Tag Archives: Financial market

Impact on capital markets

Impact on capital markets

Outline of the Community (European Union) legislation about Impact on capital markets

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Single market for capital

Impact on capital markets

Document or Iniciative

Commission communication of 2 July 1997 on the impact of the introduction of the euro on capital markets [COM (97) 337 final – Not published in the Official Journal].

Summary

In order to derive maximum benefit from the introduction of the euro, it is desirable to attain a degree of harmonisation of future euro markets by defining common characteristics that will apply to the financial markets of all the countries in the euro area.

Bond markets

Under the reference scenario adopted in Madrid, all new tradable public debt will be issued in euros as from 1 January 1999. In addition to this requirement, most issuers are now considering redenominating into euros their outstanding debt: this operation will have the advantage of generating euro liquidity in government bond markets and of enhancing the credibility of the governments’ commitment to the economic and monetary union (EMU) process.

The best method of redenominating the debt would appear to be the “bottom-up” approach:

  • individual securities are converted to euros using the fixed conversion rates;
  • the result is rounded up to the nearest cent;
  • the sum of all individual securities is then calculated and matched against the total held at the central depository.

The operation is neutral at all stages and the only potential differences for operators lie in the rounding arrangements.

Greater harmonisation of market conventions towards best practice is worth pursuing because it will increase transparency and avoid disputes. Harmonisation would concern the following points:

  • conventions governing the number of days used to calculate the accrual of interest: modern calculation systems enable the most accurate convention (exact number of days/exact number of days) to be adopted;
  • coupon frequency: the possibility of choosing between various options should be kept open. Semi-annual coupons reduce credit risk and are the norm in the US and Japanese markets, whereas annual coupons are the norm in the EU (except in Italy and the United Kingdom) and are cheaper for issuers;
  • business days: a standard definition could be to consider a business day as any day when TARGET is open for business (only Christmas Day and New Year’s Day are holidays);
  • settlement basis:
    – the most common method (“spot standard with a two-day settlement period”) would be a suitable standard to harmonise on for euro-money market transactions;
    – on bond markets, the settlement standard is currently trade date plus three business days: this standard could be maintained in the short term and a move made to a shorter settlement period in the longer term.

Equity markets

As regards the changeover to the euro, the main European stock exchanges have announced their intention to pursue a Big Bang approach: as from 4 January 1999 exchanges will trade and quote all securities in euros. Intermediaries will have to make the necessary conversion in order to account to their clients in the currency chosen by the latter.

The decision to redenominate shares is a company decision independent from the decision of the stock exchanges to trade in euros. The denomination of share capital should not affect its economic value: accordingly, redenomination can take place at any time during the transitional period, in other words from 1 January 1999 to 31 December 2001.

The recommended solution is that of Non Par Value shares (NPV). Since each share is a fraction of the capital stock, there is no need for a physical exchange of share certificates. However, in many Member States the national legislation allowing NPV shares has not yet been put in place.

In general, there is not much of a case for harmonising market conventions in equity markets.

As regards historical series and stock market indices, the changeover should not give rise to any particular problems.

Derivatives markets

The transitional issues relevant to the derivatives markets mirror those of the underlying markets to which they relate. Accordingly, the same types of solution are recommended.

Other market features

Price sources. It is important to ensure the continuity of price sources. Prices calculated on a national basis (PIBOR, LIBOR, etc.) and on a European basis (EURIBOR) can coexist. It is desirable for rates to be published for the whole of the euro area or for harmonised criteria to be available for calculating national sources. The bodies responsible for producing and publishing price sources should provide clear information on the prices that will be available between 1 January 1999 and 1 January 2002.

Issuing procedures for sovereign debt. There is concern in some quarters that the coexistence of national debt offices and the European Central Bank (ECB) debt on markets could confuse monetary policy signals. Informal coordination between sovereign issuers could help to prevent this happening.

Ratings: sovereign debt. There is a debate between those who contend that membership of the euro area could result in an adjustment for some sovereign credit ratings and those who believe that membership of EMU will strengthen the credibility of budget policy and that ratings will not be adjusted.
In any event, the cost of raising debt for an individual country is unlikely to be changed significantly by a small adjustment in its credit rating, given the importance of other factors such as liquidity and the efficiency of the country’s primary dealer system.

Ratings: corporate debt. The European Union (EU) will probably be rated AAA and thus corporate borrowers will no longer be potentially capped by the credit rating of the country in which they are located. Broadly, EMU should have a positive effect on corporate ratings.

Repos. Market participants are keen to avoid the overly aggressive use of initial margin (the amount that has to be deposited before entering into a margining transaction)/haircut (the value of a security as collateral) in the official repo market as this would be an unnecessary restriction on the development of the market.
In addition, the use of variation margins (the amount that has to be deposited by the borrower to ensure that the counterparties remain fully collateralised throughout the term of a transaction) is far more efficient because it is based on symmetric daily marking-to-market of the collateral.

Markets need certainty that no volatility can occur at the end of the process because they would not be able to hedge. Investor protection is considered as one of the key factors of an efficient financial market and is crucial in determining the international attractiveness of the markets.

Market abuse

Market abuse

Outline of the Community (European Union) legislation about Market abuse

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: transactions in securities

Market abuse

Document or Iniciative

Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse) [See amending acts].

Summary

This Directive aims at preventing market abuse in order to preserve the smooth functioning of European Union financial markets.

This Directive does not apply to transactions relating to:

  • monetary policy, exchange rates or public debt management by a Member State;
  • the European System of Central Banks;
  • national central banks.

Conditions for the prohibition of market abuse

Market abuse may arise in circumstances where investors have been unreasonably disadvantaged, directly or indirectly, by others who:

  • have used information which is not publicly available (insider dealing);
  • have distorted the price-setting mechanism of financial instruments;
  • have disseminated false or misleading information.

This type of conduct can undermine the general principle that all investors must be placed on an equal footing.

The Member States therefore prohibit any person possessing information from:

  • disclosing privileged information to any other person outside the scope of the exercise of their employment;
  • recommending any other person to acquire or dispose of financial instruments to which that information relates;
  • engaging in market manipulation.

