Supplementary supervision of financial entities in a financial conglomerate (debate) 
President
Τhe next item is the report by Theodor Dumitru Stolojan, 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 Directives 98/78/ΕC, 2002/87/ΕC and 2006/48/ΕC as regards the supplementary supervision of financial entities in a financial conglomerate - C7-0203/2010 -.
Theodor Dumitru Stolojan
rapporteur. - Madam President, I would first like to express my gratitude to my colleagues, shadow rapporteurs, the rapporteur for the opinion and to other Members of this Parliament who contributed to this report.
I would also like to express my thanks to the Council and Commission for all the successful cooperation during the trialogue meetings led by Ms Sharon Bowles. I would also like thank Mr Van Es, our adviser in the Committee on Economic and Monetary Affairs, for his support.
With regard to financial conglomerates, there are potential risks arising from multiple uses of capital, management complexity, concentration, conflicts of interest and other so-called group risks when several licences for different financial services are combined. Therefore, financial conglomerates must be placed under supplementary supervision, consolidated at group level.
The Commission intends to improve European legislation on supplementary supervision in two steps. The first step is to address the most urgent issues through amending the current directive and updating several sectoral directives. The second step, probably in 2012, is to present a proposal for a new directive on this supplementary supervision of financial conglomerates, based on a more fundamental debate on this issue.
Through our joint efforts we, the European Parliament, Council and Commission, now have a good consensus on how to change the current directive at this first step. Our main proposals refer to defining mixed financial holding companies and placing them under supplementary supervision - which includes bringing alternative investment fund managers under the scope of this current directive - introducing the possibility of stress-testing at the level of each financial conglomerate, ensuring that the new European supervisory authorities issue general guidelines regarding supervision of financial conglomerates through the joint committee, amending the Solvency II Directive and improving the transparency of supplementary supervision.
In view of the second step, our report includes a review clause. We ask the Commission to look into the possibility of placing under supplementary supervision non-regulated entities, in particular special-purpose vehicles.
The identification criteria of financial conglomerates owned by wider non-financial groups active in the banking, insurance and investment services sector are materially relevant in the internal market for financial services. The possibility of introducing mandatory stress-testing at a group level must also be considered.
Michel Barnier
Madam President, ladies and gentlemen, earlier Mrs Bowles, Mrs Swinburne and I mentioned the transatlantic dialogue and the need to look closely at how we are going to coordinate our regulatory efforts.
When I am in the United States and even in Europe, I very often point out the differences, which we must keep in mind, between the European and the US banking sectors. There are many differences.
Firstly, in Europe, the banking sector finances three quarters of the economy, compared with only a quarter in the United States. We are going to apply Basel II and Basel III to 8 230 banks here in Europe. In the United States, around 20 banks will be affected. Then, there is a third difference: the existence, here in Europe, of the issue we are discussing - which the rapporteur, Mr Stolojan, expertly addressed just now - namely, conglomerates. They are specific to Europe, which is why the Commission very much welcomes the agreement reached on the proposal on the Financial Conglomerates Directive (FICOD) and wishes to thank those of you who have strived to make a success of this process and especially you, Mr Stolojan, and the shadow rapporteurs, Mrs Bowles, Mrs Swinburne, Mr Skinner, Mr Lamberts and Mr Klute.
With regard to the Council, I would also like to thank both the Belgian Presidency and the Hungarian Presidency, which made this progress possible.
Financial conglomerates, bancassurance groups are, I repeat, specific to the European banking set-up. It is a business model that works well. However, the crisis has shown the need, once again, to strengthen certain aspects of FICOD. That is why, in August 2010, the Commission presented this proposal to amend the directive. Thanks to an agreement between Parliament and the Council on these amendments, supervision of financial conglomerates will be greatly improved through the closure of a regulatory loophole. Indeed, by including mixed financial holding companies in the sectoral directives, that is, in the Capital Requirements Directive relating to banks and in the Solvency II Directive on insurers, the highest level of conglomerates will now be supervised more effectively, and that will help, I think, to increase our financial stability.
