'IASCF: Review of the constitution - Public Accountability and the Composition of the IASB Proposals for Change' (debate) 
President
The next item is the oral question by Pervenche Berès on IASCF: 'Review of the constitution - Public Accountability and the Composition of the IASB Proposals for Change' (B6-0463/2008).
Pervenche Berès
Madam President, Commissioner, when it comes to financial reporting standards this Parliament now knows that you have a certain capacity for creativity, for setting up 'do nothing' committees. When at the start of this legislative term we questioned you about the statutes and role of EFRAG you invented the Roundtable and everybody now knows that it has not fulfilled its remit.
Faced with proposals from the IASCF trustees about establishing a monitoring group, and as soon as some of the members failed to agree with your plans, you put forward the idea of setting up an international accounting advisory group.
Parliament has now got used to your practices. When we informed you of this, by taking the initiative for a report on questions relating to IASCF governance, you rushed off to officiate, with your Japanese and American colleagues and with IOSCO, by preparing a press release on 7 November 2007 in which you claimed to be arbitrating in all the problems of governance, rather than awaiting the opportunity to be able to act on the legitimacy and authority of a position taken by the democratic representation of the European Union, or to spell it out the European Parliament.
When Parliament drew up this position on the initiative of our rapporteur, Mr Radwan, you preferred in March to put the debate back to April for reasons that concern you and for which you take sole responsibility.
When, on the strength of the April proposals, you had the momentum and the opportunity to officiate on what could have been the European Union's position on the international stage, and to do so on the basis of paragraph 9 of this resolution, which I now read: 'notes that in the abovementioned combined statement of 7 November 2007 the Commission seeks - as it did when it concluded a roadmap with the US authorities in April 2006 - to preempt solutions where it would be preferable, in the interests of effectiveness and legitimacy, to have an open consultation process and debate, to which this resolution could be a contribution', you preferred, in the secrecy of your private cabinets and departmental offices, to devise a solution without consulting either the Council or this Parliament.
Commissioner, what have you been doing since 24 April, when we voted on this resolution? Back then we asked you about the role of the IMF and the World Bank. Other Members since have questioned you about the activities of the Basel Committee, the European supervisors, in the monitoring-group structures for the IASCF. Faced with such a problem you have yet again come up with a 'do nothing' committee, namely the international accounting advisory group.
You tell us that this monitoring group should not be increased in size because that would dilute its authority and we would no longer have the power to guide the trustees. The proposal from the trustees rests on a line-up of seven members. Your proposal is based on a team of five, plus one observer and two members whom you would put on this consultative body, this international committee of auditors.
Our proposal is to consolidate the group of seven being suggested by the trustees by including what is necessary. The argument as to the number is irrelevant since, at the same time, there is a further proposal to increase the number of members on the International Accounting Standards Board itself, thereby taking it from 14 to 16.
We therefore have two things to say to you today, Commissioner. Firstly, if you really want to reform the governance of the IASB then we are in agreement, for we were the ones that asked you to do it, but please consult us, involve us, and do it from the start, not at the last moment. Do not tell us that you had urgent work to do in August, when we have been asking you for this since last autumn and you have been aware of Parliament's position since April.
What is more, we are telling you that the IASB and IASCF work programmes include a second phase in which the entire instrument has to be reviewed, including the conditions under which the IASCF is to be set up, and we would suggest that you make the most of this moment to lay down clear conditions for the stability and governance of this entire mechanism so that we will finally have a system of governance that is equal to the issues that we are faced with today. Or to put it in clearer terms, what accounting standards do we need in order to establish a financial market where the interpretation of the financial reporting standards is on the same wavelength as the economic reality of the situation that is facing us here and elsewhere?
Charlie McCreevy
Member of the Commission. - Madam President, the need to improve the governance of the International Accounting Standards Board (IASB) is something that has long been recognised by the Commission, Parliament and the Council of Ministers. I have highlighted the importance of this on numerous occasions. I have been critical of the IASB's lack of adequate consultation and feedback procedures, as well as the lack of impact assessments for new standards.
