1. 1 European Commission, Technical Assistance Information Exchange Unit (TAIEX), DG Enlargement in co-operation with the Bulgarian Chamber of Commerce and Industry Seminar on Financial Services Sofia, 15-16 September 2005 Introduction to the European Single Financial Market – Recent developments in the financial services sector Dr. jur. Dimitris Tsibanoulis Legal Advisor, Bank of Greece Dr. jur. Dimitris Tsibanoulis Legal Advisor, Bank of Greece

2. 2 Main Fields of Financial Services Banking Transactions on financial instruments / Securities field Insurance

3. 3 A Single Financial Market Investors free to invest in instruments issued/ traded in other Member States Intermediaries free to transact freely with clients in other Member States Issuers free to tap a deeper and more liquid market Infrastructure suppliers can make their facilities available to market participants/users in EU Enforcement of authorities able to prosecute cross-border infringements

4. 4 The integration of the European financial markets and its importance for growth and economic development in Europe The achievement of a fully integrated single market is a key objective of the European Union; that is a market allowing for the free movement of goods and services and for the right of EU citizens to take up employment or establish their business anywhere within the EU, without discrimination, on the basis of a harmonized set of rules and regulations.

5. 5 Why do we need an Integrated Financial Services Market? Long term economic benefits: Greater market liquidity; More efficient allocation of investment resources; Greater freedom for investors + consumers Lower cost of capital = increased investment; Better return on private savings for ordinary investors and funds will help defuse pension “time-bomb”; More venture capital and finance for higher-risk segments; Increased growth, employment

6. 6 Building blocks of the Single Market Home country/country of origin authorization and supervision Mutual recognition of equivalence of partner country authorization/supervision Harmonisation of key regulatory protections/rules Close co-operation between host State and home State authorities

7. 7 Financial Services Action Plan (FSAP) Implementing the framework for financial markets: action plan The Financial Services Action Plan adopted in May 1999 set out a road map to get rid of all existing barriers to the integration of European financial markets. It contained over forty measures, both legislative and non-legislative, which covered the entire financial services field, from securities and banking to insurance, as well as from major financial institutions to retail investors.

8. 8 Financial Services Action Plan (FSAP) The action plan for a single financial market put forward indicative priorities and a timetable for specific measures to achieve strategic objectives, namely establishing a single market in wholesale financial services; making retail markets open and secure; strengthening the rules on prudential supervision; widening conditions for an optimal single financial market.

9. 9 Financial Services Action Plan (FSAP) The FSAP is designed: - to enhance the integrity of European markets; - to increase investor confidence; - to lower the costs of offering cross- border services; and - to unify the primary markets.

10. 10 Financial Services Action Plan (FSAP) 42 legislative and “soft law” measures to enhance the EU legislative framework: Common EU rule-book for securities - Directive 2004/39/EC on markets in financial instruments, amending Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC and repealing Directive 93/22/EEC - Directive 2003/6/EC on insider dealing and market manipulation 2003/6/EC

11. 11 Financial Services Action Plan (FSAP) Single set of financial reporting standards -Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards 1606/2002 - Commission Regulation (EC) No 1725/2003 of 29 September 2003 adopting certain international accounting standards in accordance with European Parliament and Council Regulation (EC) No 1606/2002 1725/20031606/20021725/20031606/2002

12. 12 Financial Services Action Plan (FSAP) Common initial and regular disclosure documents - Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC 2003/71/EC2001/34/EC2003/71/EC2001/34/EC - Transparency Directive 2004/109/EC First steps towards EU framework for occupational pension funds of the European Parliament and of the Council Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision

13. 13 Financial Services Action Plan (FSAP) Secure and transparent environment for cross-border restructuring of companies -Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions -Directive 2001/17/EC of the European Parliament and of the Council of 19 March 2001 on the reorganisation and winding-up of insurance undertakings

14. 14 Financial Services Action Plan (FSAP) Strengthening of supervision of companies and markets Internal Market for retail customers Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC.

15. 15 FSAP Need for further work on integration Markets remain fragmented Obstacles remain Developments and changes in the markets call for appropriate responses

16. 16 How to achieve the goal of integrated financial markets ? EU financial services law-making, traditionally: too slow too rigid results divorced from market reality/practice insufficient legal certainty/uniformity to sustain home country principle. Response: Lamfalussy blue-print for reform of EU legislative process

17. 17 THE COMMITTEE OF WISE MEN ΟN THE REGULATION OF EUROPEAN SECURITIES MARKETS Τhe challenges facing the creation of an integrated securities market in Europe are that the basic legislation is not in place; that there is still insufficient prioritization; that the present system cannot produce quickly or flexibly enough the type of legislation that modern financial markets require; and that inconsistent implementation is severely handicapping the emergence of a pan-European market.

18. 18 Lamfalussy Model for a reformed EU-legislative process Consultation and Transparency Efficient and flexible regulatory system Regulatory convergence and co-operation Common implementation and enforcement.

19. 19 THE FOUR-LEVEL APPROACH RECOMMENDED BY THE COMMITTEE - Level 1: Framework principles to be decided by normal EU legislative procedures (i.e. proposal by the Commission to the Council of Ministers/ European Parliament for co-decision). - Level 2: Establishment of two new committees – an EU Securities Committee and an EU Securities Regulators Committee (in a format similar to that of FESCO) to assist the European Commission in determining how to implement the details of the Level 1 framework.

20. 20 THE FOUR-LEVEL APPROACH RECOMMENDED BY THE COMMITTEE - Level 3: Enhanced cooperation and networking among EU securities regulators to ensure consistent and equivalent transposition of Level 1 and 2 legislation (common implementing standards). - Level 4: Strengthened enforcement, notably with more vigorous action by the European Commission to enforce Community law, underpinned by enhanced cooperation between the Member States, their regulators, and the private sector.

21. 21 Financial Services Action Plan (FSAP) What remains to be done? Corporate scandals, money laundering and fight against terrorism Follow up to the Action Plan on Company Law & Corporate Governance Modernisation of 8th company law directive (statutory audit) 3rd money laundering directive Transposition of FATF recommendation No. 7

22. 22 Financial Services Action Plan (FSAP) What remains to be done? Modernisation of capital adequacy rules Base II / CAD III Solvency II Payment systems: Legal framework for payments in the internal Market and payment institutions

23. 23 Financial Services Action Plan (FSAP) What remains to be done? Financial Markets Infrastructure: Clearing and Settlement / Achievement of an integrated, efficient and safe clearing and settlement environment in the European Union.

24. 24 Charlie McCreevy European Commissioner for Internal Market and Services The integration of European financial markets – our objectives for the coming years ( Initiative Finanzstandort Deutschland, 20.12.2004, Frankfurt am Main, Germany) ( Initiative Finanzstandort Deutschland, 20.12.2004, Frankfurt am Main, Germany) Implementation and enforcement of the existing legislation Implementation and enforcement of the existing legislation The new framework puts greater emphasis on the cooperative responsibilities of the supervisors. We want the concept of a “consolidating supervisor’ to work and cross-border groups not to be subject to multiplicative requirements. The new framework puts greater emphasis on the cooperative responsibilities of the supervisors. We want the concept of a “consolidating supervisor’ to work and cross-border groups not to be subject to multiplicative requirements.

25. 25 Conclusion Huge potential benefits from integrated financial market Legislative phase nearly complete Immediate focus now on implementation and enforcement Need to have flexible system which allows to adapt quickly Need for strong involvement of stakeholders to be successful