Policy fields

Almost all new rules that govern the financial markets come from the European Union. Our task is to make sure that the regulation of the financial sectors is adapted to the needs of financial services users.

Here you find:

Prioritized issues – what are we working on right now?

Publications – an archive of our position papers to the EU Commission since 2009 and all finalised studies.

EU Dictionary – for the financial sector with explanations of words, directives and abbreviations.

A

Advisory Groups – formally known as expert groups, are groups of experts in a certain field. They provide input from stakeholders in areas where the Commission lacks internal expertise. They are found across all Directorates-General (DGs) and play a vital role in shaping Commission thinking around new policies and legislation, be it regulation on chemicals or how to tackle tax havens (source).

Alternative Investment Fund Managers (AIFM) – The activities of alternative investment fund managers account for significant amounts of trading on financial markets. Such activities may, however, contribute to increasing the risks facing financial systems or to heightening such risks. This Directive therefore aims at creating a harmonised regulatory and supervisory framework for alternative investment fund managers. Read more here.

AMF – The Autorité des Marchés Financiers (Financial Markets Authority) is the stock market regulators in France. The AMF is an independent public body that is responsible for safeguarding investments in financial instruments and in all other savings and investment as well as maintaining orderly financial markets. Official website.

B

Basel Accords – are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. The aim is to create a global standard for banking regulators to control how much capital banks need to put aside to reduce the risks associated with investing and lending. Basically, these rules mean that the greater risk the bank is exposed to, the greater the amount of capital the bank needs to hold, to safeguard its solvency.

Basel Committee on Banking Supervision – is a forum for international cooperation on banking supervision. It consists of representatives from national central banks and supervisory authorities. They develop guidelines and standards.

BEUC – is the European Consumer Organisation. It has 42 independent national consumer organisations from 31 European countries as members.

C

Capital Requirements Directive IV – The goal of the directive proposal is to strengthen the EU banking sector in order to absorb economic shocks and make sure that banks continue to finance economic activity and growth. CRD IV is the EU implementation of Basel III. Read more here.

CARRP – stands for Credit Agreements Relating to Residential Property, often referred to as “Mortgage credit”. On February 2014, the European Commission  adopted the Directive 2014/17/EU aims to create a Union-wide Mortgage credit market with a high level of consumer protection. Find more information here.

CCP – Central Counterparty Clearing House.

Corporate Governance – is a term describing the governance, or handling, of a company. It includes issues such as the role and responsibility of the board, interests of shareholders and stakeholders, ethical behavior and transparency. 

CRA – stands for Credit Rating Agency. It is a service provider that assesses the financial strength of other companies and governmental entities. Credit ratings are used by investors, issuers, investment banks, broker-dealers, and governments to assess credit risk. The big three credit rating agencies are Standard & Poor’s, Moody’s Investor Service and Fitch Ratings which together control about 95 % of the market.

CRD IV – Capital Requirements Directive IV is a result of the revision of the EU bank capital framework. This Directive comprises the Directives 2006/48/EC and 2006/49/EC. Find more information here.

CRA Directive – is a proposal for an EU Directive aimed at regulating the operations of credit rating agencies. Since a few credit rating agencies dominate the market, their rating has large consequences, and EU therefore wants to regulate them.

CRA Regulation – is the Regulation that establish the rules that a CRA must fulfill (registration, conduct of business and supervision). It is in force since December 2010 and it was amended in May 2011 to adapt it to the creation of the ESMA.

Council of the European Union – see the Council of Ministers.

Council of Europe – is an international organization for co-operation between all European countries in the areas of human rights, democratic development and culture. It has 47 member states and is an entirely separate body from the EU and cannot make binding laws. The Council of Europe has nothing to do with the Council of the European Union or the European Council which are both EU bodies. Official website.

Council of Ministers – is the EU-body where national ministers for finance, environment etc. meet. Together with the European Parliament, the Council of Ministers adopts new EU legislation. It is also known as the Council of the European Union. Official website.

Crisis Management – refers to a proposal from the European Commission adopted in June 2012. The aim of the proposal is to make sure that the failure of banks does not cause financial instability or excessive costs to tax payers. It includes the establishment of so called living wills, resolution plans and rules on transparency in business models.

CRR – the Capital Requirement Regulation establish rules on capital requirements for credit institutions and investment firms aimed at fostering enhanced risk management among financial institutions. On January 2014, a new legislative package known as “CRD IV” entered in force, including CRR and CRD IV.

