Rapid progress is called for in four key areas including consumer protection, supervision, regulation and pension reform
The EU needs to force its members to drop trade barriers or it will lose out on a substantial boost to GDP growth, damaging its long term competitiveness and worsening the pension crisis, according an industry body.
The European Financial Services Round Table (EFR) has called for rapid progress in four key areas: regulation and supervision; consumer protection; a single capital market; and pension reform.
Pehr Gyllenhammar, chair- man of the trade body, believes if these areas were addressed, economic growth would increase from between 0.5% to 0.7% of annual GDP.
The costs for savings products would go down by E10bn to E20bn per year. The cost of capital would go down significantly, benefiting member states, consumers and companies. There would also be increased choice of innovative products and increased take-up of private pension schemes, which is one of the necessary conditions to averting the pensions crisis engulfing Europe.
Presently, in the EU the framework for supervision is completely fragmented, said EFR. This has made it difficult to create a level playing field. Currently there are 15 different national regimes, some members have combined banking and insurance regulators.
Gyllenhammar said: 'If co-ordination of supervision was improved and better institutional infrastructures were put in place, differences in application and interpretation would then be corrected by the market's supervisors and participants. Minimum stand- ards should be set for good solid supervision.'
The second area that is needed for change is consumer protection. Common principles for all member states such as information requirements, should have clearly defined responsibilities for product requirements and should be implemented in the EU to help protect the consumer.
Thirdly, Gyllenhammer urges the need for one capital market where investors are free to act across the EU in any member state. He said intermediaries should only be supervised in their home state and recognised elsewhere.
Lastly, the pension industry in the EU has also been a growing concern. Gyllenhammer suggests for adequate private pensions to be provided with an open, competitive and transparent single market. Costs and charges will have to come down while choice and quality are improved.
Gyllenhammar said: 'The Lisbon Strategy of 2000 demonstrated the political will for a single market in financial services, but turning this idea into reality is proving pain- fully slow. Financial services remain the missing link in a single European market. Europe's leaders need to commit to an urgent course of action to deliver the single market in financial services.
'We now need to move much faster. It will be even more difficult to agree a new vision in a larger EU after 2004. There is also a great urgency to accelerate Europe's response to the imminent pension funding crisis.'
The EFR is a trade body comprising European banks and insurance companies.
Cautious, Balanced & Dynamic Growth
Cowardly, boring or sensible
Latest news and analysis
‘Most significant’ upgrade since launch
Changes happening over coming months