Sir,
It’s a pity some do not manage to put aside their prejudices, even when available evidence points convincingly to the contrary. A case in point is David Lascelles’ evaluation of the Financial Services Action Plan in the Spring issue of Europe's World.
Although the FSAP is probably one of the most successful actions the EU has undertaken in recent years, it is also among the most contentious, particularly as seen from the City of London. Let me develop three clear and uncontestable benefits of the FSAP. First, it has increased awareness of the importance of an integrated EU financial market. Second, the FSAP has stimulated financial market development and thirdly it has strengthened the powers of the EU as a global actor in the area of financial market regulation.
To begin with point 1, we should remember that the FSAP was launched in 1998 almost as a last-minute plan when it had become clear that the benefits of the then imminent monetary union would not materialise unless the barriers to financial market integration were reduced. EU policymakers not only managed to adopt almost all the measures foreseen in the plan, they also upgraded the procedures for financial regulation and created the Lamfalussy-type committees of national supervisory authorities. It is worth adding that they did all this in a very short period of time. It was a breakthrough that would have been impossible without a broad consensus on the importance to Europe of well-functioning financial markets. This consensus remains an important factor in bringing about the current wave of cross-border financial market integration.
Turning to the second point, even though these are still early days for discussing the effectiveness of the FSAP, it is clear that it has not hindered market development. Two clear examples are the growth in Europe and when compared to the US in the number and volume of Initial Public Offerings (IPOs), and the growth in the corporate bond markets. Last year 603 IPOs took place in the EU and 205 in the US, valued at over €50bn in Europe and €27bn in America. Between 1998 and 2004, the total amount of corporate debt outstanding in the EU more than tripled to €1,422bn, while in the US it stagnated, standing in 1998 at €1,907bn and at €2,198bn in 2004. Although economic cycles are an important determinant of these patterns, it is clear that the new FSAP rules did not hinder these, on the contrary. It also needs to be kept in mind that the FSAP did not overrule national differences, in the sense that next to a European passport for issuance countries can still maintain their national schemes, as London has done so successfully with its Professional Securities Market.
Thirdly, the success of the FSAP is reflected in the growing interest of third countries in dealing with the EU as an actor in financial markets, and by the clout the EU is beginning to enjoy at global level. The US and a number of other major trading partners now deal principally with the EU Commission on matters of financial regulation. All of the US financial regulators and supervisors regularly visit Brussels, something that was unimaginable at the start of the FSAP. A vibrant dialogue is now taking place with the US to fine-tune financial regulation, which both sides have gained from.
There are undoubtedly drawbacks to the FSAP. Some of the measures adopted under the Plan are not optimal, and David Lascelles’ article referred to them. But the overall evaluation of this ambitious legislative plan is, in my view, certainly positive, and will increasingly be shown to be so by hard facts.