These prohibitions do not apply either to trading in own shares in “buy-back” programmes or to the stabilisation of a financial instrument.

Managing information from the issuers of financial instruments

The issuers of financial instruments must publish information which concerns the said issuers as soon as possible and post it on their website. If an issuer discloses privileged information to a third party in the exercise of his duties, he must make public disclosure of that information.

Issuers must also draw up a list of persons in their employment who have access to privileged information.

The European Securities and Markets Authority (ESMA) may draft technical norms for implementation aimed at ensuring that acts adopted by the Commission are applied under uniform conditions.

Cooperation

The Directive requires each Member State to designate a single regulatory and supervisory authority with a common minimum set of responsibilities. These authorities use convergent methods to combat market abuse and should be able to assist each other in taking action against infringements, particularly in cross-border cases. The administrative cooperation procedure followed could in particular help to combat terrorist acts. The competent authorities are to collaborate with the ESMA.

Penalties

The same form of wrongful conduct shall incur the same penalty in each of the Member States.

If a competent authority adopts an administrative measure or penalty, it must inform the ESMA. If said penalty concerns an investment firm authorised pursuant to the Markets in Financial Instruments Directive (MiFiD), the ESMA shall add a reference to that penalty in the register of investment firms.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2003/6/EC

12.4.2003

12.10.2004

OJ L 96, 12.4.2003

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal

Directive 2008/26/EC

21.3.2008

OJ L 81, 20.3.2008

Directive 2010/78/EU

4.1.2011

31.12.2011

OJ L 331, 15.12.2010

Successive amendments and corrections to Directive 2003/6/CE have been incorporated in the basic text. This consolidated version is for reference purpose only.

Related Acts

Directive 2008/26/EC of the European Parliament and of the Council of 11 March 2008 amending Directive 2003/6/EC on insider dealing and market manipulation (market abuse), as regards the implementing powers conferred on the Commission [Official Journal L 81 of 20.3.2008].

Commission Directive 2004/72/EC of 29 April 2004 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards accepted market practices, the definition of inside information in relation to derivatives on commodities, the drawing up of lists of insiders, the notification of managers’ transactions and the notification of suspicious transactions [Official Journal L 162, 30.04.2004].
This Directive defines the criteria to be taken into account when evaluating market practices for the purpose of implementing Article 6(10) of Directive 2003/6/EC. The practices of market participants must comply with the principles of fairness and efficiency in order to protect the integrity of the market. These practices must not compromise the integrity of other European Union markets that are linked to it.

Commission Directive 2003/124/EC of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards the definition and public disclosure of inside information and the definition of market manipulation [Official Journal L 339, 24.12.2003].
This Directive fixes the detailed criteria for determining information that must be deemed to be of a precise nature and likely to have a significant effect on prices. In addition, it specifies a series of factors that are to be taken into consideration in determining whether specific behaviour constitutes market manipulation. Regarding issuers, it lays down the means and time-limits for public disclosure of inside information and the precise circumstance in which they are authorised to delay such public disclosure in order to protect their legitimate interests.

Commission Directive 2003/125/EC of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards the fair presentation of investment recommendations and the disclosure of conflicts of interest [Official Journal L 339, 24.12.2003].
This Directive fixes the rules for the fair presentation of investment recommendations and the disclosure of conflicts of interest. It draws a distinction between persons producing investment recommendations (who must meet stricter standards) and those disseminating recommendations made by third parties. Under Article 6 of the Directive on market abuse, this second implementing Directive must take into account the rules, including self-regulation, governing the profession of journalist. This means that the highly specialised subcategory of financial journalists who produce or disseminate investment recommendations must respect certain general principles. Nevertheless, protective measures are provided for and the use of self-regulatory mechanisms is authorised in order to determine how those basic principles must be applied. The aim of this arrangement is to preserve the freedom of the press while protecting investors and issuers against any risk of market manipulation by journalists.


Another Normative about Market abuse

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic

Internal market > Financial services: transactions in securities

Market abuse (Proposal)

Plan to harmonise national rules on UCITS depositaries

Plan to harmonise national rules on UCITS depositaries

Outline of the Community (European Union) legislation about Plan to harmonise national rules on UCITS depositaries

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: transactions in securities

Plan to harmonise national rules on UCITS depositaries

The European Commission would like to reduce the divergences that exist between the national rules governing depositaries entrusted with the safe keeping of assets on behalf on investors in undertakings for collective investment in transferable securities (UCITS) * such as unit trusts, common funds and SICAVs. By following a step-by-step approach, the Commission, in cooperation with the national regulators, intends to facilitate the cross-border activity of such UCITS. There are four main areas of action: prevention of conflicts of interest, clarification of the depositary’s liability, convergence of national prudential rules, and moves to enhance invstor transparency and information. UCITS are established in all Member States and their assets total some four thousand billion euros.

Document or Iniciative

Commission Communication to the Council and the European Parliament of 30 March 2004 on “Regulation of UCITS depositaries in the Member States: review and possible developments” [COM(2004) 207 final – Not published in the Official Journal].

Summary

In response to the conclusions of the Economic and Financial Affairs Council in June 2001 calling on it to prepare a report on the regulation of UCITS * depositaries and on the need to amend such regulation, the Commission is examining the existing legal framework. It notes that there are significant differences between Member States as regards, for example, minimum capital requirements, statutory and regulatory obligations, and the liability regimes for depositaries.

If cross-border activity is to expand, these rules must be harmonised. Fund managers and supervisory authorities will want to know exactly the resources and liabilities of depositaries established in other Member States before they are authorised to do business. In addition, investors will need to be better informed.

Favouring a step-by-step approach, the Commission is planning to entrust to regulatory experts in the European Union (EU) four areas of work for the period 2004-06: to promote better prevention of conflicts of interest; to clarify the extent of the depositary’s liability; to promote convergence of prudential requirements, notably those relating to capital and to the taking-up and exercise of the function of depositary; to tighten the standards on investor transparency and information.

