14 March 2002

EP adopted Key Directives

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Opening this evening's debate on three key proposals, Alain Lipietz addressed the question of Financial Conglomerates. The Commission's proposal was important for savers and consumers who would be able to benefit from an integrated financial market in Europe. It particularly affected the banking and insurance sectors.

Compromise amendments were now being proposed which he trusted would be acceptable to Council. He emphasised, however, that there was no intention to dilute the basic Commission approach to lay down prudential rules. He trusted that agreement on the basic proposal would create the foundations for further international negotiations under the Basle II process.

Replying to the debate, Frits Bolkestein said he could accept a large number of amendments to the conglomerates proposal, including the one relating to 'double gearing', if reworded. He could not, however, go along with those amendments which attempted to limit the scope of the legislation or sought to change the rules for calculating capital adequacy. He was, however, prepared to look for a compromise.

(see Lipietz report)

Robert Goebbels presented the reactions of the Economic Committee to the Commission's proposal relating to Market Abuse. The need for such legislation could be seen by the fact that there were only 13 successful prosecutions leading to criminal penalties between 1995 and 2000 in 17 European countries.

Goebbels underlined the need for a precise yet flexible definition of market manipulation. On account of differences in legal systems across the EU, he emphasised that he preferred an approach based on administrative sanctions, with the Commission putting forward a list of guidelines. His other concern was to see an arbitration body to settle any crossborder disputes. This could liase closely with national regulatory authorities. He too looked forward to the legislation securing widespread approval.

Commissioner Bolkestein recognised the committee's support for the Commission's move to enhance protection for savings. And, indeed, he was prepared to accept the amendments proposed by Mr Goebbels. He could not, however, go along with several other amendments, including two from Mr Lehne, expressing doubt over the phrasing relating to comitology or implementing procedures, which he felt was not necessarily completely in line with the agreement between Commission and the Parliament, not to mention the position taken by Council.

(see Goebbels report)

On Prospectuses, Christopher Huhne underlined the importance of this proposal by its approach of sweeping away the need to meet 15 different national rules. He explained that one amendment was designed to ensure the continuation of market practices with regard to eurobonds traded professionally. The decision here was to decide whether an appropriate exemption would be bonds with a value of up to euro 50 000 or euro 100 000.

Similarly with an exemption for small businesses, he was proposing that the new regulatory requirements would not apply to companies with a market capitalisation of less than euro 350m and only raising funds on the domestic market. While this could be considered a high figure, Huhne pointed out that small high-tech companies employing less than 200 people could very easily be valued much higher.

Another amendment was being proposed to reduce the regulatory burden on small businesses by making the annual updating of information optional. His other concern was to allow the issuer to choose the competent regulatory authority and eventually he looked forward to the introduction of a single regulatory authority for Europe.

As to the proposed amendments on Prospectuses, Bolkestein could accept many here, including one exempting Eurobonds traded between professional investors. One the size of the bonds issues to be exempted, he felt a higher figure than the euro 50,000 recommended by Mr Huhne was more appropriate. He could not, however, go along with some amendment, which he felt could perhaps unintentionally weaken existing legislation relating to disclosure and neither could he agree with the exemption for SMEs below the euro 350 million threshold, as this would exclude too many companies.

He was prepared to exempt SMEs from the need to update information annually, although he said this provision was important for larger companies and should be maintained. Neither could he agree to issuers being able to choose the place of issue or regulator. He agreed with Mr Garcia-Margallo y Marfil that this would lead to competition based on the lowest common denominator.

(see Huhne report)

Parliamentarians underlined the need for strict monitoring and auditing and were concerned with financial stability to ensure investor protection and supervisory rules. They stressed the importance of an efficient and effective legislative framework coupled with the need for strict supervision.

On Taxation on Savings Income Parliament called on Member States to ensure that the Directive also applied to interest paid by paying agents in their associated or dependent territories, some of which were currently tax havens.

Parliament adopted an amendment making it clear that, at the end of the 7-year transitional period allowed for Belgium, Luxembourg and Austria, those three countries should move automatically from levying a witholding tax to participating in the automatic exchange of information. No decision other than the entry into force of the directive would therefore be required.

(see Royo report)

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