European Commission outlines Action Plan for Single Financial Market

In May 1999 the European Commission outlined its policy objectives and specific measures it intends to adopt to improve the Single Market for Financial Services over the next five years. The Action Plan suggests priorities and timescales for legislative and other measures to tackle three strategic objectives: insuring a Single Market for wholesale financial services, open and secure retail markets and state-of-the-art financial rules and supervision.

In the field of retail markets, the Commission has identified six key areas for action:

1.Information and transparency

The Commission intends to produce a code of good practice on mortgage credit information by opening up a dialogue between financial services providers and consumers. This will lead to a Recommendation on mortgage credit information.

2.Redress procedures

The Commission is to consider the development of a Union-wide complaints network including the use of an ombudsmen for financial services. In the field of consumer disputes, the Commission will base its action on its Recommendation on the principles applicable to the bodies responsible for out-of-court settlements of consumer disputes (Recommendation 98/257 of 30.03.98). The Commission will also encourage networking between these bodies with a view to resolving cross-border disputes.

3.A balanced application of Consumer Protection Rules

The Commission is to analyse national consumer protection rules to establish possible equivalence between clearly similar rules. This work could culminate in a detailed report to the Council and the European Parliament on the basis of which conclusions on future policy will be drawn.

4.Paving the way for e-commerce

Although the proposals for the e-commerce and distance selling directives are being negotiated at present, the Commission also plans to publish a Green Paper to establish whether the provisions of existing financial legislation contain coherent provisions providing a suitable legal environment in which e-commerce based financial services business can thrive, while ensuring that consumers' interests are fairly safeguarded.

5.Insurance intermediaries

The Commission is working towards tabling a Directive:

(i)to update the 1976 Directive on insurance intermediaries; and

(ii)to strengthen consumer protection by establishing common requirements on, amongst other matters, registration, financial security and information disclosure to the consumer.

6.Cross-border Retail Payments

The Commission appreciates that there is a need for an integrated retail payment system. There needs to be a system enabling secure and competitive small-value cross-border transfers to be made. This needs to be put in place before the end of the Euro transitional period. The Commission states that a concerted effort involving the ESCB, EU institutions and the private sector should be launched to deliver a technically secure and operational solution as a matter of utmost urgency.

7.Timetable

It is intended that the Recommendation on mortgage credit information should be issued by the end of 1999.

The Commission Communication on a single market for payment systems is due for issue by summer 1999.

The Commission green paper on an e-commerce policy for financial services is intended for issue by mid-2000.

Comment

The Action Plan has been welcomed by the ECOFIN Council which indicated that the Financial Services Policy Group is to continue. It is full of good ideas and it places the right emphasis on flexibility, a light regulatory touch, providing a framework within which e-commerce could flourish and focusing on the provision of clear information for consumers. Working Groups are to be set up to deal with the three key areas: retail markets, capital markets and the area of sound supervisory structures.

It is useful to see how the various initiatives have been prioritised and although some initiatives may slip on the projected timetable this will probably be due to the fact that all the attention is being given to the number one priority actions.