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EXCHANGE OF VIEWS with Mr. Charlie McCREEVY, Commissioner for Internal Market and Services
In his presentation Commissioner McCreevy concentrated on four issues, namely the discussion on US GAAP and IFRS, the recent Commission proposal on financial education, the White Paper on mortgage credit and finally on SEPA.
Outlining the priorities in the international realm for the next year McCreevy mentioned the mutual recognition in the field of securities and the removal of collateral requirements for EU re-insurers with the
In the discussion Gianni Pitella (PSE/IT) and Pervenche Beres (PSE/FR) asked about the ECOFIN results, particularly with regard to the supervisory arrangements. Alexander Radwan (EPP/DE) asked about a concrete timeline to establish a European supervisor. Peter Skinner (PSE/UK) pointed to the arrangements currently discussed within the Solvency II report.
Commissioner McCreevy underlined that the real issue of supervision is how to deal with banks acting cross-border. The concept of a lead supervisor could also become a model for banking supervision, he said.
Mrs Beres also wondered why the Commission deviated from its original approach to come forward with a directive on mortgage credit. Karsten Hoppenstedt (EPP/DE) asked about the relationship of equity prices, inflation, and the implication for economic growth. Alexander Radwan warned not to copy the
Gay Mitchell (EPP/IRE) and Elisa Ferreira (PES/PT) asked about tougher enforcement and implementation of the existing directive to avoid goldplating. Commissioner McCreevy replied that Member States have indeed adopted most of the EU directives. The difficult question is much more the transposition of the directives. The Commission will therefore try to limit the risk of goldplating in member countries.
Public Hearing on Solvency II
ECON hosted a public hearing on the Solvency II proposal, with the focus on the results of the third quantitative impact study (QIS 3) on the calibration of the standard formula for solvency of insurance and reinsurance companies as conducted by CEIOPS. The following speakers have been invited:
Alberto Corinti (CEA),
Klaas Know (Central Bank of
Annette Olesen (Group Consultatif of Actuarial Associations PwC),
Phillip Keller (Ernst & Young) and
Yanick Bonnet (Co-Chair, ACME-AISAM Solvency II workingparty, GEMA).
The experts generally supported the Solvency II provisions, pointing out that the most important issue still open for discussion is the relation between SCR and MCR. Many speakers therefore called for a ‘new’ linear approach.
Another important issue is the organisation of supervision, particularly when it comes to the question of subsidiaries of EU companies based in third countries or EU based subsidiaries of non-EU companies.
Pointing to the Swiss experience of a Solvency II regime for SMEs, Phillip Keller stated that small companies had only very few difficulties to adapt to the new regime. Medium-sized companies in contrast had some more problems.
Questioned by Peter Skinner (PES/UK), Sharon Bowles (ALDE/UK) and Jonathan Evans (EPP/UK) the need for further clarification of the ‘linear-approach’ became obvious.
MEPs Karsten Hoppenstedt (EPP/DE), John Purvis (EPP/UK), Sanchez (PSE/ES) and others were also interested in the supervisory aspects. They were particularly interested in the role of a solo-supervisor, their practical experiences, and their ability to work efficiently, and how to organize the cooperation of supervisors.
A third major issue was related to the timing of the directive. Pervenche Beres (PES/FR), Mr Hoppenstedt, and others were wondering if Parliament should wait for the final results of QIS 4 becoming due in November 2008. Experts made clear that this is clearly and solely a political decision the European Parliament has to take.
Interventions can be downloaded form the ECON website
International Financial Reporting Standards (IFRS) and the governance of the IASB
Rapporteur: Alexander Radwan (EPP/DE)
Consideration of amendments
Rapporteur Alexander Radwan concentrated on three issues in his presentation.
On the structure of the of the IASB he said that with regard to the international character of the IASB he does not propose any ‘concrete’ procedure that has to be followed, but he made abundantly clear that the European Parliament has to bring in and has to defend its own ideas on how this structure should look like.
