Further convergence in supervisory practices at EU level (debate) 
President
The next item is the debate on:
the oral question by Pervenche Berès, on behalf of the Committee on Economic and Monetary Affairs, to the Council, on further convergence in supervisory practices at EU level - B6-0010/2007), and
the oral question by Pervenche Berès, on behalf of the Committee on Economic and Monetary Affairs, to the Commission, on further convergence in supervisory practices at EU level B6-0449/2006).
Pervenche Berès 
author. - (FR) Madam President, Commissioner, ladies and gentlemen, the Committee on Economic and Monetary Affairs thought it necessary that there should be a debate on supervision among the European institutions, and we wanted to be able to have one in the presence of the Council and of the Commission. We, members of the Committee on Economic and Monetary Affairs, are very pleased about the relaunch of discussions and work, within the Council and the Commission alike, on the management of the crisis on the financial markets. More effective and better supervision and cooperation among supervisors is a matter of necessity, but, nevertheless, if we want the ultimate result to be success, we do think that, at this stage of the development and profound transformation of financial markets, the opening of an interinstitutional debate on this subject is, without doubt, the best way of making headway.
The Committee on Economic and Monetary Affairs has done a great deal of work on the analysis of the European financial system and the implications of consolidation in financial services, not least in Mr Muscat's report, in which we express our support for the establishment of a Committee of Wise Men mandated not only to examine the implications of the consolidation of markets and of financial institutions, together with the implications of financial supervision, financial stability and crisis management, but also to come up with definite ideas about the existing structures and incorporate them in a report to this House.
The object of today's interinstitutional debate is to give a clear signal as to the need for the opening - or re-opening - of the great debate on the future of Europe's supervisory systems, which is essential in the interests not only of the competitiveness of the financial market itself, but also of the stability of the European Union's financial system.
Perhaps I might, at this juncture, be permitted to make certain observations. First, let me say that there have been profound changes in the financial system in Europe and around the world. Day in and day out, we are witnesses to incessant changes in the markets and to the innovations produced in those markets - developments that result, inter alia, in the gain of greater power by 'hedge funds' or 'private equities'. The ongoing consolidation of financial markets has made it possible for key actors to establish themselves and to act on completely transnational bases. Mergers and takeovers motivated by the quest for competitiveness and efficiency have grown, whether at the national or European level or globally. They have come to generate their own impetus, and hence the structure of the markets, as well as the way in which the actors operate on them, have undergone radical changes, a transformation producing new challenges, with new things at stake.
Secondly, I would observe that the consolidation of financial supervision structures must go hand in hand with the consolidation of the markets themselves, for one sometimes gets the impression that they follow different rhythms. This being so, one can find oneself wondering whether the present system of supervision in the European Union - in which supervisors have specific, and very different, structures for which they are responsible, have highly divergent competences, powers and responsibilities and act on the basis of a national mandate - is capable of ensuring the proper supervision of large multinational financial groups. One wonders whether the system is sustainable and whether it might perhaps jeopardise the financial stability of the European system itself.
Thirdly, I would highlight the peculiarities of the European Union's financial system, which is characterised by diversity and by the wealth of operators, be they local - local banks, for example - or actors operating across frontiers, on both sides of the Atlantic and on the global stage. That calls for a solid, efficient and well-adapted supervisory framework capable of responding to the challenges of regional integration, of globalisation, of innovation and of centralised management, while at the same time providing a high standard of supervision and ensuring that the system is sound and stable.
Fourthly, I would point out that improvement of the supervisory systems is in the interests of all the players - primarily, of course, in the interests of the system itself, but, secondly, also in the interests of the participants in the market, who are asking us to improve the supervision system in order to facilitate their operations on all markets. I am persuaded that the end user will also have an interest in the improvement of the system.
Fifthly and finally, the issue of European excellence in regulatory matters does have a transatlantic dimension, and it is with that in mind that it appears to me that the time has come for us to move forward.
I will sum up by saying that, in view of these observations, we, as Europe's lawmakers, face a major challenge: that of endowing Europe with solid and efficient prudential structures capable of ensuring the proper supervision of all financial actors, be they large multinational groups or high-street banks, and capable also of making supervision contribute to the competitiveness of the European model on the world stage.
The question therefore arises as to how to go about doing this: are we to set up a committee of wise men, or are we to consider that it is on an interinstitutional basis that we might perhaps be better placed to put the collective European intelligence to work? That, in any case, is the message that this House wants to convey in this debate today, and I am very grateful to the Council and the Commission for allowing the debate to be held in Parliament.
Günter Gloser
President-in-Office of the Council. (DE) Madam President, Commissioner, ladies and gentlemen, Mrs Berès has just raised a number of important issues in her speech, including with regard to financial services. I can assure her that the Council considers this aspect to be of key importance.
