Jonathan Hill, Commissioner for Financial Stability, Financial Services and Capital Markets Union proposes to dispose of three major pieces of financial legislation in the institutional pipeline.
Background: Shortly after the new composition of the Commission had been confirmed, Frans Timmermans, the European Commission’s Vice-President responsible for “Better Regulation”, asked all Commissioners to inform him about what their main objectives are and which legislative proposals in their respective areas might be scrapped. The aim is to get rid of proposals on which there is no consensus among the Member State representatives in the Council or in the European Parliament, and concentrate on delivering concrete results.
Commissioner Hill submitted his homework in a letter dating back to 18 November, where he suggests ditching legislative proposals dealing with investor compensation scheme, occupational pension funds and structural banking reform. Copies of the letter were sent to Jyrki Katainen (Vice-President for Jobs, Growth, Investment and Competitiveness), Valdis Dombrovskis (Commissioner for Euro & Social Dialogue) and Catherine Day (Secretary General of the Commission).
The proposal to amend the investor compensation scheme directive (increasing the minimum level of compensation from 20,000 EUR to 50,000 EUR) dates back to 2010. Due to the lack of agreement on its final form, the progress achieved till this day has been rather modest, not to say non-existent. Commissioner Hill does not explain in detail why he proposes to get rid of this proposal, but is it understood that it is because of this stagnancy. Reportedly, Commissioner Hill would like to ditch this proposal immediately.
When it comes to the remaining two proposals, Hill “concluded that it would be premature to withdraw either of (them) now.”
Occupational pension funds are financial institutions which manage collective retirement schemes for employers, in order to provide retirement benefits to their employees. The rules on where such funds are allowed to invest are currently being discussed in the Council and the Italian presidency envisages reaching an agreement in the next few weeks. Therefore, “it would be odd to withdraw (the proposal) now,” says Hill.
The third candidate for withdrawal is the Structural banking reform, which would separate commercial banking activities from all other banking activities (such as trading, asset management or insurance) and address the “too-big-to-fail” phenomenon and other conflicts of interests. Commissioner Hill observes that “member states are pulling in different directions in opposition to it, so withdrawal could be an option next year if member state support does not pick up.”
The intention to bin the last of the mentioned pieces of legislation causes the greatest upheaval in MEP ranks. Philippe Lamberts, MEP for the Greens, told the EUObserver that “(t)he structural reform of the banking sector, and the proposed separation of banking activities, is one of the central elements of Europe's banking reforms and banking union. To suggest withdrawing this legislation at such an early stage is breathtaking.”
To put this issue into context, let us recall what Commissioner Hill said during his hearing in the European Parliament: “Too big to fail (...) is an extremely important issue and we have to keep on the case in trying to make further progress with it. (...) the proposals we have already discussed on further bank structural reform coming out of the Liikanen proposals, we should take forward as a priority.”
Worryingly enough, Hill’s letter was preceded by a joint appeal addressed to Timmermans on behalf of the British Bankers’ Association and the French Banking Federation, calling for a fresh look at the structural banking reform. According to Lamberts, the signal Hill’s letter is sending, is “utterly unacceptable. He seems to be bending at the slightest pressure from member states and industry.”
Apart from these three proposals, Commissioner Hill envisages to analyse the cumulative impact of all EU rules since the 2007-09 financial crisis, work on the capital markets union and consumer/retail aspects to financials services.
Sources: FT, EUobserver and Reuters.