On the governance question he made clear that he supports the concept of global convergence. However, the risk that the SEC becomes the primary body for interpretation has to be avoided. Mr Radwan therefore called for a level playing field with the SEC with regard to the interpretation of global reporting standards.
Finally, with regard to SME’s and IFRS he reiterated that even with the voluntary application of IFRS for SMEs this bears the risk of a fragmentation of the EU market.
Speaking for the PSE Mrs Beres (PES/FR) supported Mr Radwans view on SMEs. Mr Purvis (EPP/UK), however, noted that the main issue is to achive the “best system” and therefore called to be less sensitive to the political question between the SEC and
The Commission representative also supported the rapporteurs view underlining that IFRS were originally not designed for SMEs.
Closing the discussion Mr Radwan reiterated that meanwhile also the big companies consider the governance of the IASB as an important factor. He underlined that he favors a European standard for medium-sized companies. If these standards develop into some kind of IFRS, there will be no objection. However, IFRS should not be dictated.
Timeline:
Vote in Committee: 29 January
Vote in Plenary: February
Insurance and reinsurance - Solvency II
Rapporteur: Peter Skinner (PSE)
Second exchange of views
Opening the discussion rapporteur Peter Skinner outlined that he will concentrate his report on political issues, particularly on group supervision, as this forms an essential part of the directive.
Karsten Hoppenstedt (EPP/DE) referred to the presentation of Philip Keller about the Swiss experience and pointed to the consequences of group supervision on medium-sized companies. It is also to ask whether the Committee should wait for the results of QIS 4 that will not be available before November 2008.
Jonathan Evans (EPP/UK) reminded of the different situation within and between the member states with regard to supervisory arrangements. The role of assets also has to be carefully investigated. Finally, he underlined that the results of QIS3 for SME’s in the
Gay Mitchell (EPP/IRE) reminded to the special role of SMEs and calls for proportionality.
Antolin Sanchez (PSE/ES) pointed to competition issues between insurance companies and financial products provided by other financial institutions. He calls for coherence between banking sector financial products and insurance products. With regard to group supervision he sees a clear need for further convergence.
Due to time constraints the chair had to close the exchange of views and envisaged to proceed with the discussion at a later stage.
Timeline:
A recast version of the Directive will be issued in early January
The draft report of Peter Skinner will be presented on 26 February
Working document Peter Skinner (September 2007)
Commission proposal (July 2007)
Vote:
Green paper on market-based instruments for environment and related policy purposes
Draftsman: John Purvis (EPP-ED)
Committee adopted the Draft Opinion (consolidated final document not yet available)
Monetary dialogue with ECB President Jean-Claude Trichet,
Speaking before the ECON Committee ECB President Jean-Claude Trichet said that the ‘hump’ in inflation would be longer than previously projected and risks were on the upside. Growth for the eurozone should be at around potential in the year ahead, but risks to that projection were on the downside. The continuing turbulence in financial markets also featured strongly in the final ‘monetary dialogue’ with the European Central Bank President of 2007.
Alexander Radwan (
Commercial banks and institutions should not rely blindly on ratings agencies and will need to reflect on certain business models, Trichet said. Also, conflicts of interest affecting ratings agencies need attention, he added.
John Purvis (
Responding to Elisa Ferreira (PES, PT) and Dariusz Rosati (PES, PL) Mr Trichet underlined the importance of avoiding second round inflationary effects “What will not tolerate second round effects”, he said. “Our last decision on interest rates was to remain alert.”
Answering questions from José Garcia Margallo (EPP, ES) and Wolf Klinz (
Astrid Lulling (EPP, LU) and Mia De Wits (PES, BE) both asked about indexation systems, which some countries use to increase salaries automatically in line with inflation. “Indexation of prices and salaries is a very bad thing,” said Mr Trichet. “It guarantees second round effects, precisely what we want to avoid,” he added saying indexation was an enormous risk for growth and job creation. He also agreed with Mrs Lulling that Member States should avoid increasing inflation by raising further administered prices and indirect taxes.
Further information and Background Documents