Prudential assessment of acquisitions and increase of shareholdings (debate) 
President
The next item is the report by Wolf Klinz, on behalf of the Committee on Economic and Monetary Affairs, on the proposal for a directive of the European Parliament and of the Council amending Council Directive 92/49/EEC and Directives 2002/83/EC, 2004/39/EC, 2005/68/EC and 2006/48/EC as regards procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of shareholdings in the financial sector C6-0298/2006.
Vladimír Špidla
Mr President, honourable Members, I should like to thank the Committee on Economic and Monetary Affairs and in particular Mr Klinz for his excellent report on prudential assessments in the financial sector and for the amount of effort that has gone into achieving a common position between the three institutions.
We share Mr Klinz's view that this proposed directive will make the whole approach to acquisitions in the financial sector more effective. We must clearly ensure that commercial decisions on acquisitions in the financial sector are clearly and transparently vetted by the relevant body. Legitimate commercial decision-making must not be frustrated by overzealous bodies or by political interference. Where both the acquirer and his target are under inspection, the bodies responsible must work together, exchange information and help each other out. This will serve to speed up the assessments process.
It is frequently said that we should not indiscriminately open our doors to the invasion of capital from third countries or to the takeover of our institutions by big business. I firmly believe that even though we have to protect the interests of our markets, our institutions and our consumers, we must continue to honour our commitments in international forums such as the WTO. We must also ensure that our trading partners also honour their commitments. The current state of affairs is most encouraging. Several institutions based in the EU have successfully penetrated third countries where they have concluded mergers and takeovers in the financial sector. At the same time, however, we should not overlook problems in the EU, where organisations from some Member States have faced problems relating to the acquisition of firms in other Member States.
The purpose of this directive is neither to encourage nor to discourage acquisitions in the financial sector. Our objective must not be to disturb the normal functioning of the market. We must ensure, however, that there is a solid framework in place leading to the assessment, and then the approval or rejection, of potential acquisitions. The key point here is that prudential assessments must not become the mere exercise of discretionary powers, as this would result in delays and obstructions and would be ineffective and uneconomic. Also covered in the report are issues of hostile as opposed to friendly takeovers. Hostile takeovers are part and parcel of the normal functioning of the market.
The Commission believes that the authorities should adopt a position in favour of such initiatives or against them. Irrespective of whether an initiative is friendly or hostile, the decision rests with the shareholders. There need to be willing sellers in any acquisition. If, according to the directive, the prudential criteria have been met, there is no reason to query the value of agreements between willing purchasers and sellers.
To summarise: clear, fair and predictable approaches and processes are of vital importance to the proper functioning of the internal market. I believe that with this directive we will remove the current ambiguity. Thank you for your attention.
Wolf Klinz 
rapporteur. - (DE) Mr President, representatives of the Council and the Commission, ladies and gentlemen, after a mere six months, the Council, the Commission and Parliament have come to an agreement on the revision of the directive on the prudential assessment of acquisitions and increase of shareholdings in the financial sector.
It is thanks to the prompt work of the Committee on Economic and Monetary Affairs and to the purposeful trilogue negotiations that it will be possible to complete this dossier before spring is out, on the assumption that ECOFIN, on 27 March, agrees to it. That is visible evidence to the public that Europe, even with twenty-seven Member States, is capable of taking action and capable of taking important decisions quickly, even - as the Commissioner has just described - with a complex dossier such as this one.
It is for that reason that I should like, at the beginning of my speech, to briefly thank all those concerned for their good cooperation, especially the shadow rapporteurs Mr Purvis and Mr Muscat, the chairman of the Committee Mrs Berès, and all those Members who have helped to make it a matter of probability that the directive will, tomorrow, be adopted by all of us, from whatever political grouping, in a block vote.
I would also like to highlight the constructive cooperation with the representatives of the Mediterranean states, whom we have been able to convince that their concerns about the fragmented shareholder structure that is so widespread in their countries have been taken into account.