Given the IASB's de facto role as a global standards setter, it is imperative its governance procedures are up to the highest standards. I want to get to the situation where we can adopt IFRS standards in the EU with full confidence that the process and content of these standards are exemplary. That is why, when I learnt that a revision of the constitution of the IASCF was envisaged, I set as a priority the improvement of governance.
You will recall last November, with my counterparts in the US Securities and Exchange Commission (SEC), the Financial Services Agency of Japan and the International Organisation for Securities Commissions, I proposed the creation of a monitoring board to ensure the public accountability of the IASCF.
We have made some good progress on this. The IASCF has recently proposed modifying its constitution in order to enter into a formal relationship with the proposed monitoring board. It accepts that this Board must have the power to participate in the nomination process of the IASCF Trustees and have the ultimate power to approve their appointment. It also accepts that the monitoring board will be able to address any area of work of either the Trustees or the IASB and refer them for consideration by the IASCF Board of Trustees or by the IASB.
The IASCF intends to reach a conclusion about these matters in early October, with changes to the IASCF constitution entering into force from 1 January 2009. This will, in particular, allow the monitoring board to become operational early in 2009. That is why I consider the time is now ripe to firm up on these proposals. If we leave it too late, we will not be able to reopen the governance issues.
The ongoing financial turmoil emphasises the need to ensure that accounting standards reflect the objectives of prudential supervision and financial stability. It has not proven possible to get agreement to have bodies such as the ECB in the monitoring board. As a compromise, we could envisage, in these new arrangements, that there would be an international accounting advisory group to advise the monitoring group on prudential and financial stability matters. This group should include both the European Central Bank and the Committee of European Securities Regulators and, no doubt, other relevant international bodies. Again, I am grateful to this House for having emphasised the importance of prudential supervision and financial stability in its resolution of 24 April.
In exercising its eventual role in the monitoring board, the Commission must also represent the other European institutions, in particular this House. To do so effectively, I would propose to draw up consultation procedures with the European Parliament. These procedures could, if necessary, be formalised in an appropriate form.
I have endeavoured to ensure that key MEPs were kept informed by my services about the evolution of this debate. It was, however, brought to my attention today that there was a lapse in this communication. Apparently, in preparing our position, events that took place towards the end of July were not communicated by my services in the usual manner, because of the holiday period. I know that there is widespread dissatisfaction in this House about the fact that you were not properly consulted during the elaboration of our proposals. I am also dissatisfied by this fact and have given clear and firm instructions to my services not to repeat such a mistake again. I believe my Director-General has been in contact with Mrs Berès to try and explain this omission. I hope that this oversight will not jeopardise the common goal we have both been striving for, namely, a better governance regime for the IASB.
With some further improvements, I am confident that these enhancements to the IASCF's governance will improve the quality of accounting standards and ensure that they meet the needs of all stakeholders - including the European Union, which to this date remains the largest user of IFRS.
The reform of the IASCF governance currently being contemplated represents a step change in the accountability of this body to public authorities, something this House has repeatedly called for. I appeal to the European Parliament to support our proposals as the best way to ensure that this reform achieves real influence.
Jean-Paul Gauzès
on behalf of the PPE-DE Group. - (FR) Madam President, Commissioner, ladies and gentlemen, we have just heard the Chairman of the Committee on Economic and Monetary Affairs express the real views of those Members who are interested in this issue. As has been underlined, everyone is aware of the importance of financial accounting standards and of the reforms that have been announced. The time has now come, Commissioner, to clarify and put into action the comments that you have made.
I have a suggestion to make: this resolution is a rigorous one and it needs to be, but there is no need to kill the sinner. What we could in fact do is to take a few days respite in order to establish a protocol between the Commission and Parliament that would clearly define the extent to which Parliament has to be kept informed, its level of involvement in this matter and the positions that it takes up, and to this end we need to postpone the vote for a few days. This is the proposal that the Group of the European People's Party and European Democrats will put forward tomorrow, namely that the vote on the resolution be postponed in order that Parliament and the Commission might be able to cooperate properly on this important subject. Obviously if nothing is forthcoming during this interval, and in order to make up for lost time and the possible lack of information, we shall be obliged to vote on the resolution that is being tabled today, with all the tough decisions that this will entail.
