical and sectoral coverage

—further improvement of information and co-operation between schemes

HMT
Follow up to Commission's Action Plan to prevent fraud and counterfeiting in payment systems   Ongoing until 2003 Follow up to: the Communication "Preventing fraud and counterfeiting of non-cash means of payment" adopted by the Commission on 9 February 2001 (COM(2001)11). The Action Plan was attached to the Communication and will run from 2001 to 2003. At the end of 2003 the Commission will prepare a report on its implementation and propose further measures, if needed. HMT
(MEASURES IN RESPONSE TO WIDER MARKET DEVELOPMENTS SINCE THE ADOPTION OF THE ACTION PLAN, BUT NOT INCLUDED IN THE ORIGINAL PLAN)

Work on Insurance Guarantee Schemes
Ongoing until 2003 Technical level work started in February 2002 to study the necessity for insurance guarantee schemes similar to those existing for banks and securities. HMT


STRATEGIC OBJECTIVE 3: STATE-OF-THE-ART PRUDENTIAL RULES AND SUPERVISION

ActionInitial FSAP optimal Timeframe Present TimeframeState of Play/Follow-up UK Department Lead
Amend the Directives Governing the Capital Framework for Banks and Investment Firms Proposal spring 2000

Adoption 2002
Proposal 2004

Adoption 2005
The Basel Committee has extended the timetable for development and implementation of the new international Accord. There will be a further impact study carried out before the publication of the final consultative document on the proposed new framework. The Commission will publish a third consultative document in early Summer 2003. Work on draft legislative proposals in progress. Proposal for directive will be adopted by the Commission early in 2004. Implementation date for new framework: 31 December 2006. The Commission will report to the Council on the consequences of the accord in late autumn 2003. HMT
Directive on Prudential Rules for Financial Conglomerates Adoption 2002Adoption December 2002 The Commission adopted on 24 April 2001 a proposal for a directive on the supervision of financial conglomerates, COM(2001)213 final. Opinion of the European Parliament delivered on 14 March 2002. Political Agreement ECOFIN Council reached on 7 May 2002. Second reading in European Parliament foreseen in second half of 2002. The Barcelona European Council (March 2002) has asked the Council and the European Parliament to adopt the Directive as early as possible in 2002. HMT


(MEASURES IN RESPONSE TO WIDER MARKET DEVELOPMENTS SINCE THE ADOPTION OF THE ACTION PLAN, BUT NOT INCLUDED IN THE ORIGINAL PLAN)

Reinsurance supervisionOngoing until 2003 Investigation of the possibilities to create a harmonised supervision framework for reinsurance. It has not yet been decided whether to choose a "fast-track" solution or to adopt a more comprehensive approach aligning this work to that of the Solvency II project. HMT
Fundamental review of the solvency systems in insurance (Insurance Solvency II) Ongoing until 2005 Long-term project to define a new solvency framework for EU insurance companies. Work at two stages:

1.in the first phase focus on the general layout of the solvency system; an orientation debate with the Member States to place in Insurance Committee in November 2002 to decide on the general form of the system,

2.in the second phase elaboration of the technical solutions to be included in the future system.
HMT
Third Money Laundering DirectiveProposal End 2003 Depending on progress, Commission will prepare a report on the implementation of the 2nd Directive and on the issues to be addressed in a third Directive. HMT


OBJECTIVE: WIDER CONDITIONS FOR AN OPTIMAL SINGLE FINANCIAL MARKET

ActionInitial FSAP optimal Timeframe Present TimeframeState of Play/Follow-up UK Department Lead
Adopt a Directive on taxation of savings income in the form of interest payments Political Agreement by November 1999

Adoption 2000
New Proposal July 2001

Adoption December 2002
Following agreements at the European Council in Feira in June 2000 and at the Ecofin Council in November 2000, the Commission on 18 July 2001 presented a new proposal for a Directive, replacing the 1998 proposal. In December 2001, the Ecofin Council approved the draft Directive for the purpose of negotiations with third countries. Following the adoption of a negotiating mandate by the Ecofin Council on 16 October 2001, the Commission entered into negotiations with the US and five key third countries to promote the introduction of equivalent measures in order to pave the way for adoption of the Directive before the end of 2002. HMT and Inland Revenue
Commission initiative on taxation of cross-border occupational pensions Proposal end 1999

Adoption 2002
Issued April 2001A Commission Communication on "The elimination of tax obstacles to the cross-border provision of occupational pensions" was presented on 19 April 2001 (COM(2001)214). The Communication sets out how the fundamental freedoms of the EC Treaty apply in the area of cross-border pension provision and calls upon Member States to eliminate discrimination against occupational schemes established in other Member States. Two cases are already pending in the Court of Justice (Danner, case C-136/00 and Skandia/Ramstedt, case C-422/01). The Commission will start infringement procedures where necessary. At the ECOFIN Council of October 2001 Council and Commission have undertaken to further develop the Commission's proposals on the exchange of information and the elimination of double taxation and double non-taxation, with a deadline of end 2002. HMT and Inland Revenue
Implementation of the December 1997 Code of Conduct on business taxation Ongoing examination in the Code of Conduct group Ongoing examination in the Code of Conduct group. A report identifying the harmful tax measures was submitted to the ECOFIN Council in November 1999 and a detailed timetable for dismantling those measures was agreed on one year later. The Code of Conduct Group is continuing its work by eg monitoring the roll-back and the standstill processes with a view to the final agreement on the tax package. HMT and Inland Revenue



15 July 2002



 
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