The Commission states that a chapter on depositaries will initially be attached to its overall UCITS report under Directive 2001/108/EC in 2005. This chapter will specify to what extent EU legislation on the relationship between fund manager and depositary will have to be strengthened and what degree of harmonisation is needed as regards the typology of eligible depositary institutions and, consequently, their missions and resource requirements. A subsequent report reviewing progress is to be adopted in 2006. It will also evaluate whether is a need to legislate at Community level in order to create a fully-fledged European passport for expanding the cross-border activity of depositaries.

Better prevention of conflicts of interest

Conflicts of interest arise when the interests of investors are not the prime concern of the depositary or fund manager. The Commission is proposing measures to strengthen convergence of the relevant national rules. Such convergence will relate notably to the list of the functions that the fund manager can delegate to the depositary and, conversely, the list of the functions that the depositary may delegate.

Clarification of the extent of the depositary’s liability

The differences in the level and extent of the depositary’s liability are a major obstacle if there is to be a high level of investor protection throughout the EU and if the scope for depositaries to engage in cross-border activities is to be expanded. The Commission thus regards it as essential that there should be a common reading of the main task of the depositary, namely asset safe keeping, and of the specific control duties assigned to the depositary.

Convergence of prudential requirements

The prudential rules governing the taking-up and pursuit of the activity of depositary differ significantly between Member States as there is no common European definition of eligible institutions. The Commission is proposing to align these rules more closely, particularly those relating to capital requirements, by identifying a specific group of institutions subject to prudential supervision.

Enhancement of transparency and investor information

The Commission identifies the areas where public information standards should be strengthened: organisation of the depositary’s tasks, measures to prevent conflicts of interest, the depositary’s liability and all the costs connected to his services.

Background

This communication is in response to the remit assigned to the Commission in June 2001 by he Economic and Financial Affairs Council. The approach it advocates is based on an extensive survey and on an Internet consultation in the autumn of 2002 concerning the different national rules impeding the development of the internal market in the case of UCITS depositaries. The survey identified major disparities between national rules that help to explain the current fragmentation of the market (in virtually 95% of cases UCITS depositaries are national institutions). The internet consultation revealed significant differences in connection, for example, with minimum capital requirements, statutory obligations and the extent of the depositary’s liability. For there to be a genuine internal market in depositaries’ services, these rules need to be brought into line.

Alongside the fund and its manager, the UCITS depositary is the third pillar of the European UCITS system set up by Directive 85/611/EEC.
In 2001 the EU adopted two other UCITS Directives amending Directive 85/611/EEC (one focuses on the instruments in which funds may invest and the other on management companies, thereby setting in place a “European passport” scheme).

Key terms used in the act
  • UCITS: Depending on the jurisdiction, UCITS can be constituted either under the law of contract (as common funds) or trust law (as trusts) and also under statute, i.e. in corporate form (as investment companies). The Directive may refer to both non-corporate forms under one designation, e.g. as common funds or unit trusts. Importantly, some Member States’ legal frameworks are limited to common funds, i.e. all their UCITS are without legal personality and depend on a designated external fund manager (a management company).
  • UCITS depositary: Directive 85/611/EEC (as amended) defines it simply as an entity entrusted with specific prudential missions and subject to a number of other general provisions. The UK regulatory designation is twofold, according to whether these missions have to be achieved with regard to unit trusts (by a “trustee”) or with regard to an investment company (by a “depositary”). However, for the reader’s convenience, only the term “depositary” has been used in this communication.
    It should also be noted that the specific regulatory meaning of the designation “UCITS depositary” is precisely based on the peculiar nature of these missions and obligations and, more generally, of the provisions drawn up under UCITS national regulation from Community law. The scope of the concept of “safekeeping” of assets, to which it is particularly related, has thus to be considered in this specific context.
  • UCITS fund manager: This may be either a “management company” or a “self-managed investment company”. Unlike common funds or unit trusts, corporate UCITS, i.e. investment companies, may bring together a vehicle (the fund) and a fund management capacity into the same entity. Directive 2001/107/EC defines them as “investment companies which have not designated a management company” in their instruments of incorporation, i.e. self-managed investment companies. In this Communication, most of the remarks concerning the “fund manager” or “management company” should also be deemed to apply to self-managed investment companies, except that these may not receive any task under a delegation mandate, e.g. from the depositary.

Credit rating agencies

Credit rating agencies

Outline of the Community (European Union) legislation about Credit rating agencies

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: transactions in securities

Credit rating agencies

Document or Iniciative

Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (Text with EEA relevance).

Summary

This Regulation aims at regulating the business of credit rating agencies with a view to protecting investors and European financial markets against the risk of malpractice. It lays down the conditions for issuing credit ratings, as well as rules related to registering and monitoring credit rating agencies.

Which credit ratings does the Regulation apply to?

This Regulation applies to credit ratings which are issued by credit rating agencies registered in the European Union (EC) and which are communicated to the public or distributed by subscription.

How are credit ratings used?

Credit ratings issued by credit rating agencies based in the EU are used by investors, borrowers, issuers and public administrations to help them make investment and financial decisions. These ratings may be used by the banks as a reference for calculating their capital requirements for solvency purposes or to help investors to assess the risks in their investment activity.

Two procedures allow the use, in the EU, of ratings issued by credit agencies established in third countries. Firstly, credit rating agencies have the option to give their endorsement to credit ratings issued outside of the EU, on the condition that:

  • the credit rating agency has carried out preliminary checks and can continue to demonstrate to the European Securities and Markets Authority (ESMA) that the credit ratings meet legislative requirements which are at least as strict as those applicable in the EU;
  • the ability of ESMA to assess and monitor compliance with the requirements is not limited;
  • the credit rating agency shall provide ESMA with all the information it requires;
  • the credit rating agency established in the third country is authorised or registered, and is subject to supervision, in that third country;
  • a cooperation arrangement has been concluded between ESMA and the relevant competent authority of the credit rating agency established in a third country.

