09 April 2002

Huhne Speech on EU Financial Markets

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The introduction of the Euro has unlocked the prospect of a vast increase in the scale of the European financial markets, Chris Huhne, MEP, said on his keynote address at the Euromoney Commercial Paper conference. He warned that the full advantages to investors and businesses of cutting out the banking middle man by using the share and bond markets would not occur if the EU shaped its financial market legislation sensibly.

He highlighted several key issues in the current draft legislation to establish a single market, including the need to resist quantitative rules on the management of Pension Funds and the need for a new draft Takeover Directive.

The Parliamentarian pointed out that current trends lead many to believe that “EU financial markets are going American” as bank lending gives way to shares and bonds. “There was a new record last year. The private sector now accounts for more than half of all euro-area bond outstandings for the first time in living memory” Mr Huhne said. “The advent of the Euro had allowed the building of share and bond portfolios in markets that were previously segmented and hence hindered by national currencies.”

Referring to the agreement on the “fast-track procedures” and the fulfillment of the FSAP timetable, Huhne is optimistic to reach an agreement on the Directives on Prospectuses, Market Abuse, Financial Conglomerates and Pension Funds. “It is a tight timetable. But it is achievable with good will”, he said.

Stressing the quality of legislation Huhne said that “the supplementary Pensions Directive must allow fund managers the flexibility to manage portfolios prudently. But any attempt to impose quantitative rules would fly in the face of the experience in all the countries with a proper level of private provision, including Britain, Ireland, Denmark and the Netherlands. The Council of Ministers should take time to get this right, rather than rush through a botched job that wrecks investor returns in countries with privately provided pensions.”

“Similarly, the Prospectus Directive must allow issuers to go to investors in everyone of the 15 Member States with only one national approval” he said and also pointed out that the forthcoming Takeover Directive will be the most difficult area to reach agreement.

See full Huhne speech

(To remember, of the 42 original measures, some 25 - most of them Commission Communications and other measures that do not need legislative acts - have been completed, or look likely to be completed. This means 17 measures are still outstanding. In order to meet the target dates established, 10 legislative acts will need to be adopted in 2002. 8 new legislative proposals still have to be made by the Commission and much of the legislation is stuck in Council.)

© Christopher Huhne