12 February 2009

ECON meeting 11-12 February

ECON discussed the amendments made on the CRD. Main issues included the supervisory structure and the amount of the retention rate for securitisations and CDSs. Committee also adopted several reports and held a meeting with National Parliaments. 

ECON discussed the amendments made on the CRD. Main issues included the supervisory structure and the amount of the retention rate for securitisations and CDSs. Committee also adopted several reports and held a meeting with National Parliaments.  

 

See:

Capital Requirements Directive

Reports adopted

Meeting with National Parliaments 

 

Capital Requirements Directive

ECON discussed the amendments made on the Capital Requirements Directive. Rapporteur Othmar Karas (EPP/AT) concentrated on three items, namely supervision, securitisation, and CDSs.

 

The aim should be a model for supervision in Europe similar to the European System of Central Banks, he said. Colleges, therefore, are only a temporary solution until the Commission publishes a new proposal. A new legislation, however, should be established by 2012 at the latest, he said. Karas explained that he did not want to touch upon the concept of a ‘lead supervisor’ as he wants the directive to be agreed upon by summer.

 

As to the securitisation, the rapporteur still favours a model which differentiates between ‘good’ and ‘bad’ papers, a concept that was proposed during the first ECON workshop in November. Essential is  finding the right wording for a definition, he said.

 

On CDSs the main question is the one of establishing a Central Counter Party. It is yet unclear if one or more CDSs are required, if a regional answer for the EU should be found or if the US and other markets should be included, and what happens to those  CDSs that are yet uncovered.

 

Starting the discussion Pervenche Beres (PES/FR) argued that the concept of colleges are not more an alternative solution to European supervision, but only a temporary solution towards an EU structure. She proposed that Level 3 Committees might be an alternative to the colleges. Central question, however, is whether Parliament should accept colleges as a temporary solution or if one should better target for a “big bang” solution.

 

The securitisation issue is no problem in principle, she outlined, and a solution on the right percentage should be possible. However, although the concept of Mr Karas is ‘intellectually interesting’, she doubts that this kind of differentiation makes sense in practice. She also made clear that she supports a European solution with regard to Central Clearing Parties for CDSs. Wolf Klinz (ALDE/DE) and Jean Paul Gauzes (EPP/FR) agreed that the retention rate for securitisations will be somewhere between 5% and 10%, and also underlined that the concept proposed by the rapporteur is problematic.

 

With regard to CDSs Mr Klinz favours more than one Central Clearing Party, also to increase competition in this sector. He was optimistic that by mid next year some two to three CCPs will have been established.

 

Mr Gauzes additionally underlined that an EU wide supervision is needed. But he also warned that harmonized Capital Requirements in Europe must not be jeopardized by differing accounting rules and statements within the banking sector.

 

Ieke van den Burg (PES/NL) reminded to take into consideration the results of the de Larosière report which will be presented on 24 February. She favours a solution that would pose a 10% retention rate in the text of the directive. To allow a certain degree of flexibility, the annexes of the directive could be part of a Lamfalussy procedure.

 

Several UK MEPs were a bit more reluctant. Sharon Bowles (ALDE/UK) and Peter Skinner (PES/UK) called colleges as a step on the way forward and a part of the answer towards European supervision. Both MEPs also questioned if the retention rate is the right way forward, and John Purvis (EPP/UK) warned not to inhibit the inter-banking market. All three MEPs also called for more care with regard to CDSs, and Mr Purvis even called for an impact assessment before taking any decision.

 

Patrick Pearson, speaking for the European Commission, reminded that action is needed now. “We have paid the price for flexibility. We want clarity. The party is over in the industry and the rules have to change. Some people don't have the understanding that we are in a different mindset today”, Pearson told the Committee.

 

Pointing to Mrs Beres's remarks on supervision he said that timing is the critical component and called for an interim solution, and debating a big bang solution later on. He agreed that the Karas proposal on securitisation is too difficult and called for a clear and simple solution. “We don't know what good securitisation is. We have to define what it means. The answer is very simple, the answer is 5% or more. If not, the Commission cannot check transposition in future”, Pearson said.

 

Mr Pearson also disagreed sharply with the call for an impact assessment for CDSs as this would take too much time and Europe has to act now.

 

Timeline:

Vote in Committee: March

Vote in Plenary: 21 April 

 

Reports adopted

ECON also adopted the draft reports on the business of electronic money institutions prepared by John Purvis - this report may well be subject to an amendment in the plenary vote due to a request made by the ECB - and the draft report on cross-border payments in the Community prepared by rapporteur Margarita Starkevičiūtė.

 

Draft report on the business of electronic money institutions

Draft report on cross-border payments in the Community

 

Adopting an own initiative report on the Economic Recovery Plan, ECON underlined its concern that differences between national measures in response to the economic and financial crisis could hamper the functioning of the common market and thus weaken EU's role as a global actor.

 

The European Central Bank's role should be enhanced, says the committee, enabling it to monitor the financial stability of the Euro area and involve it in supervision of the EU banking sector.

 

Draft report on a European Economic Recovery Plan

Press release on a European Economic Recovery Plan

 

ECON also adopted a Motion for a Resolution on the implementation of the Single Euro Payments Area (SEPA) calling on the Commission to set a clear, appropriate and binding end date for migration.

 

ECON is concerned that market participants seem to be reluctant to abolish national payment instruments, and requests the Commission to explain how it intends to promote and foster the migration to SEPA instruments.

 

Motion for a resolution on SEPA

Draft oral question to the Commission on SEPA

 

ECON meeting with National Parliaments 

In a special meeting with national Parliaments ECON underlined that a properly functioning banking sector is essential for recovery plans to work.

 

Commissioner Joaquín Almunia said it was essential to restore the banking sector to health:  "We are convinced that if the financial markets do not function properly over the coming months, the efficiency of the Recovery Plan and monetary policies will be seriously affected".

 

Pervenche Beres stressed the importance of improving financial regulation. "We, as Parliament, have more than once called for a strengthening of European co-operation as far as supervision is concerned." She proposed "a system of European supervisors, on the model of the European System of Central Banks, allowing the necessary synergy between national expertise and European integration of the means to sanction".

Czech Finance Minister Miroslav Kalousek warned against "hasty political decisions on regulation which would do more harm than good.  What is needed is evolution, not revolution, he said and warned against protectionist measures in Europe.

 

Lorenzo Smaghi, ECB Executive Board member, argued that the ECB itself should take on this supervisory role: "Co-ordination in Europe is credible only if it is based on an institution which offers and ensure confidentiality, independence and efficient decision making", he said. This would not even require a change in the Treaty, unlike the creation of a new body in charge of prudential supervision, he added. "It would be irresponsible to wait for a Treaty change via the normal revision procedures to achieve a stronger supervisory framework if the same result could be achieved without it."

 

Press release

Speech Smaghi

Speech Finance Minister Kalousek