I am particularly grateful to your rapporteur, Mr Stolojan, for his decisive contribution, which made it possible to improve the directive in several important areas. Indeed, they were not covered by the Commission's original proposal. I am referring to stress testing, which he mentioned a moment ago, and to the enhanced role of the Joint Committee of the European Supervisory Authorities. All these improvements are in line with the supervision package. The agreement will also extend the scope of supplementary supervision to include asset management companies and hedge funds controlled by a conglomerate.
Lastly, I should also like to express my satisfaction with the agreement reached on the transparency of group structures, and to say a word about correlation tables, which are a controversial and difficult issue in the trialogues. I greatly appreciate the importance that Parliament attaches to this issue, ladies and gentlemen. At times I struggle to understand the Council's difficulty in fulfilling its obligation of communicating to the Commission, via traditional transposition measures, these tables showing how the directive in question has been transposed into national law. I believe that this should, by rights, be part of the transposition work carried out by the Member States. I am very pleased to have Parliament's support on this point. The Commission believes that such tables are an integral part of our efforts to achieve better regulation, and I should like to thank you for including them in the final text, as you are proposing, and as the Commission also initially suggested.
Sebastian Valentin Bodu
rapporteur for the opinion of the Committee on Legal Affairs. - Madam President, the functioning of the investor compensation schemes has been improved and brought into line with banking scheme standards. I would like to mention that we cannot send a signal of equivalence of treatment between capital market investors and depositors in commercial banks. Although both categories have to be protected, with regard to protection for investors in securities it should be considered that the risk of the latter is taken by choice.
I welcome the introduction of the lending system between the schemes and I hope that Parliament in plenary will maintain my own amendment regarding the postponement of reaching the guarantee ceiling by Romania and Bulgaria, in order to respect the terms of the accession treaties.
Peter Skinner
on behalf of the S&D Group. - Madam President, congratulations to Mr Stolojan and the services, including Mr Van Es - he does not get mentioned very often but he is quite a solid part of our Parliamentary services, he should be thanked. Everyone - at least almost everybody - has worked tirelessly and very hard to get consensus on this law, and the legislation we will vote on will ensure appropriate supplementary supervision of financial groups. This is something that was missing from our discussion on Solvency II and which we knew was very important - as were, we remember, the effects of AIG when they occurred. So it is gratifying that I have heard already from the Commissioner of the transatlantic bearing of this issue.
We all know very well what happens when corporations are involved in things which are too complex and too risky. To this end, financial business and other key business are accommodated in this particular report, whether they are banks or insurance or involved in securities. This legislation spreads out the approach to those risks.
Commissioner, may I just mention to you now that transatlantic issues are still alive, and we need to ensure that the financial conglomerates are a part of that discussion, particularly in the TEC. I do not want to sound accusatory, but we are not seeing financial issues discussed in the TEC and we are wondering which side of the Atlantic is being resistant to seeing it discussed. Please come back to me on that.
On the directive itself, you are right: stress-testing, the role of authorities, correlation tables, are notable successes for Parliament. We won them in a hard fight within the trialogues. We should feel justified, therefore, in our relative success in this legislation, which I believe will continue in the interest of better protection of consumers - something that we should come to expect.
Sharon Bowles
on behalf of the ALDE Group. - Madam President, a key feature in the supervision of conglomerates is ensuring that there is avoidance of regulatory repetition, but it is also important to have a level playing field as viewed from the separate sectoral companies with which they compete. This underlines several of the amendments that have been made, and there is the specific point included that all risks are incorporated while eliminating supervisory and prudential overlaps.
As Mr Skinner just mentioned, correlation tables are included. Happily, all institutions finally agreed on them being necessary in this instance, because it gets complicated fitting it in to all the other legislation. But, more generally, I reinforce that correlation tables are vital as part of the European supervisory architecture. In the interinstitutional agreement I think we might also have to look at sector-by-sector as well as case-by-case exemptions from whatever is agreed.
Inclusion of uniform reporting formats, frequency and dates within two years of adoption of implementing technical standards has also been agreed and will make supervision easier. As has been mentioned, stress tests are included but not yet mandatory. As the rapporteur said, making them compulsory features in the review clause.
I also confess that I am a little disappointed that the issue of scope is only in the review clause, in particular looking at the material relevance of the financial part of a large conglomerate rather than just having a threshold. In practice, some Member States may have this under control, but I really do not see why we could not have been bolder at this point in time. As others have said, this is a good outcome, but the next review should be bolder, and we have made the point here of many of the issues that we will wish to see.