Last of all, I extend warm thanks to the Finnish and German Presidencies of the Council and to the Commission, which have competently accompanied our project and ensured smooth cooperation.
We need this revised directive. In the past, on more than one occasion, individual enterprises have failed to acquire shareholdings in other countries or to take over whole companies in them, simply for lack of an unambiguous legal framework that would have laid down uniform assessment criteria and hence a uniform procedure for the supervisory authorities. That will now change.
The object of the draft directive put forward by the Commission last autumn is greater legal certainty, undoubted reliability and clearly-demarcated decision-making processes, and, since all the interested parties are agreed on these, we have therefore supported it. All three institutions - the Commission, the Council and Parliament - believe that this is the direction in which we must go and that the highest possible degree of harmonisation is needed if people in all the Member States of the European Union are to be able to participate in the market under what really are equal conditions.
Nevertheless, there were, inevitably, differences of opinion on one point or another, particularly as regards the test period or what alternative courses of action might be available if the decision turned out to be negative, that is to say if the application for the acquisition of a shareholding or for the takeover of a whole business were to be turned down. It did, however, eventually prove possible, through negotiations, for these problems to be resolved and for us to reach a consensus.
In future, then, cross-border mergers of credit institutions, insurance companies and investment firms will be made increasingly easier, and there are four reasons why this is the case. Firstly, the supervisory authorities will, in future, have at most sixty days in which to rule on an increase in a holding. That period will be able to be interrupted only once, and for a period of twenty days, for the purpose of obtaining further information when the potential acquirer is from another EU Member State, or for thirty days if from a third country.
Distinguishing in this way between companies from the EU and those from third countries takes account of the fact that the latter's supervisory and market structures are often not identical with those in the European Union, and that European authorities are therefore not always fully informed about circumstances in those countries. It follows that the supervisory authorities must be allowed more time in which to obtain and evaluate specific information, while the companies from third states also need more time in which to prepare, translate and submit such information. The different suspension periods make both these things possible without breaking WTO rules.
Secondly, the five test criteria are unambiguous and final, and they enable the Member States to use them to define the list of specific information that the potential acquirer must submit, which must include the mode of acquisition of the shareholding and the nature of the potential acquirer, so that less information will need to be sought in the event of straightforward and clearly understandable increases in holdings than in the case of those that are more complex and may involve more than one sector.
The intention is that, two years following the entry into force of this directive, the Commission will conduct a review to establish whether the requests for information are relatively similar across the Member States or whether a divergence is becoming apparent, and it may well be that the Commission will have to intervene and ensure that no such divergences occur.
Thirdly, as the Commissioner has said, the supervisory authorities are required to cooperate closely, although it is specifically laid down that the final decision rests with the authority with jurisdiction over the targeted company, and it is this authority that must also give the reasons for any adverse decision. It is not planned that the publication of those reasons be made mandatory, but the company whose plans for acquisition were thus turned down will be able to demand it. It is equally possible that individual Member States will publish the reasons in accordance with their own laws.
Fourthly, the Commission wanted, for the purposes of ascertaining compliance with the directives, to have direct access to the documentation, but that we refused. Our reason for doing so is that the directive will, in future, make for greater legal certainty and clarity. I am firmly persuaded that this will amount to a further step closer to more cross-border consolidations and hence to an increasing integrated internal market.
John Purvis
on behalf of the PPE-DE Group. - Mr President, I should like to thank Mr Klinz for all his valiant work in getting this agreed. Although we support the compromise with the Council, it does water down the Commission's original intent and, frankly, the Commission's original text would have been better in our view. Mr Klinz, as I say, strove valiantly to keep as close as possible to the original intent and to improve on it. My group would have been happy to have tightened it, with more transparency and less wriggle room for protectionists.
