An update on EU Financial Services and associated initiatives A Brussels perspective

1. An update on EU Financial Services and associated initiatives A Brussels perspective Dr. David P. Doyle EU Policy Adviser – Financial Services Regulation November 2011

2. Building constructive links at Pan-EU level • European Parliament • European Council • European Commission • UEAPME – leading EU SME representative body • Cross-party MEP groups (Kangaroo Group, SME-UNION, Enterprise First Europe…) • Pan-EU trade and industry bodies: • EuroChambers – European chambers of commerce • BusinessEurope – EU employers Federation • EU Banking Federation • Conference Board Europe • ESC – European Economic and Social Committee • ETUC – European Trade Union Council • Permanent Representations of each EU state to the EU (diplomatic missions) EU Financial Services Policy 2

3. Guiding principles Competence Subsidiarity Proportionality • Action should be proportionate • Action should be taken by the body best placed to act, i.e., does action at community level provide added value? • Any action must remain within the scope of the Treaty EU Financial Services Policy 3

4. European parliament • Two important committees: • Economics and Monetary Committee • Legal Affairs Committee • 736 MEPs – elected for five years • Meets in Strasbourg and Brussels • Previously, powers vary according to treaty provisions, but increasingly assertive on all EU legislation • Significant new powers under the Lisbon Treaty • Joint-powers to pass legislation (with EU Council) • Operates on basis of 20 thematic committees: • Chairman • Vice chairmen x 3 • Political group co-ordinators • Rapporteurs and shadows • EU state holding EU Presidency • Political group secretariat EU Financial Services Policy 4

5. Composition of the MEPs 736 MEPs Members • EPP (265) • S&D (184) • ALDE (84) • Greens (55) • ECR (54) • EUL-NGL (35) • EFD (32) • Germany 99 • France 72 • Italy 72 • United Kingdom 72 Political groups Big decision makers EU Financial Services Policy 5

6. European commission • What is it? • 27 Commissioners, 1 from each Member State. Appointed not elected. • One for each EU State. • Commissioners collectively known as ‘College’, head by President (Barroso). • 10,000 EC officials. • Divided in Directorates (roughly equivalent to ministries). • What does it do? • Sole right of initiative to propose legislation. • Power to make Secondary legislation. • Responsible for day-to-day running of the institution (Chairs Management and Regulatory Committees, i.e., Committee on Audit Regulation). • ‘Guardian’ of the Treaties. • The influential Directorates: Trade, Internal Market, Economics & Monetary Affairs, Enterprise. EU Financial Services Policy 6

7. Council of ministers • Ministers and Commissioners – political forum • Adopts legislation (with EP) • Various Council formats (i.e., Health, Environment) • Chaired by country running the EU Presidency • Ministerial meetings held in Brussels and Luxembourg • Supported by Secretariat EU Financial Services Policy 7

8. 38 separate pieces of draft legislation Remuneration and bonuses Pan-EU Supervisory Mechanisms Hedge Funds & Private Equity OTC Derivatives, Short-selling Solvency II – Insurance Responsible Lending & Borrowing Packaged Retail Investment Products (PRIPs) MiFID II UCITs IV Capital Requirements Directive IV Credit Rating Agencies Market Abuse updated rules Financial Transactions Tax (FTT) Living wills for banks Pensions Corporate governance in financial institutions & listed companies Regulate both capital markets and market actors  Filling-in the gaps where European or national regulation is insufficient or incomplete Expansion of scope of regulation: all financial institutions, intermediaries (transactional and advisory actors) and financial instruments. More focus on Pan-EU centralised authorisation and supervision, with “implementing powers” vested in 3 authorities: ESMA, EBA & EIOPA Less directives and more regulations – assures faster implementation and less scope for gold plating and divergent interpretation Stronger powers for EU Commission (“delegated powers”) Stronger powers for EU Parliament (Lisbon Treaty): life-cycle review and approval of draft legislation Built-in “sun-set clauses” to review EU laws after 3-5 years Brussels: Perception persists that the financial crisis is not over and that debt financing for the SME sector is dwindling A charged EU Agenda since the financial crisis

9. The EU legislative response to the financial crisis Objectives • All that is of systemic importance should be regulated and supervised. • Need for better capitalised finance industry, with less leverage. • Perverse incentives in the financial sector should be tackled. • Supervision should have the right tools to grasp complex, inter-connected and globalised financial nature of activities. • Restore trust, investors and consumers should benefit from clearer, more coherent and effective safeguards. EU Financial Services Policy 9

10. EC approach to improving corporate governance in small and non-listed companies • Should EU corporate governance measures take into account the size of listed companies? How? • Should a differentiated and proportionate regime for small and medium-sized listed companies be established? If so, are there any appropriate definitions or thresholds? Can these be adapted for SMEs? • Should any corporate governance measures be taken at EU level for unlisted companies? • Should the EU focus on promoting development and application of voluntary codes for non-listed companies?

11. Agenda in the retail investment space Agenda in the retail investment space • Markets in Financial Instruments Directive (MiFID) • Insurance Mediation Directive (IMD) • Packaged Retail Investment Products (PRIPS) • Reform of the EU Pensions Regime • Reform of corporate governance policies within financial institution “European consumers deserve better. They need reassurance that their savings, investments or insurance policies are protected no matter where in Europe they are based” (Commissioner Barnier, 2010). EU Financial Services Policy 11

12. The SME Agenda Small Business Act launched in 2008 - proposing a wide ranging set of pro-enterprise measures designed to facilitate the business operations for SMEs: • Access to Venture Capital • A light touch financial reporting regime Micro-enterprises • A Directive on e-invoicing, particularly helpful to small businesses, by making e-invoices equal to paper ones. • Empowering Public authorities to be required to pay within 30 days as a security guarantee for SMEs. • Exploring options for setting up an intellectual property rights instrument at the European level, in particular, to ease SMEs' access to the knowledge market

13. The SME Agenda - Other initiatives • Legislative proposal for a Common Consolidated Corporate Tax Base (CCCTB) propose a new VAT strategy aiming notably at reducing tax obstacles and administrative burdens for SMEs in the Single Market • Facilitate cross-border debt recovery • Propose an instrument of European Contract Law • Undertake a revision of the European standardisation system in 2011 to ensure, that it addresses to the needs of SMEs • Explain the rules on labelling of origin and inform SMEs about the means available to them to protect their legitimate interests. • Create mentoring schemes for female entrepreneurs in at least 10 EU countries to provide advice and support with the start up, functioning and growth of their enterprises • Reduce the time needed to get licences and permits (including environmental permits) to 1 month by the end of 2013 • Promote second chances for entrepreneurs by limiting the discharge time and debt settlement for an honest entrepreneur after bankruptcy to a maximum of three years by 2013

14. Contact Dr. David P. Doyle EU Policy Adviser – Financial Services Email: dpdoyle@free.fr Tel: +33-628-69-40-40 Fax: +33-957755844