In the midst of the difficult circumstances that are now being imposed on us by the current financial crisis, which is not something totally unfamiliar as far as accounting standards are concerned, I hope that everyone of us will understand that we have to find a quick and practical solution that will help steer developments in the required direction.
John Purvis
Madam President, I have to admit to the Commissioner that I am really quite confused by what has been going on with this case. I had heard nothing about it until literally this week and suddenly I get deluged with approaches, both from the IASCF and from the Commission, trying to persuade me one way or the other as to whether the IMF should be included in the monitoring group. I think this is a rather unsatisfactory way to proceed with what is essentially almost a piece of legislation, so I would ask the Commissioner if we could not delay this a little, get it sorted out and come back to it perhaps at the October mini-plenary.
I would like to suggest that I do not see that adding the IMF and the World Bank to this monitoring group would make it that unwieldy. It seems to me they would cover the rest of the world in a rather satisfactory manner. I do not really see that there is a need then to have yet another accounting advisory group that advises the monitors that monitor things. It is like the house that Jack built. I wonder whether they could not in any case consult quite readily, unofficially, if they ever need to do so. I wonder if we could have some discussions over the next couple of weeks and end up with a vote, possibly in a more satisfactory manner, at the mini-plenary in October.
Zuzana Roithová
(CS) Commissioner, today's world financial crisis reveals how important fair value, the real value of a company, is for the healthy functioning of financial markets. This is vital information for shareholders and creditors. A monitoring committee could make a contribution to better transparency and comparability of financial reporting and thus to the personal responsibility of shareholders for correct economic decisions. International standardisation clearly leads to the development of cross-border capital markets and, therefore, in the interests of stability, the monitoring group should also implement preventive measures against cyclical trends and help to prevent systemic risk. Of course, the proposal to establish the group has not been subject to questioning. Its powers have not been explained, for example whether it will also have a supervisory function. I also consider it important that every country should have a delegate in the proposed monitoring group, which must also include representatives of important institutions so as to reflect the size of the most important world monetary areas, cultural diversity and the interests of the developed and developing economies and international institutions that are answerable to public bodies. It is a pity that Parliament was not consulted in advance as a matter of course.
Pervenche Berès
author. - (FR) Madam President, Commissioner, what have you done since 24 April about taking account of Parliament's position? What have you done since 24 April about debating with Parliament on finding effective solutions for handling the governance of the trustees? We know full well that the IASB is a drunken boat at the hands of auditors who have produced these so-called 'fair values', and no one knows how they have been elected when there is no longer a market to supervise.
As a result, today we are being asked to discuss the subject of IASCF governance. You are proposing to us in haste - and at a time when we are putting to you quite reasonable solutions whereby the governance of these structures might be incorporated into a global and accountable system of governance - that advisory committees should be set up. Is this reasonable?
I do not believe that this question will be solved simply by involving Parliament in this or that stage of the process. The proposal that you are putting to us for the governance of the IASCF is not satisfactory. We look forward to receiving another proposal from you and possibly will have to await the second phase of the consultation exercise and, if necessary, the review of this governance process.
Charlie McCreevy
Member of the Commission. - Madam President, at my stage in life, I do not get very surprised too often, so I am not the least bit surprised at what goes on here in the European Parliament and the views of some people.
Can I just say in all of this particular debate, let us just remember one small thing. The IASCF and its underlying constituent body, the IASB, is an independent organisation.
(Inaudible interruption from the floor)
I just want to put the facts on the table. They are totally independent but they have de facto become the accounts-standard-setting body for the globe because IFRS, which came out of the IASB, has now become the de facto worldwide accountancy standard. I have to point out that this is an independent body; since we in Europe have adopted IFRS - a decision made before my time by the Commission and to the satisfaction of the European Parliament - we are the largest constituency that has IFRS today. This position may change as the world moves over more to IFRS. We might not then be the largest any more, but we certainly are the largest current user of IFRS.
