He said good regulation is urgently needed and encouraged the EP to restore the ESAs’ powers. Remuneration should involve ethics and avoidance of excessive risk taking. He has presented about 27 legislative proposals to the EP so the Commission agenda in financial services will be packed.
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Michel Barnier CV, written questions.
Graham Bishop’s summary of Commissioner Barnier’s Hearing:
He is committed to the European project and he will defend the European common interest so he will not take orders from Paris or London. But international coordination is a key element in the strategy so G20 recommendations will be implemented and Europe must be the driving force alongside the US. For example, the G20 has already provided remuneration guidelines and he believes that it is in the interest of the financial sector to introduce regulation that brings in ethics and avoids excessive risk taking.
On the issue of financial supervision, Mr Barnier encouraged the EP by saying that it would be good to move back to the original Commission proposal giving more powers to the ESAs and there will be a proposal to create a legal framework for crisis management and resolution. [GB’s comment: These plans probably portend an early clash between Parliament/Commission and Council.]
He presented a set of legislative proposals that runs to around 27 items for financial services. These cover CRD4, derivatives (a top priority) and post-trade structures generally, responsible retail lending, SEPA migration deadlines, consumer financial education, accounting and auditing standards and many more. All in all, the next five years will be very busy – right across the financial services spectrum.
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Notes on the hearing:
Mr Barnier’s hearing was split into two parts. The first hour and a half was dedicated to the IMCO committee and the main issues tackled were copyright, counterfeiting and the Services Directive. During the second hour and a half the ECON Committee asked Mr Barnier about financial services.
Mr Barnier started by saying that:
• The G20 recommendations will be implemented; Europe must be the driving force alongside the US and other international partners
• The economy can just work well with a healthy financial services sector
• Derivatives must be regulated
Jean-Paul Gauzès (FR/EPP) raised the issue of derivatives speculation in raw materials. Mr Barnier responded by saying that the Commission has to look at the causes of speculation in raw materials. He believes it is not acceptable for politicians to leave it like that. Furthermore, the Commission will regulate derivatives as transparency is urgently needed in that area.
Udo Bullmann (DE/S&D) wanted to know what the Commission will do in order to prevent the next crisis and also to avoid incentives to short-term and risky investments. Mr Barnier emphasized that the EU needs to learn the lessons and understand them in order to act at the right level. International coordination is also a key element for the strategy. The EU needs a pertinent regulation for financial services markets to reduce incentives for short term investments. Mr Bullmann also raised the issue of derivatives regulation and the introduction of a financial transaction tax. Mr Barnier replied that derivates area top priority in the Commission agenda. They are also looking at different ways of recovering taxpayers’ money so a transaction tax will be discussed as a possible solution.
Sylvie Goulard (FR/ALDE) posed the polemic question of the Commissioner’s nationality and wondered if he was going to listen more to one specific Member State. Mr Barnier answered that he is going to act as European, independently of his passport. He is committed to the European project and he will defend the European common interest. He emphasised that he will not follow orders coming either from London or from Paris. On the issue of financial supervision, Ms Goulard said that the Council has watered down the Commission proposal and she wanted to know if the Commission agrees with it. Mr Barnier encouraged the EP by saying that it would be good to move back to the original Commission proposal giving more powers to the ESAs.
Pascal Canfin (FR/Green) asked about new proposals in the Commission financial services agenda, as from his point of view, Mr Barnier was just talking about proposals introduced by his predecessor McCreevy. Mr Barnier will focus on the G20 roadmap and the De Larosière report. However, he needs to ensure that current issues are completed so as to start with new proposals.
Kay Swinburne (UK/ECR) focused her question on the accountability of, and the cooperation among, the three new ESAs. Mr Barnier answered saying that the Commission has considered this issue and will ensure cooperation and strong coherence among the ESAs. Mr Barnier propose to give them binding powers so as to deal with divergences and, in three years time, there will be a review evaluating the performance of the ESAs.
As regards AIFMD, Vicky Ford (UK/ECR) asked him whether he is considering a redraft of the AIMF Directive and to present a clear draft that everybody could look at it and agree on. Mr Barnier recognized that things were not done in the best way at the beginning; however the AIFM industry needs to be regulated to protect investors.
Godfrey Bloom (UK/EFD) defended the City and argued that thousands of UK jobs depend on the future of the City. Mr Barnier repeated that the Commission will reform the financial services sector and quoted Lord Turner, who said that the City hasn’t learnt the lessons of the crisis yet.