Secondly, ratings issued by a small credit rating agency established in a third country, but not established in the EU, can be used in the European Union on the condition that:

  • the credit rating agency is authorised or registered in and is subject to supervision in that third country;
  • the Commission has adopted an equivalence decision recognising the legal and supervisory framework for ratings agencies in the third country;
  • the cooperation arrangements with the third country exist and are operational;
  • the credit ratings issued by the credit rating agency and its credit rating activities are not of systemic importance to the financial stability or integrity of the financial markets of one or more Member States;
  • the credit rating agency is certified in the Union.

Credit rating agencies may request certification from ESMA.

Under which conditions are credit ratings issued?

The issuing of credit ratings should not be affected by any conflict of interest or business relationship. In order to ensure this, credit rating agencies are subject to specific organisational and operational requirements. The administrative or supervisory board of the agency shall ensure independence of the rating process. It shall ensure that conflicts of interest are properly identified, managed and disclosed, and finally that the credit rating agency complies with the requirements of the Regulation. ESMA may however exempt a credit agency from certain requirements in view of the nature, scale and complexity of its business.

The methodologies of credit rating agencies and the descriptions of models and key rating assumptions, such as mathematical or correlation assumptions, are published in a manner permitting comprehensive review. In this way, agencies shall guarantee the quality of the credit ratings that they produce, and the transparency of methods used.

The credit rating agencies shall ensure regular monitoring of credit ratings and shall review this at least once a year. They shall produce general and periodic disclosures, as well as a transparency report. Agencies shall send data to ESMA on their past performance so that it can be made available to the public.

How is monitoring of credit rating activities carried out?

Credit rating agencies established in the EU must register with ESMA. They will send their application for registration to ESMA, providing, amongst other things, information on their headquarters, their legal status, their methods of issuing ratings and their policies and procedures on managing conflicts of interest. ESMA has 45 working days to examine their application.

In the case of an application for registration made by a group of agencies, ESMA decides whether to grant or refuse registration. In this case, it has 55 working days to reach a decision.

ESMA is responsible for drawing up guidelines in consultation with the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA). It is required to publish an annual report on the application of this Regulation.

ESMA carries out ongoing surveillance of credit rating agencies, particularly of their rating methodologies. It must not interfere with the content of the credit ratings or with the methodologies used by the credit rating agencies. If it identifies an infringement (listed in Annex III), ESMA appoints an independent investigator to open an inquiry, at the end of which a dossier is produced presenting his/her conclusions. ESMA then decides whether to fine the credit rating agency or to impose one of the following penalties:

  • withdraw the registration of the credit rating agency;
  • temporarily prohibit the agency from issuing credit ratings;
  • suspend the use of the credit ratings;
  • require the agency to stop the infringement;
  • issue public notices.

ESMA is required to cooperate with EBA, EIOPA and the competent authorities and sectoral competent authorities with regard to exchanging information. It has the right to send confidential information to the following bodies:

  • the central banks;
  • the European Central Bank;
  • the European Systemic Risk Board;
  • public authorities.

Context

The 2008 financial crisis and the absence of national regulations led the European Commission to establish common rules in order to better regulate the activities of credit rating agencies. In February 2009, the “Larosière” Expert Group highlighted the need to strengthen the framework for monitoring the financial sector, which enabled the creation of a European System of Financial Supervision (ESFS) comprising three European supervisory authorities and a Systemic Risk Board. The role of ESMA also enables the monitoring of credit rating agencies to be strengthened.

Key terms of the Act
  • Credit rating: an opinion regarding the creditworthiness of an entity, a debt or financial obligation, debt security, preferred share or other financial instrument, or of an issuer of such debt or financial obligation, debt security, preferred share or other financial instrument, issued using an established and defined ranking system of rating categories;
  • Credit rating agency: a legal person whose occupation includes the issuing of credit ratings on a professional basis;
  • Rating category: a rating symbol, such as a letter or numerical symbol which might be accompanied by appending identifying characters, used in a credit rating to provide a relative measure of risk to distinguish the different risk characteristics of the types of rated entities, issuers and financial instruments or other assets.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Regulation No 1060/2009

7.12.2009

OJ L 302 of 17.11.2009

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal
Regulation No 513/2011

1.6.2011

OJ L 145 of 31.5.2011

Directive 2011/61/EU

21.7.2011

OJ L 17 of 1.7.2011

Packaged retail investment products

Packaged retail investment products

Outline of the Community (European Union) legislation about Packaged retail investment products

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

Packaged retail investment products

Document or Iniciative

Communication from the Commission to the European Parliament and to the Council of 30 April 2009 – Packaged retail investment products [COM(2009) 204 final – Not published in the Official Journal].

Summary

This Communication presents the measures planned by the European Commission in the packaged retail investment products sector and more specifically in terms of mandatory information and commercial practices. The aim is bring the Community framework into line with market reality. In this regard, the Commission intends to introduce, at European level, a horizontal approach in the field of retail investment products.

Characteristics

Packaged retail investment products have the following points in common:

  • they offer exposure to underlying financial assets;
  • their primary function is capital accumulation;
  • they are designed with the mid- to long-term in mind;
  • they are marketed directly to retail investors.

These products include the following types:

  • investment (or mutual) funds;
  • investments packaged as life insurance policies;
  • retail structured securities;
  • structured term deposits.

Current weaknesses

Packaged retail investment products can be at the origin of risks where there is a sharp asymmetry in information and expertise between the manufacturers and distributors of products and retail investors.

Another main weakness of this type of product is related to the inconsistencies in the European regulatory framework in force. It is currently inadequate with regard to the retail investment market reality and is not able to offer investors a satisfactory level of protection.

The main failings of the Community framework for packaged retail investment products have their origin in the lack of key investor disclosures and in the regulation of commercial practices.

Proposals for a horizontal approach

Key investor disclosures

Information for retail investors should be harmonised and standardised as much as possible so that they are better able to compare products.

Key information made available to investors should comply with the following criteria:

  • be fair, clear and not misleading;
  • guide investors, enabling them to make informed investment decisions (performance, risks, charges, etc.);
  • be short and simple;
  • be provided at the right time.

