A single European market?

The IMAs inaugural conference opened with a debate on the prospects for a single market in financial services in Europe. The conference heard from a prestigious panel of experts, including Euro MPs Chris Huhne (LD), Peter Skinner (LAB), and Theresa Villiers (CON) all active members of the European Parliaments powerful Economic and Monetary Affairs Committee. Also on the panel was Howard Flight MP (CON), Shadow Chief Secretary to the Treasury, Mr Robin Fellgett, Director, Financial Sector at the Treasury, and Elizabeth Corley from Merrill Lynch Investment Management.

Delegates were asked to debate the prospects for a single market in financial services but those looking for a political knockabout were to be disappointed as an outbreak of informed consensus soon emerged!

A single market in financial services is the ultimate aim of the Commissions five year Financial Services Action Plan (FSAP). Setting political differences aside, the panel agreed that the FSAP was an ambitious goal that could bring real benefits to consumers of financial products across Europe including greater choice and cheaper prices. There was a general agreement that liberalising markets would encourage savings, which in turn will lead to greater investment, economic growth and employment. The completion of a truly single market in financial services would give the City the ability to compete in markets that have been traditionally closed to it - an enlarged market of up to 370 million people must be seen by businesses as an opportunity and not a threat.

An innovation in European law has been the Lamfalussy process, which is designed to enable the EU to make legislation in a more simple and speedy way (although all things are relative!). The panel welcomed this process, as it enabled the EUs financial legislation to be responsive to changing circumstance. However, stress was laid on the need to get the correct balance between democratic accountability and technical overload.

There were, however, some notes of caution. With over 40 measures within the Commissions FSAP, the panel agreed that the main challenge was keeping the project on track. There is little doubt that the Commission and others (including those on the receiving end of a huge volume of consultation documents) are being severely stretched by the volume of the work required under the action plan. Concerns were expressed over the lack of focus so far on - so-called Level 3 & 4 issues - that is the interpretation and implementation stage of Directives. Speakers said that an effort must be made by all jurisdictions within Europe to implement the various directives quickly, and not to unravel the spirit of the FSAP with harsh and protective implementation.

An important priority over the coming years has to be to get Brussels away from the mind-set that a single market can only be created through more legislation. We need to move the agenda to a presumption that implementation and enforcement of existing rules and legislation should come first, and that the market itself will provide solutions to a number of the problems facing us.

The panel agreed that its important to recognise that markets around Europe have very different traditions, and are at a variety of stages of development. All Members States are good at signing up to high-level principles, but can be less willing to change things when it comes to the details. On top of this it was noted that there has traditionally been a lack of practitioner involvement in the decision making processes, leading to some decisions being made by people with too little practical experience of the markets.

With varying degrees of implementation across EU countries, an added emphasis should be placed on the Commissions role in enforcing Directives it was said, to much agreement, that more directives are no substitute for the right directive being properly enforced. In terms of legislation, it is a clear case of quality and not quantity.

The MEPs did comment that on occasion the different voices coming from London can sound like white noise and that the financial services industry as a whole needs to establish a collective vision for Europe it was swiftly noted that IMAs European Strategy Group is already working on developing a vision for asset management in Europe the starting point of which must be that the single market needs to be market driven rather than bureaucracy driven. There are real opportunities for UK based fund managers, but it is not in the interests of anyone in Europe if we all get ourselves in institutional wrangles rather than focusing on the real business issues.

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