The Commission's original deadline of 30 days for a prudential assessment has been extended up to a possible 90 days for non-EU acquirers, but the crucial point here is that at least there will be an absolute deadline. Thus, we can hope to avoid situations where a protectionist regulator can block a takeover by delaying tactics. In the interests of transparency, we would have preferred disclosure of the reasons for a supervisor's decision, and this would have helped to develop a body of precedent and common practice around the EU. Sadly, there is a continuing preference in some Member States for secrecy.
Once again, the threat of hedge funds was raised in the context of amendments tabled by my group, which were designed to avoid difficulties for investment managers. We must get away from this knee-jerk reaction to hedge funds and private equity funds. They are helping to improve our economy just because they are active and demanding shareholders.
I hope now that supervisors will be persuaded to work more and more closely together, exchanging information and building up relationships of trust. It is in their own interest and, more importantly, it is in the interests of the financial services industry and of the whole EU economy. We are working towards a more open and competitive European market in financial services. This particular result is not all that I and my group would have wished. The fault for this lies mostly with the Council of Ministers, but we will be watching to see that it is operated in a proper spirit, rather than using every possible loophole and ambiguity to obstruct it. We must turn lip-service to the Lisbon Agenda into action, and this is one small step in that direction.
Joseph Muscat
on behalf of the PSE Group. - (MT) The obvious result of this work is that we now have a clear timetable for how long regulators will take to carry out a procedure in the field of takeovers, and I believe that the remarkable result we have achieved is due to the excellent work of Mr Klinz and to the work we did together. As with any compromise, we would obviously have all liked some things to have happened differently. However, I feel that we have achieved a very good result. I wholly agree with Mr Purvis that we now have a specific number of days at the end of which a decision will be taken regarding takeovers, and this is the greatest achievement that has taken place during these negotiations.
I also believe we have improved on the work of the Commission because we are giving the regulators the time needed to do their work. It is futile to try to exert pressure in order to shorten the amount of time required to take a decision if this ultimately leads to a situation of more haste, less speed. In this field, I believe that regulators, especially the small ones with fewest resources, must be given all the time they need in order properly to come to considered decisions on important matters such as this. I believe that this is an extremely judicious step towards achieving a transparent and European perspective in this field. Finally, although it is, unfortunately, technically impossible to include them in this legislation, the aspects we must take into consideration in advance include the social and corporate governance perspective in the field of takeovers. This is not strictly related to the field of legislation, but it is an area that our citizens are asking us to consider in depth.
Margarita Starkevičiūtė
on behalf of the ALDE Group. - (LT) I too would like to thank the rapporteur for his good work and support the ideas expressed by many colleagues. However, I would also like to mention another aspect, quite often forgotten, especially by members of our Commission; namely, that we are talking about a process that is not new. Financial groups are already operating in the European Union, and we know that for the uniform development of each country's market we have to ensure that these major groups do not crowd smaller enterprises out of the market, as these are the innovators and they are not in a position to trample the interests of consumers.
I can give you an example of my own country, where the major financial groups are so well established that they make profits of 90%, which clearly demonstrates that customers are suffering. In other words, when making decisions about company acquisitions and takeovers and the formation of new financial groups, we must let the supervising bodies assess the structure of these groups and the extent to which these new financial groups will be amenable to innovation and will manage to respect their clients' needs.
We surely cannot overlook the fact that, while we are currently occupied with the activities of financial groups, they have still not clearly specified what would happen if one of their subsidiary firms in one country or another were not operating effectively, and, let us say, it were to go bankrupt. We still have no reply as to who would compensate the clients.
I think this is a complex problem, one that has to do with organising better supervision. Therefore, an essential part of the process is the supervision of mergers and capital enlargement in the financial market in such a way that it would be possible to defend the interests of small enterprises and consumers.
Alexander Radwan
(DE) Mr President, ladies and gentlemen, Commissioner, I too would like to thank the rapporteur, Mr Klinz, for today's outcome is a very positive one, in that it was achieved rapidly through the good cooperation of the Commission, Parliament and the Council.