Selling of packaged retail investment products by intermediaries and other distributors

The MiFID (Markets in Financial Instruments Directive) provisions are considered to be a benchmark on conduct of business and the management of conflicts of interest. The Commission suggests that the scope of MiFID be extended to all packaged retail investment products.

The horizontal approach governing the regulation of commercial practices would be based on the following principles:

  • investors should be fairly treated;
  • products sold should correspond to the profile and needs of the investor;
  • risks should be clearly communicated to the investor if they decide not to take advice;
  • conflicts of interest must not adversely affect investors;
  • investors should receive clear and effective disclosures of remuneration arrangements and all charges, commissions or fees paid;
  • those assessing the suitability of products should fully understand all their features.

It is still necessary however to establish a generic definition of the concept of “a packaged retail investment product”, and a clear designation of the products that fall within scope.

Context

This Communication is the result of work carried out following the request by the ECOFIN Council in May 2007, and has the aim of restoring confidence with regard to financial markets. It is part of the reforms launched by the European Union since the start of the financial crisis in October 2008. This demonstrated the importance of ensuring transparency in financial products and brought to light the disastrous consequences of irresponsible marketing.

Taxation of the financial sector

Taxation of the financial sector

Outline of the Community (European Union) legislation about Taxation of the financial sector

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

Taxation of the financial sector

Document or Iniciative

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 7 October 2010 – Taxation of the Financial Sector [COM(2010) 549 final – Not published in the Official Journal].

Summary

This Communication proposes further exploration of two tax instruments which could be applied to the financial sector:

  • Financial Transactions Tax (FTT);
  • Financial Activities Tax (FAT).

Why are new taxes on the financial sector required?

The financial sector is regarded as one of the main sectors responsible for the 2008 crisis, particularly for the considerable growth in government debt in the world. As a result, the European Commission believes that the application of specific taxes to this sector could have the following positive effects:

  • these taxes could complement the essential regulatory measures which aim at enhancing the efficiency and stability of financial markets and reducing their volatility;
  • these taxes would enable the financial sector to contribute to national budgets in return for the support they received during the crisis;
  • these taxes could enable the financial sector to contribute more to public finances given that the majority of financial services are exempt from Value Added Tax (VAT) in the European Union (EU).

What is the Financial Transations Tax (FTT)?

The FTT would tax the value of each transaction relating to:

  • equities;
  • bonds;
  • currencies;
  • derivatives.

According to an estimate based on 2006 figures, if this tax had been implemented in that year, the tax revenues would have been around EUR 60 billion, with a rate of 0.1 % on stocks and bonds transactions.

The advantage of such a tax might lie in the application of the ‘polluter pays’ principle. This tax could reduce ‘undesirable’ operations by penalising short-term transactions. However, it would need to be applied by several financial centres in the world in order to achieve market stability and prevent relocations. For these reasons, the Commission believes that a global FTT would be the most appropriate.

What is the Financial Activities Tax (FAT)?

The FAT is an instrument which has been proposed by the International Monetary Fund (IMF). It has the following elements:

  • in principle it falls on total profit and wages;
  • it can be designed to specifically target economic rents and/or risk;
  • it taxes corporations.

The implementation of this tax, with a rate of 5 %, by the 22 ‘developed economies’ identified in the IMF report to the G-20, could generate the equivalent of 0.28 % of their GDP. At EU level, the tax revenues could be EUR 25 billion.

In principle, the FAT does not change the prices of financial instruments and does not affect the market structure. However, it could encourage profit shifting via relocating income and remuneration outside the EU. Certain technical aspects of this tax still need to be examined further in order to avoid such practices. The Commission believes that the implementation of the FAT would be more relevant at EU level.

Context

In its Resolution on financial transaction taxes of 10 March 2010, the European Parliament asked the Commission and Council to look at how a financial transaction tax could be used to finance development cooperation, help developing countries to combat climate change and contribute to the EU budget. In June 2010, the European Council insisted on the leading role that the EU should take in this area as part of a global strategy. However, there is currently no global consensus on additional tax instruments in the financial sector.

Financial education

Financial education

Outline of the Community (European Union) legislation about Financial education

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

Financial education

Document or Iniciative

Communication from the Commission of 18 December 2007 – Financial education [COM(2007) 808 final – Not published in the Official Journal].

Summary

In view of the knowledge gap among consumers with regard to financial products and the increasing choice and complexity of these products, the Commission decided to promote the development of financial education within the European Union (EU).

Objectives

This Communication is one element in the package of measures on retail financial services set out in the Commission’s report on ‘a Single Market for 21st Century Europe’ and it aims to assist stakeholders in the development of financial education programmes by:

  • raising awareness of the need to address low financial education;
  • providing high-quality financial education within the EU;
  • sharing best practices;
  • developing practical tools to facilitate better financial education teaching in schools.

Importance and economic and social benefits of financial education

Financial education benefits individuals (for example, by enabling them to make better financial provision for unforeseen situations), society (by reducing the risks of financial exclusion and encouraging consumers to plan and save some part of their incomes), and the economy as a whole (by encouraging informed behaviour and the provision of liquidity to financial markets).

Two recent studies funded by the European Commission point out, among other things, that financial education is provided by a large number of actors (supervisory authorities, social workers, public education, etc.) within the Member States and that the number of national initiatives in this area varies widely.

Baseline surveys undertaken at Member State level help to set out the priorities, and facilitate the monitoring of progress after a given period of time. In addition, several studies show the positive behavioural change that can result from participation in financial education programmes.

Framework for Community action

The field of education comes under the competence of the Member States. However, action can be taken by the Community in the framework of consumer information and education measures, and by implementing measures that support and supplement the policy pursued by the Member States.

Among the actions already undertaken, the Commission has set up an online educational tool, Dolceta, offering consumer education to adults, and the ‘Europa Diary’, an information booklet for students in secondary education.

The May 2007 Green Paper on Retail Financial Services pointed out that more could be done to encourage financial education. This was also confirmed by the replies to the Green Paper, in particular with regard to the Commission’s dissemination of best practices and the adoption of non-binding Community rules to aid financial education providers.

