16 May 2008
Paris EUROPLACE meets high level delegation from the City of
London
Paris, May 16, 2008. In the context of the
French Presidency of the European Union beginning of July 2008,
Paris EUROPLACE and the City of London have met to discuss and
defined their common vision and priorities. A joint committee was
co-chaired by Michel Pébereau, Chairman of BNP Paribas and André
Villeneuve, Chairman of City of London EU Advisory Group, and was
joined by City of London Lord Mayor David Lewis and the City of
London Corporation’s Policy Chairman Stuart Fraser, during their
official visit to France prior to the EU Presidency.
A consensus was reached on the way ahead for European financial
integration and on the framework of priorities to be delivered in
order to lead the global competition. Overall it was deemed
necessary to improve the conditions of the European integration
whilst respecting global best practices and avoiding overregulation
and bureaucratic processes: there are a number of important areas
(insurance, asset management, post-market activities, enhancement
of the Lamfalussy process…) that require both new measures combined
with the need of a convergent implementation of texts and practices
born from the completion of the 2000-2005 program (FSAP).
Lord Mayor David Lewis, who is the global ambassador for the
UK-based financial services industry, said “Despite current world
turmoil, financial markets are still the key to economic growth and
there is no way to avoid the fact that in a globalised world our
financial services must be competitive on a global basis”.
Policy chairman Stuart Fraser, whose elected role to the City
centres on issues such as working with Europe, said: “the key
priority is: furthering Europe’s integration, in order to take
advantage as soon as possible of the domestic market of 500
millions citizens and in turn strengthening the global
efficiency”.
Furthermore, Michel Pébereau adds that “in order to increase
European financial services’ global competitiveness, targeted
harmonisation initiatives should be launched on following topics:
asset management, insurance, retail banking and post trade”
Two important areas of concerns highlighted under the French
Presidency:
First, in order to ensure financial stability, the EU regulatory
framework must secure closer supervisory coordination. The
Lamfalussy process must be improved following the "better
regulation" principle. Member States should urge their national
regulators to integrate the EU dimension in their mandate and
increase their convergence of practices and their level of
information sharing, including the "comply or explain" principle.
Even if the implementation of this process is globally a success,
the three Level Three committees, should be gradually reinforced
with regards to resources, decision making rules and visibility.
Especially in the view of a more efficient prudential supervision
of pan European groups, the priority shall be given to the
functioning of the college of supervisors and to a lead home
supervisor concept. CEBS should be given the task to monitor
coherence between those colleges.
As far as the global dimension is concerned, mutual recognition
is a good approach. It should be pragmatically applied, on selected
topics and on condition that common principles maintain a level
playing field between defined areas. This process should be driven
according to a European framework and on the basis of compatible
local regulatory practices. In any case, Paris EUROPLACE and the
City of London support the multilateral dialog approach, which
involves a step toward the mutual recognition.
Secondly Paris EUROPLACE and the City of London have identified
five business priorities for 2008:
- Asset management: UCITS IV Directive is a major priority in
order to finalise the global competitiveness of the European fund
industry. Three areas should be improved: enhancement of the
“product” passport (faster and simplified procedures), including
cross-border master-feeders and transnational UCITS mergers, a
coherent and simplified prospectus, and most importantly the
implementation of a full passport for fund management companies.
It’s essential to ensure that the UCITs framework fosters financial
innovation.
- Insurance: The reform of the prudential framework with the
Solvency II Directive is a major step forward and a top priority.
It will modernize the measurement of insurance risks in order to
ensure highly harmonized protection of consumers and the
competitiveness of European financial actors. It should be based on
economic prudential requirements, allowing better capital
allocation, including at group level, and it should bring
improvements of risk assessment and management by insurance
companies. It should be based on economic prudential requirements,
allowing better capital allocation, including at group level, and
it should bring improvements of risk assessment and management by
insurance companies.
In this respect, crucial choices will have to be done to ensure
that the new reform will effectively really modernize the insurance
supervision and take into account risks appropriately:
-
- The minimum capital requirements (MCR) calculation must use a
risk sensitive methodology in line with the Solvency Capital
Requirement (SCR).
- The economic assessment of the risks and requirements
concerning groups must be carried out at the consolidated level.
The respective powers of the supervisor of the parent company and
the supervisors of local subsidiaries will have to be organized
consequently in a rational manner.
- The principle of risk assessment on a one-year view proposed by
the European Commission must be implemented appropriately to
companies over long term risks in order to avoid detrimental
effects for the consumers
- Accounting standards: The convergence of global standards is a
common objective. Nevertheless, the recent crisis showed the
weaknesses of the full fair market value approach. The evolution of
such global standard should respond to the users’ needs. In
particular the industry is opposed to the extension of fair
valuation to the banking book. Consequently, the governance of the
IASB board should be adjusted to take on board such needs and be
articulated with national or regional processes integrating those
standards. Furthermore, the IASB board should enter into a
constructive dialogue with the industry.
- Pensions: it is suitable to develop pan European pension
products, with a harmonized and economic based prudential
framework. This is a key issue for answering the needs of European
citizens and for the European economic growth.
- Retail banking: harmonisation of consumer protection rules is
key to provide more choice and to reduce prices for retail
financial products. Therefore a targeted harmonization process
should be a prerequisite to trigger more progress in the European
retail banking market.
- Post-trade: In this area Europe is still too fragmented and not
competitive enough. There is a view that the Code of Conduct will
fail to deliver all initial expectations. Recent initiatives and
evaluation process will come to a conclusion in a few months, but
it appears that the interoperability and the segregation between
general interest and commercial functions, which are the main
issues addressed by the Code, may not be reached. On this basis
major orientations should be decided before the end of 2008, such
as the Legal Certainty Group’s proposals on securities Law. This is
expected to solve some Giovannini barriers and improve
interoperability conditions for market infrastructures. Those
proposals should be driven by effective cost reductions, precise
governance principles to manage the relevant projects in the
interest of all parties concerned and assuring its ability to
evolve at the right speed to respond to users’ needs.
To enlarge this level of consensus, Paris EUROPLACE and the City
of London agreed to set up few task forces to identify and document
specific issues on critical and important areas. Those task forces
will address the following topics:
- alter UCITs
- transatlantic dialogue
- pension funds
- post-trade
- accountancy standards
Press contacts:
Arnaud de BRESSON
Paris EUROPLACE
Managing Director
Tel : +33 1 49 27 11 44
email:
bresson@paris-europlace.com
Susanna HOWARD
City of London Corporation
Press Office +44 20 7332 3450/ +44 7824 343 456
Susanna.Howard@cityoflondon.gov.uk