Competition: Sector inquiry on retail banking
Rapporteur: Gianni Pittella (PSE)
First exchange of views
In a first exchange of views rapporteur Gianni Pittella (PSE/IT) outlined the main points of the forthcoming report. With regard to banking services the mobility of the consumer, the quality of information, and the transparency of costs has to be enhanced.
Mr Pittella also thinks of a single information sheet showing the basic costs of an account and listing all additional costs of typical services.
With regard to payment services, he suggested that with regard to interbank fees, the method for calculation has to be defined at European level.
Othmar Karas (EPP/AT) underlined that the report has to be seen in connection with his own report on the green paper on retail services, the report of Olle Schmidt on the same issue (IMCO Committee). He complained that the sector inquiry had shown it shortcomings when it comes to concrete measures to be taken.
Olle Schmidt (LIBE/SW) also reminded that the above mentioned reports have to be coordinated. It also has to be born in mind that the current situation is characterized by largely fragmented markets.
Speaking for the Commission Irmfried Schwiemann made clear that the Sector Inquiry is not ‘a case’, but has to be regarded as a snapshot of the current market situation. She also outlined that the situation in many member states has already improved since the inquiry without any intervention from the Commission
Timeline:
26 February: Draft report
Commission Sector Inquiry
Committee document not yet available
Green Paper on Retail Financial Services in the Single Market
Draftsman: Othmar Karas (EPP-ED)
First exchange of views
Othmar Karas (EPP-ED) outlined the agreement found between ECON and IMCO Committee on the report on the Green Paper on retail financial services with the ECON report focussing on supply side issues including supervisory practices, better regulation and financial market, while the other part of the report prepared by Olle Schmidt (LIBE/SW) in the IMCO committee will concentrate on demand side issues, in particular on consumer protection issues.
Mr Purvis (EPP/UK) made clear that he wants to see several items included into the report, particularly credit ratings, money laundering, insurance, and the interrelationship between the wholesale and the retail market.
Mr Pittella (PSE/IT) made clear that his group will fight for full harmonisation with regard to consumer protection issues.
The debate was closed after a few minutes and shall be continued at a later stage.
Timeline:
26 February: Draft report
25-26 March: Consideration of amendments
5-6 May: Vote ECON Committee
June/July: Vote in Plenary
Commission Green Paper
Committee document not yet available
ECON meeting on European Financial Supervision, Crisis Management on Financial Markets
The president of the ECB, Jean-Claude Trichet, meet MEPs and national MPs in the European Parliament discussing among others the turbulence in the financial markets. Mr Trichet said banks themselves needed to draw lessons about their own risk management mechanisms, and that the Basel II framework might need refinement. All players in the 'originate to distribute' model of credit securitisation needed to check that the right incentives were in place to assess and monitor risks. Public authorities should, he said, focus on promoting sound risk management practice.
“The effectiveness of crisis management and resolution largely depends on the existence of an efficient supervisory and central banking framework able to identify and react at an early stage to potential threats to financial stability”, Trichet notet. “Further measures are necessary on the harmonisation of regulatory requirements at the EU level, also through the elimination of the so-called “gold-plating”, and the consistent implementation of the supervisory requirements, agreed by Level 3 Committees, and the development of streamlined and coherent supervisory processes by national supervisors, with the support of Level 3 Committees.”
“The improvement of the financial stability arrangements should build on the existing largely national responsibilities for financial stability. In this respect, the Lamfalussy framework provides the appropriate institutional setting.”
“A closer link between the financial stability assessment of central banks and the supervision of major cross-border banking groups undertaken by the colleges of supervisors would be helpful.”
“There will be very important lessons to be learned by credit institutions in terms of risk management”, he said with regard to the recent turbulence in the financial markets. “The experience of the turbulence has highlighted that some categories of risks have been underestimated by banks”.
Mr Trichet went on to say that “it is still too early to draw any definitive conclusions” as the present market correction is complex. The “turbulent episodes that we are observing are a vivid reminder of how a disturbance in a particular sector can propagate across many markets and many countries”.
Alexandre Lamfalussy said the “mind-boggling complexity” of some financial instruments had increased opacity: average citizens could not possibly understand them, and experts within financial institutions who did, “were not always able to carry their message to senior management.” This had led to an over-reliance on the credit rating agencies, with “market participants not doing their homework.”
Mr Lamfalussy asked whether the failure of some banks to manage risks properly was a result of poor internal systems, problems with communication or remuneration systems which “blunted risk awareness.” The crisis prevention ability of authorities needed to be enhanced, he said, and central banks needed the type of privileged information on what happens inside banks that only financial supervisors could provide.
Finally, he stressed the role that excessive global liquidity had played in creating ‘financial euphoria’ which led markets to ignore risk. “We would be well advised to seek policy instruments allowing authorities to control market liquidity,” he said, arguing that the prime cause of the excess liquidity had been the long period of low US interest rates in the aftermath of the internet bubble.
Slovenian Finance Minister Andrej Bajuk said that the Level 3 committees needed to be strengthened, and that faster progress was needed in the work already underway before the summer's turmoil on crisis management.
Mr Bajuk emphasised, that Slovenia’s Presidency added a special supplement on the subject to the ECOFIN Council Work Programme. ECOFIN will focus on the following three sets of questions: the response to the current situation on the financial markets, further activities relating to Lamfalussy procedure changes, focused mainly on ensuring supervision and reinforcing EU agreements on financial crisis management.
In its spring meeting in March 2008, the European Council will review the developments and situation on the financial markets on the basis of ECOFIN’s contribution. The whole financial stability dossier will be the main topic of an informal ECOFIN meeting to be held in Slovenia in April.
Mr Bajuk believes that practical guidelines for crisis management should reflect common agreement on the measures and procedures needed to deal with cross-border crisis situations. To produce the best EU framework, general principles need to be established on burden sharing, implementation guidelines and cooperation mechanisms.
Milan Cvikl emphasised the need for coordination between supervisors, and said that the Solvency II directive “will need to ask who ultimately bears the burden in a financial crisis.”
The other co-chair, Pervenche Berès (PES/FR), Chair of the Economics Committee, said it would be best for key decisions, like minimum capital requirements, to be made in the primary legislation on Solvency II (Level 1), rather than seeing them as mere technical details. On strengthening the Level 3 committees, she asked the Minister to help persuade the Commission that legislation was needed to achieve this.
Mrs Berès said that Mr Trichet “did not give an answer to the current issues at hand, but he has been rather precise reaffirming that the policy of the ECB is centred in price stability and he was clear asking those responsible for setting prices and the social partners to respectively look at the risk of inflation and constant pressure on salary negotiation”.
Mr García-Margallo (EPP/ES) said “Trichet was very generic in his intervention about the supervision system or cooperation between national banks...it was not what we expected”.
Wolf Klinz (ALDE/DE) said that Mr Trichet underlined that “crisis management depends on the existence of an efficient supervisory and central banking framework”. On the need for pan-European cooperation to deal with financial issues he agreed with Mr Trichet that “cooperation between supervisory authorities will have to go further”.
Speech Trichet
Speech Lamfalussy
Speech Bajuk
© Graham Bishop
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