I should like to underline once again that the European financial system is also regarded as making an important contribution to the Lisbon Strategy and plays a pivotal role in strengthening the financial-stability framework in the EU. What is equally important, however, is that the efficiency of financial supervision be enhanced without encumbering the financial sector with an excessive supervisory burden or restricting competition. Allow me to draw attention to three key points in the Council conclusions mentioned.
Firstly, the Council stressed the importance of fair and non-discriminatory national supervisory practices to achieve a level playing field within the EU. It also attached importance to striking the appropriate balance of home/host country responsibilities, and emphasised once more the importance of an adequate and independent financial supervision to ensure financial stability.
Secondly, the Council invited the three level 3 committees to take into account the obstacles identified in the course of their work and in their reports, and also the report by the Financial Services Committee (FSC) on supervisory convergence, in their endeavours towards convergence of rules and practices. It is particularly important in this regard that they work on common formats for financial institutions reporting to supervisors, in order to avoid duplication of costs.
Thirdly, the Council declared its support for the Commission's intention to use its powers to also ensure compliance with the rules on competition and state aid. The Council considers it a priority to support the work of the three level 3 committees, for which they need suitable supervisory tools. The Council conclusions of May 2006 also contain a comprehensive short- and medium-term action plan for this field, based on a report by the Financial Services Committee. The thoroughly revised supervisory rules for insurance and securities firms and banks constitute a milestone, providing a new basis for cooperation between supervisors to the benefit of the financial stability and competitiveness of our financial industry.
The FSC report indicated three challenges revealing the need for further action. I believe that these challenges will be particularly significant in the immediate future. Firstly, supervisory convergence and cooperation must be further strengthened. Secondly, the efficiency of the supervisory regime must be increased and, thirdly, international supervision must be improved in view of the growing number of cross-border financial groups.
In the light of these challenges, the action plan approved by the Council in May of last year comprises a combination of several tools. These are aimed at fostering the creation of a European supervisory culture, a mediation and delegation mechanism, and also electronic data-sharing arrangements and common formats for reporting. I note that this last aspect has been emphasised also at European Parliament level, in the Muscat report. I welcome the convergence of views on this, too.
The Financial Services Committee has been asked to monitor the progress achieved by the three level 3 committees in implementing the various tools, in particular.
The FSC has also been instructed to monitor the convergence of supervisory powers at an adequate level. I know that the Commission is also devoting considerable attention to these aspects, and am confident that Parliament, too, will support this process within the framework of its dialogue with the level 3 committees. Further insights are expected as a result of the work of the Interinstitutional Monitoring Group.
I should now like to move on to the long-term prospects and the matter of tackling regulatory issues. Besides the existing challenges that have already been mentioned, the FSC must take into account issues arising from market developments when establishing long-term, strategic priorities. In this regard, the FSC recently set up a new sub-group, which is due to present a report on long-term supervisory issues by autumn 2007. This new strand of work will be based on the following bottom-up approach: further fundamental changes in supervisory tasks should be made only where there is proof of problems.
I should also like to emphasise that the overall issue of supervisory convergence must be seen in the context of the consolidation of markets and financial institutions. For this reason, I am particularly pleased that Parliament and the Council managed to agree, in the first instance, on the text of the Directive on the supervisory assessment of acquisitions in the financial sector as early as March. This is a clear indication of our common determination to improve the EU framework for the day-to-day work of our supervisory authorities.
Finally, I should like to emphasise that we must take account of all the challenges of this kind facing the EU bodies in the fields specified. These include strengthening financial stability by means of supervisory arrangements and procedures, and also fostering European competitiveness - both of which benefit from facilitating the consolidation of our financial industry. The process of doing so must also be conducive to the protection of consumer interests. The Council is working together with the Commission on all the aspects specified, and we also welcome the strong interest of the European Parliament, which is also demonstrated by this debate. I should like to express my particular thanks for Parliament's commitment to promote further progress.
Charlie McCreevy
Member of the Commission. Mr President, honourable Members, the European financial sector has changed dramatically over the last few years. Capital markets have expanded and are increasingly integrated. New investment techniques have emerged. The consolidation of the banking sector has accelerated. Pan-European conglomerates now play a major role on all national markets.
These changes are positive for the efficiency of our financial industry and should be welcomed. But they also present new challenges to policymakers. We must ensure that our arrangements for financial supervision are adapted to the needs of a more integrated EU financial sector. This is vital for financial stability and for the competitiveness of our industry.
Greater cooperation and convergence between European supervisors is of utmost importance in this context. It has been one of my priorities since I joined the Commission and will remain so until the end of my mandate.
Let me briefly recall what the Commission has already done to foster a more effective and efficient supervisory system in Europe.
