Tag Archives: Movement of capital

A concerted effort to establish a European financial area

A concerted effort to establish a European financial area

Outline of the Community (European Union) legislation about A concerted effort to establish a European financial area

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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

A concerted effort to establish a European financial area

Document or Iniciative

Communication from the Commission to the Council of 23 May 1986 on the programme for the liberalisation of capital movements in the Community [COM(1986) 292 final – not published in the Official Journal].

Summary

The purpose of this Communication is to present the major phases in the Commission’s proposed approach, so as to arrive at as liberal as possible a Community system of capital movements. It looks at the implications for the effective integration of financial markets and for the coordination of Member States’ monetary and financial policies since in 1986 the euro did not yet exist.

Liberalisation of capital movements

In the Commission’s view, there are three categories of operation concerned by the progressive liberalisation of capital movements:

  • capital operations: operations such as commercial credits or direct investments are linked to the exercise of the other fundamental freedoms of the common market (free movement of goods and services, free movement of persons and freedom of establishment);
  • operations in financial market securities: the liberalisation of financial securities such as bonds or shares requires a single financial market at European level;
  • operations involving financial credits: the liberalisation of operations involving financial credits and operations relating to money market instruments is necessary for the establishment of a unified financial system.

The Commission notes that, as each threshold is crossed, growing constraints are imposed on the Member States, whose situation changes in terms of their policy choices. The room for manoeuvre which Member States have in settling potential conflicts between the internal and external objectives of their monetary policy actually depends on a number of factors, such as the level of development of their domestic financial system, the structural characteristics of their balance of payments, the importance of the national currency as a reserve or exchange instrument, etc.

Main phases in the liberalisation process

The Commission proposes two main phases for achieving the liberalisation of capital movements:

  • liberalisation of capital operations;
  • total freedom of capital movements.

The liberalisation of capital operations, which is needed for the common market to function smoothly, involves both ending exceptional arrangements and extending Community obligations as regards liberalization. Ending exceptional arrangements includes, for example, the safeguard clauses that certain Member States (France, Ireland, Italy and Greece) have secured with a view to maintaining certain restrictions on capital movements. The Commission wants to extend the Union’s competences concerning the free movement of capital and highlights the need for the total freedom of capital movements. This should apply to operations that are still excluded under Community law, such as financial loans, money market operations, deposits and balances on current accounts, etc. so that competition can function normally.

The Commission poses the question whether all the Member States are capable of moving towards this objective at the same speed. Any differentiation to be made between the Member States in the liberalization process should not be introduced below a uniform level of Community obligations. However, through its instruments for supporting balances of payments, the Community must be able to offer Member States which are faced with special constraints the means of overcoming them. In the long term, the Commission is working on a system of unconditional liberalisation under which recourse to safeguard clauses such as those provided for in the Treaty (Articles 108, 109 and 73) will still be possible. It considers that it is important for liberalisation to be paralleled by provisions designed to ensure the cohesion and identity of the financial area, e.g. regarding the conduct of monetary policy:

  • cohesion of the European financial area: A Community-wide integrated financial system is instrumental in commercial integration and in the convergence of economic and monetary policies. The parallel progress made by these two forms of integration requires cohesion between policies and Community provisions, such as protection for users of financial services.
  • conduct of monetary policies: The full convertibility of the European currencies, while respecting the exchange criteria of the European Monetary System (EMS), will create new conditions for the management of the financial system. Similarly, the reinforcement of internal coordination will raise questions with regard to the Community’s external monetary relations.

Lastly, the Commission sets out a timetable for the forthcoming initiatives which it plans to take, including presenting legislative proposals on the European financial area and initiating a forward study on the implications of financial integration for monetary cooperation and the liberalisation of financial services, etc.

Effects of foreign legislation on the Union's financial interests

Effects of foreign legislation on the Union’s financial interests

Outline of the Community (European Union) legislation about Effects of foreign legislation on the Union’s financial interests

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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

Effects of foreign legislation on the Union’s financial interests

Document or Iniciative

Council Regulation (EC) No 2271/96 of 22 November 1996 protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom [See amending acts]

Summary

The aim of the Regulation is to protect the economic and/or financial interests of natural or legal persons against the effects of the extra-territorial application of legislation. The laws in question are specified in the Annex to the Regulation. The protection concerns international trade and/or the movement of capital and related commercial activities between the Community and third countries.

The Regulation applies to:

  • any natural person being a resident in the Community and a national of a Member State;
  • any legal person incorporated within the Community;
  • nationals of the Member States established outside the Community and to shipping companies established outside the Community and controlled by nationals of a Member State, if their vessels are registered in that Member State in accordance with its legislation;
  • natural persons being a resident in the Community, unless that person is in the country of which he is a national;
  • any other natural person within the Community, including its territorial waters and air space and in any aircraft or on any vessel under the jurisdiction or control of a Member State, acting in a professional capacity.

