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FSAP II is set to begin Back  
The European Commission has outlined its priorities for the next stage of financial services integration. With 93 per cent of the original 42 measures under the Financial Services Action Plan (FSAP) now under implementation, Irish companies should be aware that the Commission’s future priorities include the rapid adoption by the Parliament and Council of the 8th Company Law Directive on Statutory Audit, and of forthcoming Commission proposals for a Third Money Laundering Directive and for a Directive on Capital Adequacy.
The modernisation of 8th Company Law Directive on Statutory Audit, was proposed in March 2004, and it aims to reinforce audit quality and to restore trust in the audit function.

The Third Money Laundering Directive, which will be proposed by the Commission shortly, aims to reinforce measures on preventing the use of the financial system for money laundering and terrorist finance.

The Commission’s final priority for 2004 is a Directive on Capital Adequacy, setting out revised capital requirements for banks and investment firms (CAD III), to be implemented by 2006-2007.

This effort is taking place in parallel with the work of the G-10 Basel Committee to develop a new international framework and the Commission will present its legislative proposal soon after agreement in Basel.

Also under consideration is the Action Plan on Company Law and Corporate Governance, which was presented by the Commission in May 2003. The first Corporate Governance initiatives under the Action Plan are expected for the second half of 2004. These are:
• A recommendation on directors’ remuneration, giving shareholders more transparency and influence (a public consultation has already taken place).
• A recommendation to promote the role of independent non-executive or supervisory directors. A public consultation will end on 4 June.
• A confirmation at EU level of the collective responsibility of directors for financial statements: again consultation is due to end on 4 June.
• Full disclosure of the use of structures like special purpose vehicles and offshore centres.
• The introduction of an annual corporate governance statement for listed companies.

A Directive on reinsurance supervision, aiming to harmonise methods for reinsurance supervision in Europe, was proposed by the Commission in April 2004, and a proposal, scheduled for 2005, on Insurance Solvency II, based on extensive work now taking place, will seek to create a consistent risk-based insurance solvency system that is compatible with international developments in supervision and financial reporting.

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