Under the Lamfalussy process it has created European committees of supervisors in the areas of securities, banking and insurance. These committees have already led to greater supervisory cooperation and more convergence in supervisory practices. I expect them to continue and accelerate work in this regard. It is crucial for achieving coordination in crisis situations.
The Commission has pushed for more streamlined supervision of large financial institutions, in particular through the establishment of the consolidating supervisor concept in the capital requirements directives. The consolidating supervisor is responsible for ensuring proper information exchange between supervisors, central banks and finance ministries in the event of a crisis. His role is key and I therefore intend to propose further and more ambitious steps towards consolidating supervision in the area of insurance in the framework of the Solvency II project.
In investment services, we have the principle of more central control, with some limited exceptions for branches.
In order to deal more specifically with financial stability issues, my departments have set work in motion on five interconnected areas on which clarity is required if we want to improve our ability to respond to financial crisis. These are liquidity arrangements, crisis management, lender-of-last-resort issues, deposit guarantee schemes and the winding-up of financial institutions. There will be a Commission conference on these matters on 26 June, in which Mrs Berès, as Chairwoman of the Committee on Economic and Monetary Affairs, will also take part.
The Commission's efforts have to be seen in conjunction with the work undertaken in the Ecofin Council. A crisis-simulation exercise took place in 2006. As a follow-up to that exercise, the Council will reflect in 2007 on how better to address cross-border crisis situations and clarify burden-sharing arrangements. In addition, the Financial Services Committee has initiated work on issues related to improvement of supervisory efficiency.
The Interinstitutional Monitoring Committee on the Lamfalussy process will also complete its final report in 2007. I hope it will contain useful recommendations as to how the committees of supervisors can improve their work and deepen their cooperation. This would place them in an even better position to address possible financial stability issues in the future.
Towards the end of this year, the Commission will also produce its own assessment of the way in which the Lamfalussy process works. Clearly, the functioning of the committees of supervisors will be a crucial aspect of this overall assessment. I look forward to hearing Parliament's views.
I am convinced that through close cooperation between Parliament, the Council and the Commission we can move this debate forward. Conclusions will need to be drawn from the various ongoing activities. I am open to suggestions on how to go about this. I think, however, that it would be too early to create a committee of wise persons at this stage. I would rather await the completion of the different initiatives later this year before envisaging the next move.
Let me conclude. EU financial markets are strong. We do not have a broken supervisory system in need of repair. Major progress has been made over the last few years in terms of modernising EU supervisory arrangements, but further improvements are also necessary. They are the consequence of integration. On this we are all agreed. We should continue our efforts to make the Lamfalussy structure the regulatory vehicle for delivering the effective, efficient and converged supervision required by a single market in financial services. Work has been set in motion in order to determine how the Lamfalussy structure and our financial stability arrangements can be further improved to meet the demands that arise from closer European integration.
I look forward to discussing with Parliament in due course what precise initiatives may be required to respond to the problems that have been identified, so as to equip our European financial sector with the best possible supervisory system. This is critical, because top-class supervisory and regulatory structures are crucial for long-term EU capital market competitors in the global economy.
Karsten Friedrich Hoppenstedt
on behalf of the PPE-DE Group. - (DE) Madam President, it is good that Mrs Berès' question on the Committee on Economic and Monetary Affairs is being discussed and answered here today. This follows on seamlessly from the Muscat report, and also from yesterday's debate in committee - in which the Commissioner also participated.
The crisis simulation with a view to reviewing financial stability in the EU that was presented at the Ecofin meeting in Helsinki last September has indeed revealed shortcomings. This scenario - that is, constantly evolving financial instruments such as hedge funds and derivative financial instruments - illustrates the need for further debate that takes sufficient account of consumer security. Thus, we need a system of functional, interlinked supervisory rules and practices in the EU.
Consumer protection, an effective financial industry and stable financial markets constitute the supreme objective of financial supervision, which must also help the industry fully utilise its potential and creativity. Therefore, good supervision must be guided by the existing risks and must take a principle-based approach instead of devoting itself to detailed individual analysis. It must not impose any additional burdens on enterprises, the rules must be developed in close contact with the financial industry, and cross-border financial markets must be dealt with at pan-European and global level in equal measure.
Supervision should be limited to what is really necessary and useful. Existing measures should be used in a more cautious, more market-friendly way, avoiding imposing unnecessary burdens. At the present time, I strongly oppose a centralised European supervisory authority additional and parallel to the national supervisory authorities, as this would cancel out the EU principle of subsidiarity and lack any democratic legitimacy. Not only would a body such as this meet with a lack of understanding on the part of many, particularly as it would create additional non-transparent bureaucracy, but it would also be accompanied by a serious loss of sovereignty for the Member States, as it would disregard national budgets in the case of crises.