Basic principles for the provision of high-quality financial education programmes

The Commission has set out eight principles that could aid the stakeholders involved in disseminating financial education to devise and implement financial education programmes:

  • financial education should be available and actively promoted at all stages of life on a continuous basis;
  • financial education programmes should be carefully targeted to meet the specific needs of individuals and be timely and easily accessible;
  • consumers should be educated in economic and financial matters as early as possible, from school age and this education should, preferably, be included in the general school curriculum;
  • financial education programmes should include general tools to raise awareness of the need to improve understanding of financial issues and risks;
  • the financial education programmes provided by financial services providers should be fair, transparent and objective. They must always be in the consumer’s interest;
  • financial education trainers should be given appropriate training and the necessary resources;
  • national coordination between stakeholders should be promoted and international cooperation between financial education providers should be enhanced to facilitate the exchange of best practices;
  • financial education programmes should be regularly evaluated and, where necessary, updated.

Planned initiatives and practical assistance

Although financial education is indeed the responsibility of the Member States, the EU can provide considerable practical assistance. The Commission has, therefore, identified the following initiatives as a matter of priority:

  • setting up a group of experts in financial education, which will have the task, among others, of promoting and sharing best practices, and advising the Commission on the development of its financial education policy;
  • providing sponsorship (including messages of support and the use of European logos) to the Member States and actors in the private sector, for the organisation of national and regional conferences and for any other initiatives seeking to promote financial education;
  • publishing on the Commission website a database of financial education programmes and research in the EU, in order to facilitate consultation of best practices and research in this field;
  • developing, from 2008, a new Dolceta module for teacher-training in financial education, with the aim of encouraging and helping teachers in primary and secondary education to incorporate financial issues into the general curriculum.

RELATED ACTS

Commission Decision 2008/365/EC of 30 April 2008 setting up a group of experts on financial education [Official Journal L 125 of 9.5.2008].
This Decision sets up a group of experts on financial education whose mission is to promote best practice in this field and to advise the Commission on the implementation of the principles detailed in its Communication of 18 December 2007. The group is composed of 25 specialists representing the public and private sectors appointed by the Commission for a mandate of three years renewable.

Markets in financial instruments and investment services

Markets in financial instruments and investment services

Outline of the Community (European Union) legislation about Markets in financial instruments and investment services

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: transactions in securities

Markets in financial instruments (MiFID) and investment services

Document or Iniciative

Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC [Official Journal L 145 of 30.4.2004]. [See amending acts].

Summary

In accordance with the Financial Services Action Plan, the EU has adopted a Directive designed to strengthen the Community legislative framework for investment services and regulated markets with a view to furthering two major objectives:

  • to protect investors and safeguard market integrity by establishing harmonised requirements governing the activities of authorised intermediaries;
  • to promote fair, transparent, efficient and integrated financial markets.

Authorisation conditions and procedures

The Directive requires the Member States to harmonise the rules governing investment services and activities. To that end, the Member States must set up an authorisation system enabling investment firms to operate throughout the EU. These firms must be registered and the register must be accessible to the public. Each authorisation is notified to the European Securities and Markets Authority (ESMA).

ESMA is able to develop draft regulatory technical standards. Furthermore, it assists the Commission in its relations with third countries and in assessing their markets.

In other words, the Directive must allow investment firms, banks and stock exchanges to offer their services across borders on the basis of the authorisation issued by the competent authority of their home Member State *. Since authorisation is subject to the same conditions in all the Member States, it will promote the harmonisation of rules governing investment firms.

In this context, the Directive is intended to align national rules governing the provision of investment services and the operation of stock exchanges, with the ultimate aim of creating a single European “securities rule book” *. It will benefit investors, issuers and other market stakeholders by promoting efficient and competitive markets.

Prudential assessment

This Directive is also intended to establish the harmonisation of the assessment rules of procedure and criteria for the acquisition of a qualifying holding *. Its objectives include the maximum harmonisation of the notification thresholds for an envisaged acquisition or the disposal of a qualifying holding, and the maximum harmonisation of the assessment procedure and the list of assessment criteria.

In the context of an envisaged acquisition, the prudential assessment of the shareholders and of management fulfils detailed criteria and is conducted jointly by the competent authorities.

The Directive states in particular that the competent authorities judge the appropriateness of the proposed acquirer and the financial soundness of the envisaged acquisition on the basis of:

  • the reputation and experience of those who direct the business of the insurance company following the envisaged acquisition;
  • the financial soundness of the proposed acquirer;
  • the existence of reasonable grounds to suspect an operation or attempt to launder money or finance terrorism.

Investor protection

The Directive will considerably enhance investor protection by setting business of conduct rules for providing investment services to clients and minimum standards for the mandate and powers that national competent authorities must have at their disposal. It also establishes effective mechanisms for real-time cooperation in investigating and prosecuting breaches of the rules.

Transparency and market integrity

The Directive creates an obligation to safeguard market integrity, to report transactions and to keep records. ESMA has access to this information.

In particular, it establishes a pre-trade transparency obligation. This requires “internalisers” (i.e. firms dealing on own account * by executing client orders outside regulated markets or multilateral trading facilities *) to disclose the prices at which they will be willing to buy from and/or sell to their clients. However, it limits this disclosure obligation to transactions not above standard market size, defined as the average size of orders executed in the market.

Each Member State is responsible for establishing a list of regulated markets and communicating this to the other Member States and ESMA.

This means that European wholesale markets will not be subject to the pre-trade transparency rule and that wholesale broker-dealers will not be exposed to significant risks in their role as market makers.

Operator protection

The Directive includes a set of protective measures for “internalisers” when they are obliged to quote, so that they can provide this essential service to clients without running undesirable risks. These measures include the possibility of updating and withdrawing quotes.

The Directive also establishes a fair market for retail investors. It prevents financial institutions from discriminating between such investors, e.g. by offering some of them improvements to publicly quoted prices.

Appointing competent authorities

Member States must appoint their competent authorities and send the necessary information to the Commission, ESMA and the competent authorities of the other Member States. The competent authorities act as a point of contact in the Member States. ESMA keeps a list of these authorities up-to-date. These authorities are required to cooperate closely with ESMA.