Central Securities Depositories – CSDs are systemically important infrastructures in modern securities markets. They perform crucial services that allow at a minimum the registration, safekeeping, settlement of securities in exchange for cash and efficient processing of securities transactions in financial markets. 

CSDR – on September 2014, the new Regulation on Central Securities Depositories entered into force. Find more information here.

D

Dark pool – Private exchange or forum for trading securities not openly available to the public. Also known as “dark pools of liquidity,” they are so named for their complete lack of transparency. It represents large trades by financial institutions offered away from public exchanges to allow trades to remain confidential and outside the purview of the general investing public.

Deposit Guarantee Schemes (DGSs) – schemes which compensate a limited amount of deposits to depositors, when a bank has failed. From the depositors’ point of view, this protects them, at least partly, from bank failures. From a financial stability perspective, this prevents depositors from making panic withdrawals from their bank, which could cause severe economic consequences.

DG Financial Stability, Financial Sevices and Capital Markets Union (DG FISMA) – is the EU Commission Directorate-Generale that coordinates and monitors the effectiveness of EU reforms to secure financial stability and improve the supervision of financial markets, ensures that EU legislation is fully implemented and respond to emerging financial risks. Please find more information here.

Directive – Legal act of the European Union which lays down certain end results that must be achieved in every Member State. National authorities have to adapt their laws to meet these goals, but are free to decide how to do so. Directives may concern one or more Member States, or all of them. See “Regulation” for comparison.

Directorate-Generale (DG) – The European Commission is divided into several departments, which are known as Directorates-General or DGs. Find a list of them here.

Disintermediation – Elimination of financial intermediaries (banks, brokers, finance houses) between the suppliers of funds (savers/investors) and the users of funds (borrowers/investees).

E

EFTA – is the European Free Trade Association, a free trade organisation between four European countries that is linked to the EU. The EFTA members are Norway, Iceland, Liechtenstein and Switzerland. The first three countries are part of the EU’s Internal Market through the EEA Agreement.

ETFs – Exchange-traded funds are low cost index funds that trade like stocks. ETFs offer intraday liquidity meaning they can be bought or sold when the stock market is open for trading. Generally, ETFs are very tax-efficient and have lower annual expenses compared to closed end funds and mutual funds. ETFs cover a broad spectrum of assets including stocks, bonds, currencies, real estate and commodities (source).

ETUC –  is the European Trade Union Confederation. It is made up of national trade union confederations from 36 European countries, and represents 60 million employees. The ETUC is recognized by the EU and other authorities as the only representative cross-sectorial trade union organisation at European level. Official website.

European Banking Authority (EBA)– is one of the three EU Supervisory Authorities for the financial markets. EBA is responsible for coordinating banking supervision in the EU, and work for financial stability, market transparency and the protection of consumers, for example by conducting stress tests on European banks. The EBA has the power to overrule national regulators if they fail to properly regulate their banks. Official website.

European Central Bank (ECB)– is the central bank for Europe’s single currency, the euro. Official website.

European Commission – is the only body who initiates and drafts EU legislation. The Commission is made up of 28 Commissioners, one from each EU member state, who are all responsible for their own policy area, i.e. environment, employment or inner market. Around 20.000 civil servants work for the Commission. Official website.

European Council – consists of the EU Member States’ prime ministers or heads of state. It decides on the general politic direction of the EU, but does not adopt concrete legislation. Official website.

European Economic Area (EEA) – is the result of an agreement between the member states of the EFTA and the EU. It allows Iceland, Norway and Liechtenstein to be part of the EU’s Internal Market without a conventional EU membership. Switzerland has a similar separate agreement. More information here.

European Insurance and Occupational Pensions Authority (EIOPA) – is one of the three EU Supervisory Authorities for the financial markets. EIOPA works for transparency and the protection of insurance policyholders, pension scheme members and beneficiaries. Official website.

European Market Infrastructure Regulation (EMIR) – Regulation on Over-The-Counter (OTC) derivatives, central counterparties and trade repositories. Read more here.

European Parliament (EP)– consists of 736 Members (MEP’s) elected by the citizens of the EU countries. Together with the Council of Ministers, the Parliament adopts legislation and the EU budget. Official website.

European Securities and Markets Authority (ESMA)– is one of the three EU Supervisory Authorities for the financial markets. ESMA oversees the European securities market and works for investor protection and market transparency, efficiency and orderly functioning. Official website.

European Supervisory Authorities (ESAs) – refers to the three financial supervisory authorities of the EU. It consists of the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pensions Authority (EIOPA). They are complemented by the European Systemic Risk Board (ESRB). Earlier, the term European System of Financial Supervisor was used for the same three authorities.

