tax & jurisdiction | single market will benefit uk only if balance is right, say lords
Despite the UK's House of Lords coming out against the idea of a European single regulator the European Union (EU) has put in place a system to harmonise implementation of financial advisory legislation.
The Lords' report examined the moves by the EU towards a single European financial market, which is the goal of the 42-point Financial Services Action Plan. This plan has passed 36 points, including creating a EU passport for insurance intermediaries. The remaining handful, such as the Investment Services Directive which will create a passport for fund advisers, is to be completed by April, ahead of the expansion of the EU to 25 members, with implementation by the end of 2005.
The report said a single market would benefit the UK if the balance was right. Lord Woolmer, chairman of the Lords committee that prepared the report, said: "A key part of this balance would be achieving good legislation rather than rushed legislation to meet the 2005 deadlines. There are some disturbing signs that this balance is suffering as EU ministers feel the pressure of that deadline."
There was no support in the report for the concept of a single EU financial regulator. However, in November the European Commission unveiled its plan to streamline decision-making in order to improve regulatory and supervisory co-operation across the EU members that could result in the equivalent of a single regulator.
This EC approach is modelled on the Lamfalussy committee method already used in the securities industry. This approach will be extended to banking, insurance and cross-border mutual funds (Ucits).
Under the Lamfalussy system, directives would set out the principles to be followed and the scope of the technical implementation required. These technical implementation measures are based on information provided by committees of all members' supervisory authorities and member state representatives.
The national supervisory committees will also be responsible for improving the practical implementation of EU law in the member states. Under these plans there will be a European Banking Committee and European Insurance and Occupational Pensions Committee to join the existing European Securities Committee, which will, in future, cover Ucits as well in adopting implementation measures.
There will also be two new committees of national supervisors for banking and insurance to join the Committee of European Securities Regulators.
Graham Bishop, EU financial services expert at his eponymous consultancy, said: "This structure would take all EU law and case studies and make its practical application in every country the same. There is no need for a single regulator, therefore, as this leads to a single decision being made."
But Paul Smee, director general of the UK's Association of IFAs and part of the pan-European intermediary trade association, Bipar, which is representing the industry on financial advice, said: "Even under the plans for committees of regulators to agree how directives are implemented I suspect there will be differences on standards between markets."
On the Investment Services Directive, he added: "The European Parliament will vote shortly. There are problems on professional indemnity insurance created under the revised directive but it will create minimum standards."
most important EU Directives for the UK to be passed by April 2004
Investment Services - removes discrimination between stock exchanges and creates a pan-European passport on financial advice.
Transparency - would create quarterly reporting for listed companies.
Liability - for directors and auditors increased on accuracy of annual report.
Takeover - aims to makes cross-border acquisitions easier.
Source: House of Lords
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