Any persons whose economic and financial interests are affected by foreign legislation person must inform the Commission accordingly within 30 days from the date on which it obtained such information.

If a court or tribunal or an administrative authority located outside the Community handed down a decision giving effect, directly or indirectly, to the laws specified in the Annex (such as the USA’s “Iran and Libya Sanctions Act” of 1996), it would not be recognised or enforceable in any manner. The persons referred to in this Regulation shall not comply with any requirement or prohibition based on the laws specified in the Annex. Nonetheless, a person may be authorised to comply with the said requirements or prohibitions. This authorisation is given by the Council on a proposal from the Commission which is assisted by a Committee composed of the representatives of the Member States.

The Member States determine the sanctions to be imposed in the event of breach of any relevant provisions of this Regulation.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EC) No 2271/96 29.11.1996 OJ L 309 of 29.11.1996
Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EC) No 807/2003 05.06.2003 Official Journal No L 122 of 16.05.2003

Facility providing financial assistance for balances of payments

Facility providing financial assistance for balances of payments

Outline of the Community (European Union) legislation about Facility providing financial assistance for balances of payments

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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

Facility providing financial assistance for balances of payments

Document or Iniciative

Council Regulation (EC) No 332/2002 of 18 February 2002 establishing a facility providing medium-term financial assistance for Member States’ balances of payments [See amending acts].

Summary

The support facility provides medium-term financial assistance is established, enabling loans to be granted to Member States experiencing difficulties in their balance of payments on current or capital account. Only those Member States that have not adopted the euro may benefit from this European facility.

This Regulation defines the application procedure and arrangements for granting loans to Member States benefiting from this facility.

Procedure

The facility may be implemented by the Council on the initiative of either the Commission, in agreement with the Member State concerned, or a Member State experiencing difficulties.

To obtain financial support in the medium term, the Member State will carry out a needs assessment with the European Commission and present to the Commission and the Economic and Financial Committee an adjustment programme. After examining the situation in the Member State seeking assistance, the Council decides:

  • whether to grant a loan or appropriate financing facility, its amount and its average duration;
  • the economic policy conditions attached to the medium-term financial assistance with a view to re-establishing a sustainable balance of payments situation;
  • the techniques for disbursing the loan or financing facility, the release or drawings of which are, as a rule, by successive instalments.

The Commission and the Member State concerned will then conclude a Memorandum of Understanding which details the conditions set by the Council. The Memorandum is then sent to the European Parliament and the European Council.

At regular intervals, the Commission, in conjunction with the Economic and Financial Committee, verifies that the economic policy of the Member State receiving assistance accords with the commitments laid down in the adjustment programme or any other conditions. The Member State will make all the necessary information available to the Commission and cooperate fully with them. The release of further instalments depends on the findings of such verification.

Loan arrangements

The borrowing and lending operations are carried out in euros. They use the same value date and must not involve the EU in the transformation of maturities, in any exchange or interest-rate risk or in any other commercial risk.

At the request of the beneficiary Member State, loans may carry the option of early repayment.

At the request of the debtor Member State and where circumstances permit an improvement in the interest rate on the loans, the Commission may refinance all or some of its initial borrowings or restructure the corresponding financial conditions. These operations may not have the effect of extending the average duration of the borrowing concerned or increasing the amount of capital outstanding. The costs incurred in concluding and carrying out each operation are borne by the beneficiary Member State. The Economic and Financial Committee must be kept informed of these operations.

Moreover, the outstanding amount of loans which can be granted to Member States under this financial assistance facility for balances of payments is limited to EUR 50 billion. To this end, the Commission shall be empowered on behalf of the EU to contract borrowings on the capital markets or with financial institutions.

The ECB makes the necessary arrangements for the administration of the loans.

The beneficiary State shall open a special account with its central bank for the management of the financial assistance. It is also required to transfer the payments due to an account with the ECB seven working days prior to the corresponding due date.

The European Court of Auditors has the right to carry out any necessary financial controls or audits. The European Commission and the European Anti-Fraud Office can also send officials to the Member State receiving financial support in order to carry out controls.

Compatibility with other financial assistance facilities

Loans granted as medium-term financial assistance may be granted in addition to short-term monetary support granted by the European Central Bank (ECB) under the very short-term financing facility.

The financial assistance facility for balances of payments is also compatible with the European financial stabilisation facility. This stabilisation facility offers financial assistance to Member States in financial difficulties.

Lastly, where a Member State which has not adopted the euro proposes to call upon sources of financing outside the EU, it shall first consult the Commission and the other Member States. Such consultations shall be held within the Economic and Financial Committee. Their aim is to examine, in the first instance, the options offered by the financial assistance facility for balances of payments.