On international cooperation, Peter Skinner (UK/S&D) asked what is the Commission’s role and if the EU could lose competitiveness by not reaching the same standards as the rest of the world. Mr Barnier said the Commission needed to work on that issue, and not only with the US but also with other international partners such as China. There is also a need to reach a common framework on International Accounting Standards.
Saïd El Khadraoui (BE/S&D) wanted to know Mr Barnier’s opinion on remuneration policies. Mr Barnier believes that it is in the interest of the financial sector to introduce regulation that brings in ethics and avoids excessive risk taking. Moreover, the G20 has already provided guidelines on that issue and the Commission will follow them.
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Policy-related questions
4. What are the three main priorities you intend to pursue as part of your proposed portfolio, taking into account, where relevant, the financial, economic and social crisis and concerns related to sustainable development?
1. Reinforcing the single market: the single market is the engine of European growth. Defending the single market means verifying the application of the Community acquis by the Member States and guaranteeing equal rules for all without distortion or discrimination. No effort will be spared, especially in developing support tools for citizens and enterprises. The economic, social and financial crisis demonstrated the need for an in-depth review of the single market in order to identify new sources of growth and employment and to strengthen the position of the European Union on the world stage. In practical terms this will involve drawing on the findings of market-operation studies to identify areas in which the internal market is not delivering its full potential and presenting new initiatives to stimulate growth in the interest of citizens and SMEs. It will be important in this context to pay greater attention to the social dimension of the measures planned.
2. Moving out of the crisis and ensuring the stability of a financial system where savers are protected: I am in favour of a dynamic European financial sector which is regulated in an intelligent manner and monitored efficiently. This is essential if we want to restore the confidence of savers and investors, a key element for the recovery of our economy. The conditions of efficient regulation will also have to be defined without creating excessive constraints. I have identified five objectives for equipping our financial system with a more solid and more equitable foundation: (i) a financial sector at the service of sustainable growth, (ii) a more equitable sector, with consumers, savers and SMEs protected appropriately, (iii) a more disciplined sector, with better supervision of financial institutions and greater coordination at European level, (iv) preparation of mechanisms which will enable us to deal with crises, (v) lastly, playing a leading role in identifying common solutions at world level. Active participation of the Union in the work of the G20 and other international institutions and the development of our relations with our main partners will be essential in this respect.
3. Developing a knowledge-based economy: I intend to adapt our intellectual property rights strategy to meet new challenges. The European intellectual property system must be modernised and reinforced in order to promote the knowledge-based economy. I am in favour of an exhaustive and consistent framework for copyright law which will enable us to meet new challenges such as digitisation. Negotiations on the Community patent and the unified patent litigation system must be concluded. To enable European enterprises to realise their full potential for innovation and creation, a modern intellectual property framework is required which will stimulate investment and technological progress and facilitate access to knowledge and its dissemination.
5. What are the specific legislative and non-legislative initiatives you intend to put forward, and according to what timetable? What specific commitments can you make regarding in particular the committees' priorities and requests attached hereto which would fall within your portfolio? How would you personally ensure the good quality of legislative proposals?
In the area of financial services, reinforced cooperation is the only way of guaranteeing efficient supervision of an integrated European market, including in times of crisis. It is my intention to complete the reform of supervision in Europe with the Parliament and the Council. I would like to ensure that the new system, and in particular the three new authorities, are implemented under optimum conditions and I will prepare the scheduled evaluation of the system in due course.
I intend to submit a proposal to the Commission relating to the creation of a legal framework for crisis management and resolution. This framework will serve to reinforce and harmonise the supervision of financial groups in terms of equity and liquidity and the financial stability of each Member State and of the Union as a whole. My departments will also examine the implementation of European deposit guarantee funds and resolution funds. One of the lessons to be drawn from the financial crisis is the need to improve the quality and increase the level of equity held by banks in future. I am planning a fourth revision of the Capital Requirements Directive (CRD4) in order to incorporate the G20 agenda and the work of the Basel Committee into the Community agenda. The implementation of a modern supervisory framework in the insurance sector is an essential objective and will result in the adoption of application measures under the Solvency II Directive. European pensioners must be able to rely on robust and efficient systems. I would like to see a reform of the IORP Directive (relating to the activities and supervision of institutions for occupational retirement provision) as part of the revision process. Much remains to be done in the area of financial markets and their infrastructure. I would like the 'market abuse' and MiFID directives to be re-examined. I will propose a coherent legislative framework to the Commission for over-the-counter derivatives (OTC), as well as for post-trade activities and infrastructure, including a legislative proposal on indirectly held securities. With regard to the Single Euro Payments Area (SEPA), I intend to propose a legislative initiative for adoption by the College with the objective of setting one or more deadlines for migration to SEPA products for direct debits and credit transfers, as well as an initiative to improve governance. In the area of retail financial services, I believe that in the face of the current fragmentation of the credit market, particularly the property market, we must present responsible initiatives with regard to lending and borrowing. More specifically with regard to retail financial products, I would like to put forward a coherent legislative framework to ensure that savers are better informed and better advised. I intend to address the issue of sanctions.
