Speech by Jonathan Hill, Member of the European Commission, responsible for Financial Stability, Financial Services and Capital Markets Union
"I'm very glad to be back a month after we met to discuss the Green Paper on Capital Markets Union. I thought we had a very useful exchange then, and I was very grateful for the suggestions and comments you made. Today I am glad to have the chance to have a broader discussion across the whole range of the portfolio and to update you on recent developments.
Before I do, I would like to thank the many members of ECON with whom I have had discussions since last November. This is a Committee held in high regard, and I can see why.
Last year, during my hearings, I set out five main priorities:
To implement the reforms of the last five years
To complete the outstanding financial reforms
To ensure consistent implementation of international standards and principles
To develop a Capital Markets Union
To extend more of the benefits of the single market more directly to citizens
So let me start by reporting on what we have been doing in each of those 5 main areas.
First, implementation, and most importantly on Banking Union, where we have made good progress. The SSM took on responsibility for supervision on 1 November. With the support of this Committee, we have appointed some excellent Board members to the SRB. They have got off to a good start, and will have their first Plenary Session tomorrow. Before Christmas, we also agreed the basic contributions that Member States will make to the Single Resolution Fund. Now my focus is on making sure that BRRD is transposed and that the IGA is ratified by all Member States. I raised this at the last meeting of ECOFIN and I want to assure you that we will keep the pressure up.
On implementing “Level 2” measures, you know as well as me what a huge task we have in taking this forward:
- there are over 400 empowerments in level 1 legislation of which the Commission could use up to 340 this year. In considering the detail of Level 2, we will of course respect Level 1 and also strike a balance between managing risk and doing so proportionately.
Through its participation in expert groups, the Parliament is involved in the preparation of delegated acts from an early stage. As soon as the draft technical standards prepared by the European Supervisory Authorities are submitted to the Commission they are forwarded to the co-legislators.
I understand that good use is being made of the monthly scrutiny slots on level 2 measures organised by ECON. My staff also set up bilateral meetings with Rapporteurs on specific files to explain the approach taken and discuss any sensitive issues. I hope these are helpful and working well.
Let me update you briefly on where we are with the files I inherited.
First, congratulations to Mr. Lamassoure and to Vice-Chair Mr. Zalba on ELTIFs and the MIF regulation respectively. As regards ELTIFs, I'm very keen to put the level 2 rules into place as quickly as possible this year, so that we can provide legal certainty and companies can start marketing them to investors. Given the role of ELTIFs in creating secondary markets for infrastructure projects or SME loans, I am keen to make quick progress.
A number of proposals are currently being negotiated in trilogues. I would like to thank ECON for its constructive engagement in the political trilogues on the revision of the Insurance Mediation Directive – Mr Langen – and on the Payment Services Directive – Vice-President Tajani.
Discussions so far have been very constructive and have provided a clear common understanding on the issues to be taken forward at political level. The Commission will continue to play its role at both political and technical level. We want to help conclude the discussions under the Latvian Presidency.
As regards Money Market Funds, I know it has not been easy so I very much welcome the agreement that was reached in ECON – congratulations to you, Ms Gill. It is now for the Council to agree on a general approach. It seems to me that ECON’s compromise is a step in the right direction. It addresses some of the concerns about the financial stability and "run risks" associated with MMFs. I welcome the prohibition of sponsor support to address the 'contagion link' between banks and MMFs. I also welcome the balance found on liquidity and diversification of investment holdings, and on enhanced transparency requirements. We are currently investigating the proposed threshold of 20 bps for LVNAV MMFs to assess whether the model is capable of withstanding financial stability concerns associated with CNAV MMFs.
You are also currently discussing a number of reports, on securities-financing transactions – Mr Soru –, on benchmarks, – Ms van Nieuwenhuizen – on Banking Structural Reform – Mr Hökmark – and on Occupational Retirement – Mr Hayes.
In addition to this important work, we need to remain alert to any emerging risks. As you know, the Commission intends to adopt proposals in the coming months on non-bank recovery and resolution.
Let me say a few words about the third area of priority: international standards and principles. There needs to be consistent implementation if we are to help secure financial stability, avoid regulatory arbitrage and make it possible for cross-border financial activity to flourish.
That said, as with our capital and liquidity rules, the EU should not be afraid to implement international standards in a way that makes sense for Europe and which matches Europe’s diverse financial landscape.
The fourth main area is the Capital Markets Union, which we discussed a few weeks back.
Put simply, CMU is about linking savings with growth. We want to remove the barriers that stand between investors' money and investment opportunities; overcome the obstacles that are preventing those who need financing from reaching investors, and make the system for channelling those funds – the investment chain-as efficient as possible. If we get this right, we have a great opportunity to encourage long-term investment, investment in infrastructure, and alternative funding for SMEs.
I am keen to hear the views of members of this Committee but also of Members States, national parliaments, NGOs, SMEs and the financial services industry. I and my officials have so far been to 9 Member States and we will be doing more during the remainder of the consultation. We would welcome the opportunity to participate in other events which perhaps you could host in your own Member States.
On securitisation and on the review of the Prospectus Directive, we have consultations going ahead on the same timescale as the overall Green Paper. My officials are having discussions with central banks, the ESAs and national supervisory authorities. Again my aim will be to make progress as speedily as possible and to bring forward legislative proposals later this year.
The fifth priority was exploring how we can deliver more of the benefits of the single market directly to citizens. The EU has done a lot to spread the benefits of financial services. But I am keen that we should look at financial services from the point of view of consumers and identify barriers which prevent them from benefiting from better competition, for example in the area of marketing cross-border investment funds, where authorisation and marketing fees vary considerably.
We all know from experience that the prices of certain financial products are more competitive in some Member States than in others.
In the coming months, I will be launching a consultation seeking to understand the barriers that persist within the Single Market and how we might help to give consumers access to more products, better services and keener prices."
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