The reason why a speedy result was necessary was that at the nation state level, there is an increase in protectionism, not only in the financial sector but also in others, for any Member State will be pleased if a company based there can invest in another country and take over businesses in it, but heaven help a company from another country that tries to do likewise; that is when they pull out all the stops and get tough, not only in the financial sector, but also in energy, as we have seen, for example, with Endesa and E.ON.
That is why action to deal with this became necessary. I am glad that it was possible to agree on criteria and deadlines, but I have my misgivings about the role played in the debate by the supervisory bodies, who, back in the days of the 'Basel II' debate, had not done very much to clarify how they were supposed to monitor the integration of financial markets. In saying this, I am certainly not advocating a European supervisory body, but, given the way the supervisory bodies in Europe have organised things, their primary interest is in staking out their national boundaries, and so the first move should come from us at the European level, and from the Commission, with an invitation being extended to the supervisors to engage in dialogue on the subject.
I would also like to say something about hedge funds, which Mr Purvis has already mentioned; although I agree with him wholeheartedly that these should not be demonised, I would like to see discussions - which I believe should include other parts of the world in particular - about the need for the Commission to act in this area, to conduct a one-off evaluation - of the kind that has become a permanent feature in other areas - of how hedge funds should be handled, of how the utterances from the Bundesbank and the European Central Bank on the stability of the financial markets should be understood, and to make a presentation on the subject. Having heard what this House has had to say to the Commission, I get the impression that someone is now refusing to put in the work, and I would be delighted if someone were to pick up this ball and make progress in this area. Commissioner Špidla, there seem to be a lot of proposals being made in your area of responsibility, so perhaps you can fire up Commissioner McCreevy with the ambition to do likewise.
Antolín Sánchez Presedo
(ES) Mr President, cross-border issues and the acquisition of shares in banks, insurance and investment companies are less than in other sectors. One barrier is the uncertainty in the procedures for prudential assessments before national supervisors, given the lack of criteria on the unity of the acquirer and the detailed regulation of the procedures.
The proposed directive deals with these problems and harmonises their treatment. The amendments approved in the Committee on Economic and Monetary Affairs make the requirements clearer, facilitate supervisory action, protect confidentiality and improve control. Their result in general is positive and I congratulate the rapporteur, Mr Klinz.
One sensitive issue is that, in cases of great dilution of property with low participation, great influence can be achieved. We have therefore defended the obligation to notify any significant participation and we support the idea of the Member States being able to set a transparency threshold of less than 10% for receiving information and determining its existence.
Piia-Noora Kauppi
Mr President, like all my colleagues before me, I too would like to thank our rapporteur Mr Klinz. All in all, we can be satisfied with the outcome of this directive. It supports a valuable aim: facilitating consolidation of the financial sector in Europe. Without fluid financial markets, other forms of market integration will fail. The financial world must show the way; it cannot be prevented from making decisions about investments and mergers by arbitrary restrictions, as has been the case until now.
From now on, the rules for national authorities will have to be transparent and strictly prudential in nature, and I am hopeful that they will stick to the letter of what has been agreed. No more pseudo-prudential protectionism, please! The decision by the competent authority on approval or rejection of the action should be as swift and as expedient as possible. Just as has now been agreed in the directive, we are in favour of very tight deadlines for decisions. Furthermore, actions which target investment gains first and foremost, and which do not alter ownership structures, need not arouse the kind of national fears we are seeing in the market. Consolidation in the financial sector should, as far as possible, be about market incentives and conditions, not political considerations.
On the aggregation of holdings, let us also remain faithful to what has been agreed. If the decisions on holdings are made by independent investment entities, there is no need to aggregate holdings inside one group of companies. We have conglomerates in this market and we need to guarantee that independent actors can act freely. This also concerns the hedge funds mentioned by my colleagues.
President
The debate is closed.
The vote will take place tomorrow at 12.00 noon.