Sven Giegold
Madam President, Mr Barnier, Mr Stolojan, ladies and gentlemen, we share the opinion that this report is necessary in order to correct a poorly drafted report from 2002 and a poorly drafted Financial Conglomerates Directive. The directive in question was drafted in the spirit that prevailed prior to the crisis, when it was felt that regulation should be less rigid and that exceptions should be permitted. As far as the legislation is concerned, it is right that we have now corrected this.
It is also right that the Joint Committee of the three supervisory authorities - in other words, those for banking, for insurance and for securities and markets - is now at last being given greater powers in respect of these institutions; overarching powers which extend beyond the segregated area of banking or insurance. What has also become clear, however, is that this principle of segregation into three separate supervisory authorities is no longer appropriate when we look at the actual reality in the financial markets, and that we did not go far enough at the time.
It is a pity that the most important and most relevant issues have ultimately ended up only in the review clause. We are therefore hoping for a strong report both from the international financial institutions and also from you, Mr Barnier - from the Commission - and I hope that we will finally get this in the course of the coming year. Our citizens are expecting clear answers when it comes to the issue of financial institutions being too big, too interconnected, to fail. Allowing increasingly complex and opaque financial institutions to come into being is not something to be proud of. We therefore need to make improvements in this area.
Claudio Morganti
Madam President, ladies and gentlemen, the various entities that can be identified as financial conglomerates span a number of fields and are therefore difficult to reduce to a single category and to a single regulatory scope.
In the past this situation has created several difficulties, which the financial crisis has further exacerbated. The draft report is therefore going in the right direction to fill a gap that has become increasingly apparent over time. The newly established European Supervisory Authorities supervising the markets, banks and insurers must be able to act by common accord in this area, and I think that the establishment of a joint committee is a good idea.
The scope of this directive needs to be clearly identified at European level in order to avoid misunderstanding and potential conflicts that would weaken the role of prevention and supervision in the sector. The increasingly close interdependence that has emerged in the financial sector certainly needs new, more effective and extensive rules that can be applied to the entire European dimension.
Elena Băsescu
(RO) Mr President, I too wish to begin by congratulating my colleague Mr Stolojan. This proposal for a directive is part of the changes associated with the supplementary supervision that is taking place, aimed at streamlining risk management practices.
The need to review the framework supporting the supplementary supervision of financial entities in a financial conglomerate has been dictated by globalisation, which has had an impact on Europe's financial market. The financial crisis has spotlighted major shortcomings in the financial sector in terms of supervision. I should mention that the aim of reviewing this framework is to supervise the operation of Europe's biggest financial groups. Some financial groups cannot be subject to supplementary supervision because of their legal structure. At the same time, it is sometimes difficult to keep banking activities separate from insurance activities.
Finally, I should emphasise that it is of paramount importance for financial groups to be subject to an identical, harmonised supervision procedure, which would strengthen Europe's supervisory mechanisms.
Ildikó Gáll-Pelcz
(HU) Mr President, the report by Mr Stolojan is an excellent piece of work and underlines an urgent issue. We can say, based on the problems and as a result of the globalised and integrated status of the financial sector, that the previously applied monitoring methods and procedures have to be synchronised with the risks arising in the complex and extended financial conglomerates. I agree that the extensive contamination of financial conglomerates and the errors in the system will affect the situation of the financial sector in the long term as well. I absolutely support the amendment of the directive in order to restore trust, and I support the idea to prepare guidelines for transparency. The proposed stress tests will highlight the weaknesses of the system, and this is why I believe that the exposure to risks will definitely decrease in the near future.
Jean-Paul Gauzès
Mr President, I have a comment and a request to make. My comment is to emphasise that, thanks to Mr Stolojan's work, we have been able to reach an agreement at first reading; I hope that this dossier will encourage the Council to successfully conclude the negotiations on the three other dossiers.
Then I would like to ask you, Mr President, to give the floor to Mr Bodu. He mixed up the texts before and was supposed to take the floor on behalf of the Committee on Legal Affairs. I am making this request as coordinator of the Group of the European People's Party (Christian Democrats).
