| Single market in financial services should be given high priority and increased urgency |
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| Report highlights the need for a new political push for financial services integration in Europe and claims that consumers are loosing out because of the slow pace of change. |
‘Careful’ regulation of financial services in European member states and the sluggish integration of the financial retail markets are leading to reduced choice, higher costs and lower economic growth throughout the European Union. These findings come from a new report commissioned by the European Financial Services Round Table organisation and chaired by Paolo Cecchini.
The report predicts that a truly integrated market for financial services could add between 0.5 and 0.7 percentage points each year to economic growth in the European Union. And in the European mutual funds area alone the findings suggest that there are potential savings of E5 billion to be made through integration.
The report, entitled ‘The benefits of A Working European Retail Market for Financial Services’ and authored by Friederick Heinemann and Mathias Jopp, identifies a number of obstacles that currently impede the development of unified financial markets in Europe. Among these are policy-induced obstacles like different taxation, consumer protection or supervision arrangements that are capable of alteration, and there are natural obstacles like differences in language and culture that can not realistically be addressed by national or European policymakers.
The report recommends a more harmonised regulatory structure would help to dissolve the barriers and proposes continued discussion on the possible advantages of a two tier supervisory system where multinationals could opt for supervision on a European level. It also recommends that more thought be given to the establishment of single European supervisory authority if effective co-operation among 25 to 30 national agencies after enlargement becomes too difficult.
Discriminatory tax policies were criticised by the report, as they currently shelter some national financial markets from foreign competition, and do not conform with the EU Treaty. Examples concern the markets for life insurance and investment funds. And in the funds industry the outdated definition of UCITS in the directives was seen by the report to limit cross border marketing of innovative fund products.
Commenting on the report Pehr G. Gyllenhammar, chairman of the European Financial Services Round Table said ‘Completion of the single market will require not only radical thinking, but also strong management of the extensive changes needed, both in the regulation of the industry and also in its operations. Given the considerable benefits which can be achieved and the costs of standing still, it seems clear that the initiatives required to complete the single market in financial services should be given high priority and increased urgency.’
These sentiments were echoed by Paolo Cecchini, retired Director General of the European Commission and author of the 1988 Cecchini report. He said the report emphasised that ‘much remains to be done’. Commenting on the report he said, ‘This clearly requires not only the swift implementation of the Financial Services Action Plan, but also a number of other actions by the EU, its member states and the involved business actors. The list of the missing aspects is quite impressive and requires what, by the present operating standards of the EU, could well be considered an almost unreachable target in the light of the present mood of soft legislation and subsidiarity.’ Paulo Cecchini will speak in Dublin on the 9th of April at the Finance Dublin Conference 2002. |
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| Article appeared in the March 2002 issue.
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