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ECON Committee held an exchange of views with Commissioner Kroes which concentrated on the temporary extension of state aid rules on the background of the financial crisis. ECON also adopted the report on Solvency II and discussed the report on UCITS.
Exchange of views with Neelie Kroes, Commissioner for Competition
Commissioner Kroes told MEPs that an EU-wide response to the banking crisis would be preferable to unilateral action. Competition rules were part of the solution rather than an obstacle to it, she argued. “Now is rescue time”, the Commissioner said and made a clear distinction between such rapid decisions and the subsequent, essential, proposals for restructuring or liquidating the bank, where the state aid system applied as normal: “This situation does not mean that competition rules will not be applied. They are the way to ensure a common framework, even when governments have to act at national level.”
Unilateral action was not the way forward, she said: “Ignoring state aid rules would tempt governments into a subsidy race, with healthy companies being put out of business because others get subsidies.”
On government guarantees for bank deposits, she said “In this specific context, general guarantees can be a legitimate component of public policy response.” The Commission would be looking to provide legal certainty on this subject in the days ahead. “My preference would be for an EU solution – that is the best way to coordinate national actions, make them more effective and limit spillovers.”
Irish and German government guarantees
On the Irish guarantee scheme, she said concerns had been raised about its “very large scope,” and at first it had seemed to discriminate according to nationality, but “I welcome their willingness to apply the scheme to other banks with significant operations in Ireland. It could do with some fine tuning to be put in line with EU law.” Ms Kroes stressed that she was in contact with the Irish authorities. The German guarantee policy for retail deposits, she said, was similarly being discussed with the German authorities, but “at first sight it does not seem problematic for competition.”
Hypo Real Estate and Fortis
The revised plan to rescue Hypo Real Estate did not appear to need any change to the positive decision given by the Commission on the previous plan, as it was only the private participation that was being increased, she said. On Fortis, on the other hand, the rescue plans were now completely different from the previous approach and the Commission would have to consider them afresh. Ms Kroes encouraged all Member States to involve her team as soon as possible in developing any rescue plans as this would make it simpler to ensure they were compatible with competition rules.
Several MEPs including Udo Bullmann(PES/DE) and Wolf Klinz (ALDE/DE) reminded that the companies losses should not be socialised and demanded some form of a pay-back rule.
Jonathan Evans (EPP/UK) asked if it was really true that competition rules were still in place, with Ireland offering a 100 per cent guarantee and, in the UK, Bradford and Bingley and Northern Rock owned by the state. Would it not be better just to say directly that the rules were suspended during the crisis, he asked.
Ieke van den Burg (PSE/NL) said that whether the rules were suspended or action presented as rescue separate from restructuring was a matter of formulation, but “I fully support the intention to be part of the solution.” She wanted an investigation of the influence of Wall Street investment banks: “We have seen how devastating their activities have been.”
Sophie In’t Veld (ALDE/NL) wanted to know whether the Netherlands’ government takeover of the Dutch part of Fortis and ABN AMRO was really in line with state aid rules: “We all realise the need to act quickly,” she said, “but how can we ensure everything is balanced and proportionate?”
Commissioner Kroes insisted that there was no doubt at all that competition rules remained in place. Article 87 of the Treaty allowed for rescues in cases such as the present one, she said: “We all agree that we are in a serious situation, we can use Article 87 and stick to the competition rules.”
In general, the question of state or private ownership was not a competition issue, she said, although in banking, “we need to take account of the impact on the level playing field when the shareholder is the government,” and whether there was a state aid aspect, but it was too early to finalise the Commission’s view on this.
The Competition Commissioner noted that there were no major investment banks left on Wall Street: they had all collapsed, changed status or been taken over. But there were things to be concerned about: "There needs to be more transparency, better supervision and better standards."
Insurance and reinsurance - Solvency II (recast)
ECON adopted the report on the Solvency II directive prepared by Peter Skinner (
A well as setting absolute minimum levels for the Minimum Capital Requirement for different types of company, the text adopted by the committee indicates that the MCR should be between 25 and 45 per cent of the company’s Solvency Capital Requirement, with the exact amount being a calculation based on variables which indicate the company’s ability to remain operational.
The most significant amendments regarding group supervision include the mandatory creation of supervisory colleges – made up of the various national supervisors responsible for a group and its subsidiaries – to facilitate cooperation, exchange of information and consultation between the supervisors. Another key change comes in the arrangements for handling disagreements between the group supervisor and the supervisor of a subsidiary on key issues such as implications of a subsidiary’s risk profile for the calculation of the group SCR. MEPs say the matter must be referred to CEIOPS for advice. The final decision would be for the group supervisor, but if they chose not to follow CEIOPS’s advice, they would need to explain their reasons in detail.
Detailed provisions were also set out on how group support would work in practice and the issue of when surplus funds could be treated as capital for the purpose of meeting the various requirements. A broader amendment indicates that supervision should be conducted with a view to the wider financial stability of the Community as a whole as well as considering the health of an individual company.
The final document as adopted will be made available as soon as possible.
UCITS
ECON considered the draft report of rapporteur Wolf Klinz (ALDE/DE). Mr Klinz underlined in his presentation that it has to be assured that a feeder UCITS shall be able to redeem or re-purchase its units before the liquidation of the master takes place. Care has also to be taken to guarantee a direct regulator-to-regulator approach. Furthermore, he outlined that the Key Investor Information must be free of costs. Also, the notification period should be shortened to 5 working days.
In general, Mr Klinz called for a stronger cooperation among supervisory authorities and referred to the work already undertaken by CESR, although some ‘fine-tuning’ is expeted for the final report to be published end October. Nonetheless, with regard to the short timetable discussions with the European Commission have to start in due course.
Astrid Lulling (EPP/LUX) welcomed ‘in principle’ the introduction of a Management Company Passport. However, certain conditions have to be fulfilled concerning the supervision of these instruments. An efficient oversight also includes a minimum staffing of the supervisory units, she said and announced further amendments once the CESR final report is available.
Donata Gottardi (PES/ITA) said that the devil is in the detail when it comes to the question to define what is ‘domestic’. She therefore called for a detailed regulation that also includes those aspects where UCITS or parts of them are outside the EU jurisdiction.
Draft report on UCITS
CESR: Consultation on MCP