Sebastian Valentin Bodu
rapporteur for the opinion of the Committee on Legal Affairs. - Mr President, supplementary supervision of a financial conglomerate should lead to a reduction in the systemic risk that such conglomerates pose to the market. Supervision at group level will be added and will not replace the supervision of each member of the conglomerate under the applicable arrangements for supervision in the banking market, the capital market or the insurance market.
Therefore we will have supervision at group-member level, over which we will overlap the supervision at group level to which the member belongs. This supplementary supervision will not produce extra bureaucracy as long as there is cooperation between the European and national authorities with regulatory responsibilities.
Czesław Adam Siekierski
(PL) Mr President, I am extremely pleased that we are tackling this difficult yet important issue today. The rapporteur quite rightly observed that as well as fighting against the consequences of the recession we should also act to introduce suitable regulations to remedy its causes. This is long-term thinking and should be applauded. Better, more effective and more accurate supervision of the flow of capital should become our priority. We must be aware of our situation, of who exactly is responsible for financial supervision, and of the circulation and utilisation of our capital.
Michel Barnier
Mr President, I am grateful to everyone who spoke in support of Mr Stolojan's position.
I should like to make a few comments and clarifications. Firstly, I should like to thank Mr Skinner for his very competent treatment of these issues. Like you, Mr Skinner, I believe that this text will do much to enhance supervision at a global and consolidated level. Like you, I believe that this is part of the G20 programme that I have often mentioned here before you - Mrs Băsescu referred to it a moment ago. No operator, sector or product should escape effective regulation and intelligent supervision. Mr Siekierski, just now, also raised this point concerning global supervision.
Mr Skinner, regarding our discussions with the United States, I have told you how much time I am spending on this issue; we are making progress point by point, and we are doing so with a great deal of confidence but without being naive. The text on derivatives that we discussed earlier with Mr Langen was the subject of many technical discussions with the US regulators throughout summer 2010.
On the subject of our discussions with the United States, firstly on the substance, Mr Skinner, I can assure you that these discussions are extremely rich and intense and that no stone has been left unturned. When I met the US authorities and the US minister, I made clear reference to this particular point on conglomerates by explaining that we were going to look in depth at this issue, which is specific to Europeans.
These issues, Mr Skinner, are formally dealt with in the Basel Committee's Joint Forum, not in the context of the transatlantic dialogue, and that makes a certain amount of sense, in practice, as financial conglomerates are global players. Here too, we are monitoring this work very closely. Mrs Bowles mentioned the result - a positive one, thanks to you - achieved with regard to correlation tables and their inclusion in the text, as we had requested.
I wish to voice my agreement with Mr Giegold on the need for consolidated global supervision. This issue of the Joint Committee, which Mr Morganti too raised, is important. I should also like to tell him that we have together scheduled a review for 2012, and even for 2013; we will do everything we can. Mr Giegold, these amendments that you are going to adopt are only the first stage. We must continue to strengthen the legislative framework for conglomerates, particularly in the text of the supervision package, and the role of the Joint Committee, and this in the light of the lessons that we could learn, in a few years' time, from the application of the Capital Requirements Directive 4 (CRD 4) and the Solvency II package.
Consequently, on this very important issue, which is specific to Europe but which affects powerful businesses, I am happy to continue our dialogue on strengthening the supervision of these conglomerates in other debates, as I just said, in 2012 and 2013, and like Mrs Bowles, I hope that we can do so as boldly as possible.
Theodor Dumitru Stolojan
rapporteur. - Mr President, I thank all the speakers who raised several issues in this debate, some of which we had a long discussion on during the trialogue meetings. My colleagues proposed some issues as amendments, and the main obstacle we had in agreeing on these issues was the lack of impact assessments. We should not forget that we are discussing the financial sector, which is very sensitive to all kinds of regulation, and each regulation has a cost. Therefore we should be very careful when we propose different regulation for entities operating in this sector.
I very much hope that the Commission will be able - maybe next year - to come up, as they proposed, with a new proposal for a directive on supplementary supervision of financial conglomerates. Once again I want to thank Mr Barnier the Commissioner, and his staff, who worked very hard with the Hungarian Presidency and with our colleagues, in order to arrive at this consensus, which I hope will be voted on tomorrow.
President
The debate is closed.
The vote will take place on Tuesday, 5 July 2011.
