The Financial
Services Action Plan (FSAP)
International Association of Risk and Compliance Professionals
(IARCP)
A single market. A harmonised market in
banking, investment, insurance, derivatives, commodities.
This is a top priority for the European Union.
The Financial Services Action Plan (FSAP), launched in 1999 and
almost completed by 2004, is a huge and ambitious project.
There are
42 original measures in the FSAP.
Some are
non-legislative, a few are regulations, and
there are almost 30 directives.
Over 20 of the original measures are likely to affect the
financial sector.
The most
important measures are:
1. The Capital
Requirements Directive
DIRECTIVE 2006/48/EC OF
THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 June 2006
relating to the taking up and pursuit of the business of credit
institutions (recast)
DIRECTIVE 2006/49/EC OF THE EUROPEAN
PARLIAMENT AND OF THE COUNCIL of 14 June 2006 on the capital
adequacy of investment firms and credit institutions (recast)
The Capital Requirements Directive (CRD) is the common
framework for the implementation of Basel ii in EU.
This directive
is making significant changes to two existing directives that were
implementing Basel I:
1. The Banking Consolidation
Directive
2. The Capital Adequacy Directive
Although the Capital Requirements Directive (CRD) has worked very
well for the European Union, after the market crisis it was
obvious that there was a need for amendments.
We have the:
Capital Requirements Directive
II (CRD II)
Capital Requirements
Directive III (CRD III)
Capital Requirements Directive
IV (CRD IV)
2. The 8th Company Law Directive
DIRECTIVE 2006/43/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
of 17 May 2006 on statutory audits of annual accounts and
consolidated accounts
The 8th Company Law Directive is
similar to the US Sarbanes Oxley Act.
This directive is called the
European Sarbanes Oxley.
In fact, there are
similarities and
differences.
This Directive was
necessary to ensure that investors and other interested parties can
rely fully on the accuracy of audited accounts and to enhance the EU's
protection against the type of scandals that recently occurred in
companies such as Parmalat and Ahold.
Most of the measures in
the proposal, however, were already in preparation well before those
scandals broke.
Faith in financial
reporting and financial markets should be restored to protect
investment, jobs and growth.
This Directive fulfils
many of the priority commitments the Commission announced in its May
2003 Communication "Reinforcing statutory audit in the EU" (see
IP/03/715).
It clarifies the duties
of statutory auditors, their independence and ethics, by introducing a
requirement for external quality assurance and by ensuring robust
public oversight over the audit profession.
This considerably
broadens the scope of the former Eighth Council Directive on Company
Law, which only dealt with the approval of statutory auditors.
The 8th Company Law
Directive also provides a basis for effective and balanced
international co-operation between regulators in the EU and with
regulators in third countries, such as the US Public Company
Accounting Oversight Board (PCAOB).
The latter is
particularly important because of the global nature of modern capital
markets, demonstrated again by the international nature of the recent
scandals, which affected several jurisdictions.
The 8th Company
Law Directive of the European Union
3. The Markets in Financial
Instruments Directive (MiFID)
DIRECTIVE
2004/39/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 21
April 2004 on markets in financial instruments
The
Investment Services Directive has been replaced by MiFID that
reflects developments in financial services and markets and
extends the scope of the passport to cover commodity derivatives,
credit derivatives and financial contracts for differences for the
first time.
4. Financial Conglomerates
Directive
DIRECTIVE 2002/87/EC OF THE EUROPEAN
PARLIAMENT AND OF THE COUNCIL of 16 December 2002 on the
supplementary supervision of credit institutions, insurance
undertakings and investment firms in a financial conglomerate
The Financial Conglomerates Directive tries to introduce
supplementary supervision of financial conglomerates on a
group-wide basis, in addition to both the prudential supervision
of regulated entities on a standalone basis and consolidated
supervision on a sectoral basis.
The
Financial Conglomerates Directive of the European Union
5. Savings Tax Directive
COUNCIL DIRECTIVE 2003/48/EC of 3 June 2003 on
taxation of savings income in the form of interest payments
The Savings Tax Directive is the effort of the European Union to
stop taxpayers from fleeing to lower tax environments.
The new
environment is becoming very interesting, as, although not in the
EU, many offshore financial centers have voluntarily agreed to
apply the same or equivalent measures.
Understanding the
inancial Services Action Plan (FSAP)
The Financial Services Action Plan (FSAP) is an ambitious
programme with four key strategic objectives:
1. Developing a single European market in wholesale financial
services
2. Creating open and secure retail markets
3. Ensuring financial stability through establishing state of the
art prudential rules and supervision
4. Setting
wider conditions for an optimal single financial
market.
The overall aim of this assignment was to measure the economic
impact attributable to the FSAP as a whole at this point in time.
It also sets out the baseline methodology for how future
developments attributable to the FSAP can be assessed.
To meet these four strategic objectives, the FSAP introduced
42 measures each with their own operational objectives (such as
increasing market confidence, harmonising information etc).
The Financial Services Action Plan (FSAP) was largely completed by
its 2004 deadline, with 39 of the 42 measures adopted.
This is considered a success in legislative procedural terms
for a programme of this scale, which included landmark
legislative initiatives, introduced a new regulatory process and
had to respond to unprecedented market events in the financial
services area.
To achieve this extremely wide-ranging programme required a
tremendous effort on the part of all institutions with relatively
few resources.
The range of activities from ex-ante consultation exercises to
drafting of legislative proposals by Commission personnel and
inter-institutional negotiations was extremely wide-ranging.
The FSAP has already been the subject of considerable analysis
by various parties, including:
1. The ten Progress Reports on the FSAP (the “Progress Reports”)
2. The Financial Services Committee report on Financial
Integration (the “Asmussen report”)
3. The Reports of the Four Independent Groups of Experts on
European Financial Integration (“expert group” reports)
4. The European Parliament’s Economic and Monetary Affairs
Committee’s draft report on the Current State of Integration of EU
Financial Markets (“van den Burg report”)
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