As regards enterprise governance, I will present a report on governance in financial establishments which will contain proposals for remedying the weaknesses revealed by the crisis. I also intend to present a report on the implementation of the recommendation on remuneration policies in the financial services sector as soon as possible, as well as other initiatives intended to eradicate abusive remuneration practices. I will adopt the same approach in relation to the implementation of the Recommendation on the remuneration of directors, followed, if necessary, by appropriate proposals. With reference to listed companies, a report on the application of the 'Transparency' Directive will be published very shortly, possibly followed by amendment proposals.
In the area of financial information, one of my priorities will be the adoption by all of our partners, including the United States, of high-quality global accounting standards, in line with the recommendations of the G20. I would also like to improve the governance of the IASB significantly. As regards SMEs, I would like to put forward an ambitious proposal for the modernisation of accounting regulations. Lastly, with regard to the statutory audit of accounts, my priorities will be to enhance international cooperation in order to enable mutual recognition of supervisory systems in respect of directors, and potential adoption of the international accounting standards (ISA). With regard to company law, and in response to the requests of the European Parliament, I will propose that the Commission conduct a more indepth analysis of the cross-border transfer of registered offices. I will also present a report on the modus operandi of the Statute for a European company.
The services sector is the economic driving force of the European Union. Achieving a single market for services is therefore a priority. The mutual evaluation process provided for under the 'Services' Directive, which will take place over the course of 2010, should provide an overview of the situation in the Member States and help to identify potential requirements in terms of additional actions. The Communication on the supervision of the distribution services and retail sector will also enable an analysis of the situation to be carried out.
The Services Directive is also a good example of the effort invested by the Commission in improving the implementation of directives. Cooperation between the Parliament and the Commission in the area of transposition is of increasing importance in a Union of 27. I propose continuing and reinforcing this cooperation for the benefit of European citizens and enterprises. Furthermore, the Directive on the recognition of professional qualifications will undergo a full assessment. I will continue to defend the Community acquis and use the powers invested in the Commission to remove the obstacles which continue to exist in the Member States. At the same time, the smooth functioning of the internal market will also be dependent on working in partnership with the Member States and developing SOLVIT and the SMAS (Single Market Assistance Services) single portal.
I would like to place particular emphasis on the development of cross-border online services and consumer protection, both in terms of access to these services and their use, in order to improve customer confidence.
In the area of intellectual property rights, I would like to see the development of a consistent legal framework. I will ensure the finalisation of the legislative work on the Community patent and the patent litigation system. I am also planning to modernise the legal framework for trademarks. I intend to reinforce the legal framework relating to the respect of intellectual property rights, which will be further supported by the Counterfeiting and Piracy Observatory.
The regulations governing public procurement should stimulate the competitiveness of industry and enable public authorities to secure optimum value for money in their procurement activities. We must adapt our approach and use public procurement to stimulate demand for innovative products and services which are environmentally friendly or promote social inclusion. In this respect, I intend to respond to Parliament's requests for clarification in the form of an interpretative communication. I believe that it is essential to examine whether the regulations themselves can be improved in order to further facilitate access to public procurement markets, for SMEs in particular. An evaluation of the directives is envisaged to this end, preparing the ground for potential modernisation at a later stage. I will continue with the finalisation of the impact analysis in progress and other preparatory work with a view to developing a legislative initiative in the area of concessions. With regard to the 'better lawmaking' objective, I will ensure, over the course of my mandate, that all legislative proposals are accompanied by impact analyses including the social impact of the provisions proposed. In terms of the simplification and reduction of administrative costs, I intend to continue the work in progress and begin the revision of the 4th and 7th company law directives in particular.
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