References

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

Regulation (EC) No 332/2002

24.2.2002

OJ L 053 of 23.2.2002

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

Regulation (EC) No 1360/2008

1.1.2009

OJ L 352 of 31.12.2008

Regulation (EC) No 431/2009

28.5.2009

OJ L 128 of 27.5.2009

Related Acts

Decision ECB/2003/14 of the European Central Bank of 7 November 2003 concerning the administration of the borrowing-and-lending operations concluded by the European Community under the medium-term financial assistance facility [Official Journal L 297 of 15.11.2003].
The regulation of the ECB implements Article 9 of Regulation (EC) 332/2002 and ensures the administration of loans granted under the regulation.

Money laundering: prevention through customs cooperation

Money laundering: prevention through customs cooperation

Outline of the Community (European Union) legislation about Money laundering: prevention through customs cooperation

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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

Money laundering: prevention through customs cooperation

Document or Iniciative

Regulation (EC) No 1889/2005 of the European Parliament and of the Council of 26 October 2005 on controls of cash entering or leaving the Community.

Summary

This regulation complements the provisions of Directive 91/308/EEC on prevention of the use of the financial system for the purpose of money laundering within the European Union (EU). Directive 91/308/EEC was replaced by Directive 2005/60/EC, which in particular extends the scope of the preventive measures to terrorist financing. The competent authorities * of the EU countries now have harmonised rules for the control of cash * entering or leaving the EU.

Obligation to declare

The regulation places an obligation on any natural person entering or leaving the EU and carrying cash of a value of EUR 10 000 or more to declare that sum to the competent authorities. The information provided must be correct and complete, otherwise the declaration is invalid.

The declaration is provided in writing, orally or electronically, to be determined by the EU country, and must contain information on:

  • the declarant, including full name, date and place of birth and nationality;
  • the owner and the amount and nature of the cash;
  • the intended recipient of the cash;
  • the provenance and intended use of the cash.

The information obtained, either from the declaration or as a result of controls, must be recorded and processed. It is made available to the authorities responsible for combating money laundering or terrorist financing in the EU country of entry or of exit. The information provided may be communicated to non-EU countries by the EU countries or by the Commission, subject to the consent of the competent authorities. The national and EU provisions on the transfer of personal data must be complied with.

Professional secrecy covers all information which is by nature confidential or which is provided on a confidential basis. It must not be disclosed without the express permission of the person or authority providing it. However, the competent authorities may be obliged by law to disclose this information, for instance in connection with legal proceedings. In such a case, any disclosure or communication of information must fully comply with prevailing data protection legislation.

Checking compliance with the obligation to declare

Officials of the competent authorities may check compliance with the obligation to declare by carrying out controls on natural persons. This includes controls on the natural persons themselves, their baggage and their means of transport. Such controls must comply with national legislation in this area.

In the event of failure to comply with the obligation to declare, cash may be detained by administrative decision in accordance with national legislation.

The information obtained may be made available to other EU countries, in particular where there is evidence of illegal activities. In such cases, Regulation (EC) No 515/97 on mutual assistance between the administrative authorities of the EU countries and cooperation between the latter and the Commission to ensure the correct application of the law on customs and agricultural matters applies mutatis mutandis. Where there are indications that the financial interests of the EU are adversely affected, the information will also be transmitted to the Commission.

Where it appears from the controls that a natural person is entering or leaving the EU with sums of cash lower than EUR 10 000 and where there is evidence of illegal activities associated with the movement of cash, that information may also be recorded and processed.

Penalties

By 15 June 2007, EU countries must lay down the penalties applicable in the event of failure to comply with the obligation to declare. Such penalties must be effective, proportionate and dissuasive.

Key terms used in the act
  • Competent authorities: the customs authorities of the EU countries or any other authorities empowered by EU countries to apply this regulation.
  • Cash: the term “cash” covers currency (banknotes and coins), but also other monetary instruments such as cheques, promissory notes, money orders, etc.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EC) No 1889/2005

15.12.2005

OJ L 309 of 25.11.2005

Related Acts

Commission report to the European Parliament and the Council on the application of Regulation (EC) No 1889/2005 of the European Parliament and of the Council of 26 October 2005 on controls of cash entering or leaving the Community pursuant to article 10 of this Regulation [COM (2010) 429 final – Not published in the Official Journal].
This report concludes that EU countries have effectively organised competent authorities to ensure that passengers comply with their cash declaration obligation. They have also implemented a penalty system and/or cash detention system for cases of non-compliance with the cash declaration requirements. However, in a few EU countries, some shortcomings have been detected in the recording, processing and making available of control information and in the introduction of national penalties. This report notes that EU countries need to be closely monitored to enhance the harmonisation of the implementation of Regulation (EC) No 1889/2005 (the “Cash Control Regulation”).