Deposit guarantee schemes
Consideration of amendments
Report, amendments, Commission document
Presenting the report to the Committee, rapporteur Christian Ehler (EPP-ED) warned that it is misleading to assume that distortions to competition simply exist because of the pure existence of different deposit guarantee schemes in the member countries.
The report considers that the various existing ways in which the deposit-guarantee schemes are financed should be examined, in the context of possible distortions of competition and the ensuing costs, and particularly of the effects on operation in the event of a cross-border crisis.
The existing differences between the systems and the variety of parties involved in the public and private sectors must be taken into consideration. Therefore, the repporteur supports the assessment of the Commission that the operation of deposit-guarantee schemes might be improved through self-regulatory measures, particularly cross-border ones, as stated in his report.
Mr Ehlers agreed with the Commission that legislative amendments to the deposit-guarantee directive should only be undertaken when the results of further research, particularly in the field of cross-border risk and crisis management, have become available. At the time being there is, however, no need for further legislative measures.
Discussion in Committee centred on two questions, namely on possible competitive distortions and lessens from the latest financial turmoil.
MEPs Hökmark (EPPE, SWE), and Klinz (ALDE, D) called to reduce possible competitive distortions.
Mr Purvis (EPP, UK) also questioned if the current system is suitable to prevent systemic risks and protect the consumers, referring to the experience of Northern Rock in the UK.
Mrs Beres (PES, F) noted that the current system seemed to be unable to cope with the recent crises situation.
Responding to a question of a possible discrimination of cross-border activities of banks, the Commission representative made clear that this is not allowed on the basis of currently existing European legislation.
Closing the debate Mr Ehlers called for a realistic approach reminding that no member country has the resources to guarantee the deposits in case of a larger bank subject to a crises situation.
Timeline:
ECON vote: 5 November
Plenary vote: December
International Financial reporting Standard (IFRS) 8 concerning disclosure of operating segments
Rapporteur: Pervenche Berès (PSE)
Consideration of amendments
Report, amendments
Considering the amendments Mrs Beres noted to incorporate in part or fully most of the amendments made to the report.
Amn 1+2 of should be taken together
Amn 3 will be incorportated
Amn 4 will also incorporate the need of “impact assessments” and the term “equilibrium between stakeholders”
Amn 5-7 should be taken together
Amn 8 should also underline the “European” role
Amn 9+11 will be incorporated
Amn 10 will not be incorporated
Subsequent discussion focussed on the ‘country-by-country’ vs ‘global’ accounting standards approach as mentioned in the amendment 9 by Peter Skinner. MEPs Purvis and Klinz oppose this formulation as this would exclude regional entities.
Commenting on the discussion the Commission underlined that it has not yet seen the amendments. However, the ‘country-by-country’ approach would go far beyond IFRS 8 and might cause legal problems.
Also, the Commission vies the general need for an impact assessment on every change to the standards as questionable and proposes to include the wording “where appropriate”.
Timeline:
Vote on the Report will be 22 October 2007
Establishing a mechanism for the determination of equivalence of accounting standards applied by third country issuers of securities
Co-rapporteur(s):
Margarita Starkevičiūtė (ALDE)
Peter Skinner (PSE)
Consideration of draft motion for a resolution
(Report not yet available)
Mrs Starkeviciute outlined that she will not support the Commission proposal to further postpone the decission until 2011.
Mrs Starkeviciute argues that a mutual agreement with the US is in sight, and also Japan seems to move forward.
Timeline:
Deadline for amendments: 18 October,
Consideration of the report: 22 October
Vote in ECON: 5 November
Vote in Parliament: November
Common principles on Flexicurity
Draftsman: Olle Schmidt (ALDE)
Consideration of draft opinion
Opinion, Commission document
International Financial Reporting Standards (IFRS) and the governance of the IASB
Rapporteur: Alexander Radwan (EPP, D)
Consideration of draft report
Draft Report
Presenting his report Alexander Radwan (EPP, D) concentrated on three main issues, namely governance issues, convergence and SMEs.
The most serious question in relation to the IFRS process is doubtless the democratic legitimacy of the IASB, Mr Radwan noted in his report. The Board of Trustees, shows particular shortcomings.
Main points of criticism related to the appointment of board members, the selection of agenda items of the ISAB, and transparency issues with regard to the financing of the IASB.
He also criticized the US SEC intention intends to recognise only financial statements drawn up according to the English version of the standards adopted by the IASB. Mr Radwan supports the Commission initiative calling for the recognition of IFRS, which has the force of EU law.
With regard to SMEs, Mr Radwan considers that even promoting or encouraging voluntary use of the IFRS for SMEs will short-circuit the democratic process and cut out legislators. He questions if there is a real need for IFRS for SMEs and calls for a cost-benefit analyses in this regard.
Commenting on the report Mrs Beres (PSE, FR) stated that the existence of such organisations such as the IASB is a “real example for the ongoing globalisation process” and questioned how these can be incorporated in some form of “world governance”.
The EU has lost its leading role in the process and is now only re-acting on developments. Although the EU never wanted to play a pro-active role in the IASB, Europe has to be enabled to choose its own trustees.
Mr Klinz (ALDE, D) reminded on the “international” character of IFRS stating that the EU has recently regained some control over the process again. The composition of the Trustees and the Board remains central. However, the incorporation of SMEs remains the most delicate issue, as this group did not call for it and it, therefore, does not represent a bottom-up approach.
Mr Purvis (EPP, UK) criticised the Radwan report as all too negative. It should be taken into account that the interface with the EP is improving and that IFRS for SMEs is purely voluntary.
Responding to the remarks Mr Radwan recalled to the “normative power of facts”. He is worried that the application of IFRS “comes through the back-door”, which has to be prohibited.
Timeline:
Deadline for amendments: 6 November
Second consideration: 20 November
ECON vote: 19 December
Plenary vote: January
Monetary dialogue with Mr. Jean-Claude TRICHET, President of the ECB
The meeting mainly concentrated on macroeconomic issues including economic and monetary issues and productivity growth. With regard to financial stability Mr Trichet reitterated that the ongoing re-assessment of risk “reflects the materialisation of some of the vulnerabilities that had previously been identified by the ECB as well as by the global central banking community”, he said. “In a number of cases the present episode of market correction will impact banks’ profits.”
“Our baseline scenario is that the process of adjustment in the money and credit markets will take place in an orderly manner”, Trichet said. “Nevertheless, it cannot be excluded that this positive baseline scenario could yet be challenged by some low-probability but potentially high impact negative events. Therefore, there is no room for complacency at the present juncture.”
Trichet identified potential and non-exclusive remedies to the situation:
- First, there is a need to increase transparency and further improve risk management – including liquidity risk management - relating to complex structured products.
- Second, an assessment of the role played by rating agencies needs to be undertaken.
- Third, a review of certain areas of the regulatory framework, such as the treatment of liquidity risk should be carried out.
- Fourth, the case of non regulated entities should continue to be examined very carefully, not only the “highly leveraged” non regulated institutions but also the other entities like “conduits” and “special vehicles”: the case of the “highly leveraged” has already been examined by the Financial Stability Forum and orientations have been suggested.
Full speech
Full text of the hearing with the transcript of the questions and answers
© Graham Bishop