Let us first wait and see how the supervisory bodies of the newly formed 27 come together and do their work. We do not need a uniform, centralised supervisory structure, but we do need a common supervisory culture characterised by the same values and objectives.
Joseph Muscat
on behalf of the PSE Group. - (MT) There has been constant reference to a report drawn up by myself, dealing with this area in detail and approved by this Parliament.
This report, which has now been adopted as the position of this Parliament, contains an analysis of a situation that is becoming ever more acute. One of the most important points is the fact that different practices and levels of supervision exist at national level. From a European perspective, this signifies a reduction in market efficiency, as well as further operating costs for institutions that operate in different countries. The report questions whether the present system ensures the effective supervision of large groups that operate in various countries and sectors. We even requested a more detailed examination of the European Social Model at the level of prudential stability and crisis management structures. We agreed on the need for an effective crisis management system at European level. The current market development trend means that a crisis, even if initially originating in one country, can quickly spread to other countries.
The reaction to a crisis such as this one is becoming increasingly complex because of the large number of institutions involved and the lack of clarity about what their role consists of. European consumers and investors are ultimately those who suffer the most from lack of action in this sector. Within this framework, Parliament agreed on the need for a committee of experts to study these implications and report back with their recommendations.
I am well aware that there are different opinions on this initiative and on the form it ought to take. However, I believe that the time has come for a full debate on the matter, with all the institutions participating. What we do not need is for everyone to try to leave each other out of the debate when it comes to deciding what shape the supervision of European financial markets will take. I believe we must focus our efforts more on the urgent need to debate this point, and stress that we have no time to lose.
Margarita Starkevičiūtė
on behalf of the ALDE Group. - (LT) I would like to say that perhaps most countries have a saying about starting preparations for winter during the summer. As we discuss this issue, we would like to remind the European Commission and Council of that old truism. Because up to now we were always told that working groups would be formed and this question would be discussed. Without a doubt, consolidation has its positive aspects; however, with it comes an increased systematic risk in the market. Financial groups operate in all European Union countries and quite often dependence on their activity and the influence of their activity is quite high. When we talk about reforming supervisory processes, we must first ask ourselves something that I usually ask the heads of European supervisory bodies: if a subsidiary firm is operating in a certain country, and because of its unsatisfactory operation, that country's economy is starting to suffer, who will pay? Who will be responsible? Which country's legislation will apply? Another question. If a crisis situation develops in the subsidiary firm, how will it be managed? At the national level or the financial group's level? Unfortunately, as yet we have no answer to these simple questions. I am quite pleased with the information that Council and Commission representatives supplied for us in relation to what is being done; however, once again I would like to stress that as new risky products find their way onto the market, we must speed up all processes and get together to resolve the basic issues, and not to get lost in details, because talking about various types of coordination and suchlike is all very well, until a crisis develops. The reference point for our decisions about reforming supervisory processes has to be what we would do in a crisis situation.
Piia-Noora Kauppi
Madam President, I would like to thank the Chairwoman of our committee, Mrs Berès, for her timely contribution. We started discussing the van den Burg report in committee this week, and one of the key topics also in the post-FSAP agenda is how to develop a good supervisory system for Europe. It is very important for us to hear what the Council and Commission think about the future in this joint agenda.
The Financial Services Action Plan is now more or less complete, so the focus is now on implementation and supervisory convergence. We think that even though national regulators have already been able to develop quite good practices, the work must go on, and beyond the Lamfalussy committees. It is for example very positive that we now have colleges of supervisors handling big, multi-jurisdiction, pan-European cases, but sometimes these colleges lack authority; they do not have enough resources; they do not take enough majority decisions, for example, so it would be very good if we could consider more qualified majority voting in Level 3 committees as well as in the colleges of supervisors.
I would also like to point out that in Mrs van den Burg's draft report we have promoted a new idea that, for top pan-European players, we should have a well-equipped European supervisory authority inside the system. We would like to create a European supervisory authority, but it should not be outside the scope of the Commission's current sphere of responsibility. It should be inside the system. I think this idea could also be considered by the Commission.
Finally, it is also important to develop cooperation at global level. We know that the financial risks and prudential challenges are not only European, but also very much involve the big market players in America, and so on, so it is very good that the Commission has taken this financial services dialogue with transatlantic partners seriously, but there needs to be continual further development.
Charlie McCreevy
Member of the Commission. Mr President, I would like to thank all the Members for their very valuable contributions.
As I said earlier, the development of financial supervision is of critical importance. A stable financial environment is a prerequisite for the economic growth that the EU needs, and the protection of consumers. So the prevention of financial crises is important. Supervision needs to be as efficient and effective as possible. We need to make practices of national supervisory authorities converge in order to minimise the burdens on cross-border firms. We need a common supervisory culture: more supervisors doing more things the same way.
These are important issues that I look forward to working on with you.
President
The debate is closed.
