10 March 2005

Speech Trichet: ECBs view on European Financial Integration

Mr Trichet sees the post-FSAP period as a “window of opportunity” for further enhancing financial integration. “In the area of financial regulation and supervision, a key objective is to achieve a high degree of regulatory and supervisory convergence across countries”, he said. “The forthcoming revision of the Codified Banking Directive will provide a robust underpinning for greater cross-border cooperation among authorities, especially for large banking groups. The revised Directive will tighten the requirements for the information exchange and coordination between the consolidating supervisor and host supervisors” he contined. “Efforts should now focus on their effective implementation.”

The ECB President also stated that the “Integration of financial markets cannot take place without an integrated payment, clearing and settlement infrastructure.” The ECB is currently building TARGET2, which is due to go live in 2007 and will replace the current decentralised system with a single technical platform. Not only will it increase cost effectiveness, but it will also allow for the provision of a harmonised service level ensuring a level playing field for banks across Europe.

Owing to the single currency, a significant process of consolidation has also taken place in the securities infrastructure in the euro area. At the present moment, the current configuration remains complex, with a significant number of national exchanges, clearing houses and central securities depositories. Further consolidation of some of the European infrastructure is advisable.

With regard to a future Directive on Clearing and Settlement, Mr Trichet clearly welcomed the Commissions communication on “Clearing and Settlement in the European Union” and the actions the Commission intends to undertake to improve the arrangements. “We agree that the barriers as identified by the Giovannini Group must be eliminated”, he said. “In order to ensure the smooth operation of the markets and guarantee financial stability, we share the Commission’s view that a sound regulatory framework is essential.”

“In principle, the ECB and the Eurosystem support the adoption of a framework directive on clearing and settlement for two main reasons. First, a directive would complement the market-led removal of the “Giovannini barriers”, a necessary condition for competition to be able to fully play its role. Second, the implementation of the ESCB/CESR standards, as well as any other harmonisation measures, may require changes to the national legal framework that cannot be made by the national supervisory authorities.”

Full speech

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