Member States and ESMA may conclude cooperation agreements concerning:

  • the supervision of credit institutions;
  • the procedures of liquidation and bankruptcy of firms;
  • the procedures for statutory audits of the accounts of investment firms;
  • the supervision of bodies involved in the procedures of liquidation and bankruptcy of investment firms;
  • the supervision of persons charged with carrying out statutory audits of the accounts of insurance undertakings, credit institutions, investment firms and other financial institutions.

Final provisions

The Directive is designed to improve the Community rules on securities markets. It therefore sets out the general obligations which Member State authorities must enforce.

Implementing measures, reports and reviews will be adopted by the Commission following consultations with market participants from the Member States and taking into account the opinion of the Committee of European Securities Regulators.

Key terms used in the act
  • Home Member State: for an investment firm: if the investment firm is a natural person, the Member State in which its head office is situated; if it is a legal person, the Member State where its registered office is situated or the Member State where its head office is situated (if, under national law, the legal person does not have a registered office). For a regulated market: the Member State in which the regulated market is registered or, if under the law of that Member State it has no registered office, the Member State in which its head office is situated.
  • Transferable securities: those classes of securities which are negotiable on the capital market, with the exception of instruments of payment, such as: shares in companies and other securities equivalent to shares in companies, partnerships or other entities, and depositary receipts in respect of shares; bonds or other forms of securitised debt, including depositary receipts in respect of such securities; any other securities giving the right to acquire or sell any such transferable securities or giving rise to a cash settlement determined by reference to transferable securities, currencies, interest rates or yields, commodities or other indices or measures.
  • Qualifying holding: any direct or indirect holding in an investment firm which represents 10 % or more of the capital or of the voting rights, or any other possibility of exercising a significant influence over the management of the investment firm in which that holding subsists.
  • Dealing on own account: trading against proprietary capital resulting in the conclusion of transactions in one or more financial instruments.
  • Multilateral trading facility (MTF): a multilateral system, operated by an investment firm or a market operator, which brings together multiple third-party buying and selling interests in financial instruments – in the system and in accordance with non-discretionary rules – in a way that results in a contract.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2004/39/EC

30.4.2004

31.1.2007

OJ L 145, 30.4.2004

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal

Directive 2006/31/EC

28.4.2006

31.1.2007

OJ L 114, 27.4.2006

Directive 2007/44/EC

21.9.2007

20.3.2009

OJ L 247, 21.9.2007

Directive 2008/10/EC

20.3.2008

OJ L 76, 19.3.2008

Directive 2010/78/EU

4.1.2011

31.12.2011

OJ L 331, 15.12.2010

Successive amendments and corrections to Directive 2010/78/EU have been incorporated in the basic text. This consolidated version is for reference purpose only.

Related Acts

Proposal for a Directive of the European Parliament and of the Council on Alternative Investment Fund Managers and amending Directives 2004/39/EC and 2009/…/EC [COM(2009) 207 final – Not published in the Official Journal].
This Proposal aims to establish regulatory and supervisory standards for hedge funds, private equity and other systemically important market players. The Proposal meets the need to strengthen the regulation and oversight of managers following the financial turbulence of 2007-2008.
It applies to managers managing alternative fund portfolios with assets of at least Euro 100 million.
It defines a framework relating to:

  • rights and obligations of managers;
  • operating conditions and initial authorisation in relation to liquidity;
  • treatment of investors;
  • supervisory cooperation information sharing and mediation.

Codecision procedure (2009/0064/COD)

Commission Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive [Official Journal L 241 of 2.9.2006].
The purpose of this Directive is to establish a harmonised framework of organisational requirements and operating conditions for investment firms.

Review of the Lamfalussy process

Review of the Lamfalussy process

Outline of the Community (European Union) legislation about Review of the Lamfalussy process

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

Review of the Lamfalussy process

References

Communication from the Commission of 20 November 2007 entitled “Review of the Lamfalussy process – Strengthening supervisory convergence” [COM(2007) 727 final – Official Journal C 55 of 28.2.2008]

Summary

The Lamfalussy process was launched in 2001 for the purpose of strengthening the European regulatory and financial sector supervision framework. It consists of four levels. It starts with the adoption of the framework legislation (Level 1) and detailed implementing measures (Level 2). For the technical preparation of the implementing measures, the Commission is advised by committees, made up of representatives of national supervisory bodies, which exist in three sectors: banking, insurance and occupational pensions, and the securities markets. These committees then contribute to the consistent implementation of Community directives in the Member States, ensuring effective cooperation between the supervisory authorities and convergence of their practices (Level 3). Finally, the Commission enforces the timely and correct transposition of EU legislation into national law (Level 4).

Based on the review of this process, the Commission proposes practical improvements to strengthen the Community supervisory framework, especially during periods of market instability.

The evaluation of the Lamfalussy process is positive on the whole. However, despite undeniable contributions (flexible regulatory system, convergence, cooperation, etc.), there is a need for certain improvements.

Improvements in the legislative process and enforcement

Experience with the adoption of framework legislation and implementing measures has generally been positive, with only a few adjustments necessary between institutions with regard to supervision and implementation.

The evaluation of the schedules for the sequencing of the measures for the adoption of legislation and implementation (Levels 1 and 2) proves to be complicated as the deadlines are so variable. Consequently, it is difficult to set reasonable deadlines for both transposition and application. To resolve this, the transposition deadline for the whole legislative package could be linked to the adoption of the last implementing measures identified in Level 1. Work on the Level 1 and Level 2 measures could also be carried out more in parallel for greater coherence and facility.

The Lamfalussy process has enabled sound regulatory principles to be introduced and applied. In particular it has led to improved quality of legislation and enhanced transparency and predictability of European Union (EU) policy-making. However, Member States must refrain from adding further national rules (“gold-plating”). For greater transparency regarding consultation, the systematic publication of contributions should also become general practice. Finally, impact assessment should be extended to all significant implementing measures.