For some time, with the support of the European Parliament, we have been endeavouring to improve the governance arrangements of the IASCF trustees, noting that they are an independent organisation.
We have made some progress in the past, and the IAS recently announced that they were going to have a review of their own constitution. So we are availing ourselves of that opportunity to make our submission. We have no right to impose our view on the IASCF - this is up to the independent trustees - but we are making it our submission to improve the governance arrangements. I would just point out this basic fact before everybody, as we might say in Ireland, 'loses the run of themselves' in this particular area. That is the de facto and de jure situation.
The IAS trustees are intending to bring in their new governance arrangements, having considered all the submissions, in early October. The closing date for making our submission has actually passed by a few days. It was to be 20 September, and the date today is 24 September. We waited to submit our final result. We have been in informal consultations with them for some time, so they know, really, what we are going to propose, but we waited for Parliament's resolution for the courtesy of doing that. So we will have to submit our formal proposals in the next few days.
It is entirely a matter for Parliament as to what you want to do with this particular recommendation. Mr Gauzès has put forward a reasonable approach about taking a few extra days perhaps to work out a protocol about Parliament's participation in the process which I am endeavouring to set up.
As regards the monitoring board idea, which we announced last November, it is not possible for everybody to be represented on the monitoring board. It will not be acceptable to the trustees of the IASCF, and, if they say absolutely no, then that is that. So we proposed a kind of a way around this by having relevant people, relevant bodies, in this advisory group. I am not hung up on any particular strong views as to how it should be organised or who should be on it. I do not have any views about that.
I only learned today that my services have not been in constant contact with relevant Members here in the European Parliament in the past month or so. This was news to me, because I thought my officials would have been keeping contact the whole time with the people here who take an interest in this particular subject, but I find out today that did not occur. In my former remarks, I said that I regretted this, and that I had given directions that it should not happen again; we want to cooperate. No more can I do.
Mr Purvis, it is not as though Parliament can delay until any time it likes - mid-October or beyond - but if I want the European Commission to have a say, I have to submit our formal proposals regarding our ideas about governance to the IASF board forthwith. They will not agree with some of them. As Mr John Purvis says, he has been lobbied for the last two days by various actors in this particular scene as to what they want to achieve.
From reading the resolution as it is drafted, there is one definite peculiarity about this, which I think should not go unnoticed, particularly by Mrs Berès who has long been an advocate of greater governance and accountability of this particular IASB body. The peculiarity of the resolution is that it would do exactly what the trustees actually want and reverse what we are trying to do in getting more governance. That is the peculiarity, but the matter of the resolution is entirely a matter for the European Parliament, not a matter for me. I would just make that particular comment in passing, because there are people among the IASB trustees who are not too anxious to accommodate some of the more far-reaching governance arrangements that we are proposing for them. There will be a fair degree of resistance. We are reliant on the existing trustees to take account of our concerns and to improve these governance arrangements as we think fit. We are not in the position, because we only submit these things, to make demands and say it has to be like this, but we have had contacts and they know what we are going to propose. They are not happy with some of what we are going to propose. I am aware of that, but we are trying to get this improved governance.
Not that I am ever surprised by what happens in the political arena, as I have been well over 30 years in this field, but it will be ironic if, after we have got this far over the years in getting our way on two things - namely that the IFRS has become an international standard and that, now, as people here know, the United States is proposing that IFRS be available to US companies (something I predicted would happen about two years ago to the relevant members of the relevant Parliament committee and was more or less laughed at that this would ever occur, and it has) - this body that has been demanding with us and pressing us to get increased governance and accountability from this particular body is, at this particular stage and according to some people, actually going to do quite the opposite. I just think it is a little bit ironic, but I hope I have explained this as best I can.
President
I have received one motion for a resolution pursuant to Rule 108(5) of the Rules of Procedure.
The debate is closed.
The vote will take place on Thursday, 25 September 2008.
