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The Council adopted conclusions on the clearing and settlement of securities transactions and took note of progress on Solvency II. Council also held a debate on deposit guarantee schemes.
Clearing and Settlement
ECOFIN reached conclusions on the Code of Conduct, the safety and soundness of the post-trading infrastructure, the Giovannini Barriers and on Target-2 for Securities.
As to the Code of Conduct the Council emphasised that more progress is needed on effective unbundling of services and accounting separation, as well as on access and interoperability based on sound business. Council expects that the private sector to fully implement the Code, and also stressed the need to ensure that the benefits of the Code are also transmitted to the retail-side of the chain.
The work started with the former ESCB/CESR draft "Standards for Securities Clearing and Settlement in the EU" should be completed. The adopted text should take the form of non-binding Recommendations solely addressed to public authorities, the Council notes.
Its scope should include ICSDs, and exclude custodians - whilst CEBS is invited to further review, in cooperation with CESR, the coverage of risks borne by custodians, taking into account that some CSDs/ICSDs/ CCPs are also subject to the CRD, so as to ensure a level playing field while avoiding inconsistencies in the treatment of custodians and double regulation by end 2008. On credit and liquidity risk controls, the text to be adopted should replace former draft standard 9 by Recommendation 9 of the CPSS-IOSCO Recommendations for securities settlement systems of 2001.
The FSC should assess the impact of its implementation on enhancing the level playing field, investor protection and prudential safety by mid 2010.
The ESCB and CESR are invited to adapt and finalise the draft by autumn 2008 and the FSC to monitor progress to ensure that there are no remaining gaps to be addressed and to reassess the situation by end 2008.
Further conclusions relate to the Giovannini Barriers and T2S. With regard to the T2S project, the ECB should further explore the advantages and disadvantages of establishing a separate legal entity to further ensure responsiveness to market needs and limit potential conflicts of interest.
Concerning the public technical, legal and fiscal barriers identified in the Giovannini reports, the Commission intends to adopt a Recommendation on withholding tax procedures by early 2009 and to take into account the need to both simplify and improve overall tax efficiency.
Council conclusions on Clearing and Settlement
Solvency II
The Council took note of progress on Solvency II, on the basis of a report from the presidency. Since the last progress report submitted to the Council, in December, the number of provisions on which substantial work is still needed has been significantly reduced, and the presidency has started exchanges with representatives of the European Parliament.
The supervision of insurance groups operating in several member states has in particular given rise to discussion, given the innovative nature of the Commission's proposal on this issue, the different circumstances in the member states and different views on how to ensure policyholder protection. Other issues on which discussions have not yet concluded concern the treatment of equity risk, minimal capital requirements, surplus funds and participations.
Seven of the 313 Articles in the Directive remain unresolved, Minister Bajuk stated. “When consensus on these seven articles has been reached, the Directive may be adopted”, he said. The principal open issues remain the calculation of the minimum required capital, group support, supervision and surplus resources.
Deposit Guarantee Schemes
The Council held a policy debate on the functioning of deposit guarantee schemes and their role in ensuring financial stability, in particular with regard to the banking industry.
The Commission is expected to present a report on the subject in September, providing the basis for a more targeted policy debate later in the year.
The Financial Stability Forum has recommended a review of deposit guarantee arrangements in the light of the recent difficulties in the banking sector. At EU level, the key policy question is whether there is a case for developing common principles and/or strengthening the regulatory framework.
Directive 94/189/EEC requires member states to ensure the existence of one or more deposit guarantee schemes that can reimburse depositors at least up to EUR 20 000 within three months if a bank is unable to pay back deposits. The cost of financing the scheme must be borne by the banks themselves, though the directive doesn’t harmonise methods of financing.
The directive provides discretion to the member states in implementing the rules, so the schemes differ significantly across the EU. The main differences concern the share-out of roles between public authorities and the private sector, triggers for pay-outs, the types of deposits covered, the level of protection offered to customers and the financing of the schemes.