In order to increase transparency regarding transposition, the impact of the various disclosure instruments put in place (under the Capital Requirements Directive, etc.) should be strengthened. The Commission publishes regular statistics on the state of play of transposition by Member States, especially concerning Level 1 and Level 2 directives. For their part, Member States should provide the Commission with transposition tables. In the case of late implementation, infringement proceedings will be launched under Article 226 of the EC Treaty.

Supervisory cooperation and convergence

Supervisory cooperation and convergence are one of the innovations of the process, but have not always had the expected effects.

Strengthening the Level 3 Committees [or committees of regulators] is essential. As regards political accountability, an overall two-step approach (political guidance from the European Parliament, the Council and the Commission and committee reports) should enable them to deliver more results. In addition, the mission of the national supervisors is to be extended to include a cooperation and convergence requirement at European level. As regards the legal status of Level 3 Committees, changes to the legal framework will be considered concerning the decisions setting them up and the definition of their role.

Reducing the practical obstacles at European and national levels would strengthen mutual trust and the implementation of the measures. Decision-making, especially of the committees of regulators, should be facilitated (extension of qualified majority voting and definition of solutions in the case of a blocking minority) and carry more authority (even if non-binding) in relation to the national regulators and supervisors.

Member States also have a key role to play to guarantee the application in full of the standards and guidelines concerning:

  • the powers of national supervisors and sanctions. In view of the divergence of the national systems, the regulators and supervisors should have sufficient supervisory powers and tools, including sanctions, to be able to fulfil their obligations;
  • the guarantee of the operational independence of national supervisory authorities in four fields: institutional, regulatory, budgetary and supervisory;
  • the proposals strengthening cooperation between home and host regulators. The Commission’s role is to raise awareness, evaluate and take measures (delegation of tasks, multilateral memoranda of understanding, role of ‘lead’ supervisor, etc.).

The development of common standards to ensure optimum cooperation between colleges of supervisors would guarantee greater coherence and uniformity of application and would allow the problems of competences between home and host countries to be resolved.

Cross-sector cooperation is based on a joint protocol on cooperation, signed in 2005, and is provided for when added value can be expected from a joint action. Level 3 Committees have agreed on joint annual work programmes since 2006 to deal with priority subjects such as financial conglomerates and common reporting standards.

As regards crisis management, rapid information procedures must be provided for to ensure efficient, collective action in the case of a major market disturbance or financial crisis.

The Commission considers that some financial assistance from the EU budget may be appropriate in response to the calls made on the committees of regulators arising from their Community obligations.

Remuneration policies in the financial services sector

Remuneration policies in the financial services sector

Outline of the Community (European Union) legislation about Remuneration policies in the financial services sector

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

Remuneration policies in the financial services sector

Document or Iniciative

Commission Recommendation 2009/384/EC of 30 April 2009 on remuneration policies in the financial services sector.

Summary

This Recommendation sets out general principles applicable to remuneration practices in the financial services sector which aim at avoiding any excessive risk-taking in this sector, particularly by banks and investment firms.

The Recommendation applies to:

  • financial undertakings having their registered office or their head office in the territory of a Member State;
  • remuneration of those categories of staff whose professional activities have a material impact on the risk profile of the financial undertaking.

The Recommendation does not apply to fees and commissions received by intermediaries and external service providers in case of outsourced activities.

Remuneration policy

Remuneration policy should be in line with the business strategy, objectives, values and long-term interests of the financial undertaking, such as sustainable growth prospects or the protection of clients and investors in the course of services provided.

The remuneration policy should be the result of a balance between fixed and variable components. The fixed component should represent a sufficiently high proportion of the total remuneration allowing the undertaking to operate a fully flexible bonus policy.

The structure of the remuneration policy should be updated regularly so that it corresponds to the development of the company.

In the event that remuneration is performance-related, it should be evaluated according to current or future risks without omitting to take into account the cost of the capital employed and the liquidity required.

The procedures followed should be clear and documented and internally transparent.

The (supervisory) board should establish the general principles of the remuneration policy of the financial undertaking and be responsible for its implementation.

Control functions, human resources departments and external experts should also be involved in the design of the remuneration policy.

Remuneration policy should, at least on an annual basis, be subject to central and independent internal review by control functions for compliance with policies and procedures defined by the (supervisory) board.

Disclosure

Information on the remuneration policy should be disclosed by the undertaking in the form of an independent statement or a periodic disclosure and should list:

  • information on the decision-making process which defines the remuneration policy chosen;
  • information on linkage between pay and performance;
  • performance measurement criteria;
  • the performance criteria on which the entitlement to shares, options or variable components of remuneration is based;
  • the main parameters and rationale for any annual bonus scheme and any other non-cash benefits.

Supervision

The competent authorities should carry out supervisory activities and take into account when doing so parameters such as:

  • the size of the financial undertaking;
  • the nature of its activities;
  • the complexity of its activities.

Financial undertakings should, in addition, send the competent authorities a statement indicating the level of compliance with the principles given above concerning remuneration policy.

Context

Remuneration practices in the financial undertakings sector, particularly in banks and investment firms, have led to excessive risk-taking. These practices contributed, to a certain extent, to significant losses suffered by large financial undertakings and were, partly, at the origin of the October 2008 financial crisis. The Communication “Driving the European recovery”, published in spring 2009, presents a plan which aims at restoring and maintaining a stable and reliable financial system. This Recommendation on remuneration policies is part of the strategy proposed by the plan.

Related Act

Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Report on the application by Member States of the EU of the Commission 2009/384/EC Recommendation on remuneration policies in the financial services sector [COM(2010) 286 final – Not published in the Official Journal].

This Report concerns the application of Recommendation 2009/384/EC in the different Member States.
It notes disparities in the application of the principles laid down in the Recommendation. At present, only 16 Member States have fully or partly applied the Recommendation and 7 Member States apply the measures advocated in the Recommendation across the financial services sector.
Moreover, the Report also notes the reluctance of financial institutions to modify their remuneration practices. These institutions are continuing to filter most of the information relating to their individual remuneration practices.

In view of these still considerable obstacles, the Commission intends to pursue the action undertaken and to contribute to the introduction of global rules on remuneration policy in the financial services sector within the context of the G20 and the FSB.