European Systemic Risk Board (ESRB) – is an independent EU body, under the responsibility of the ECB, which oversees the financial system as a whole within the EU. It identifies risks and issue warnings and recommendations. Read more Official website.

European Works Council (EWC)– is where employees in transnational companies have the right to consult with management. The company must share information, answer questions and listen to input. An EWC is established on the initiative of the employees. Find more information here.

EWC agreement – When an European Works Council is established, the company and the employees negotiate a EWC agreement that describes how, when and how often the EWC should meet with the management. Find more information here.

F

Finance Watch – is an organisation that is founded to balance the power of the finance industry’s lobbying towards EU. Finance Watch and BETTER FINANCE work together with consumers, researchers and many more to give the EU an alternative picture of how things are, or should be.

Financial Transaction Tax (FTT)– is a tax on the profit as well as total wage sum of financial institutions. This means that as soon as a financial instrument (i.e. securities, bonds, shares and derivatives) changes owner, the tax has to be paid. On February 2013, the European Commission tabled a proposal for a Directive for a FTT still under discussion at the European level. Find more information here.

Financial inclusion – is the delivery of financial services at affordable costs to disadvantaged and low income groups. It is based on the idea that all citizens need access to a bank account and basic banking services.

Financial Stability Board (FSB) – is an international body that monitors and makes recommendations about the global financial system. It was established after a G-20 meeting in April 2009 as a successor to the Financial Stability Forum. The Board includes all G-20 major economies and the European Commission. FSB has no decision making mandate. Offical website.

Financial taxation – refers to different ways to direct taxes towards the financial sector, for example as a Financial Activities Tax or a Financial Transaction Tax.

Financial Services Action Plan (FSAP) – the Financial Services Action Plan is an EU initiative from 1999 aimed at creating a single market for financial services. One result of the plan is MiFID.

G

G-20 – is the group of finance ministers and central bank governors from the 20 major economies in the world: 19 countries plus the European Union. Collectively, G-20 economies account for more than 80 per cent of the global gross national product and two-thirds of the world population.

Generally Accepted Accounting Principles (GAAP) – The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information. GAAP cover such things as revenue recognition, balance sheet item classification and outstanding share measurements (source).

Green Paper – is a discussion document written by the European Commission. It is intended to stimulate debate and launch a process of consultation. The paper does not typically focus on specific proposals, but presents ideas on what future regulation could be about.

H

High-frequency trading – Trading platform that uses powerful computers to transact a large number of orders at very fast speeds. High-frequency trading uses complex algorithms to analyze multiple markets and execute orders based on market conditions. Typically, the traders with the fastest execution speeds will be more profitable than traders with slower execution speeds. As of 2009, it is estimated more than 50% of exchange volume comes from high-frequency trading orders (source).

I

Impact Assessment – Before the European Commission proposes a new initiative, it evaluates the potential economic, social and environmental consequences. An impact assessment gives decision-makers evidence regarding the need for EU action and the advantages and disadvantages of alternative policy choices (source).

Inducement – A reward for a specific behavior, designed to encourage that behavior, also called incentive (source).

Insurance Mediation Directive (IMD) – EU Directive that establish rules to protect customers’ interests and guarantee professionalism and competence among insurance intermediaries. It has a catalogue of minimum professional requirements that anyone who wants to work as insurance intermediary has to meet. On July 2012,  the European Commission adopted a proposal for a revision of the Insurance Mediation Directive (IMD 2). It is expected to be adopted in 2014 coming into force in Member States in 2016. Find more information here.

Insurance Mediator – an insurance mediator acts as an agent or third party between customers and insurance companies. He/she gives advice to the customer on what insurance to have, and recommends insurance policies.

International Monetary Fund (IMF) – is an organization of 188 countries, working for financial stability, international trade, economic growth, and poverty reduction. The IMF monitors the economic health of its members, lends to countries in difficulty and provides assistance. Offical website.

Investor Compensation Scheme Directive (ICSD) – The ICSD, first adopted in 1997,  makes it compulsory for EU Member States to have in place a scheme to protect investors in the event of fraud or due to operational or administrative error. In 2010, in an effort to restore consumer confidence in financial markets, the European Commission proposed a review of the ICSD. Read more here

IORP – is short for Institutions for Occupational Retirement Provision Directive. It is an EU Directive designed to create an internal market for occupational retirement provision. Read more here.

J

K

KID – Key Information Documents are short, plainly-worded documents that will provide investors with answers to the key questions they have about the features, risks, and costs of investment products. According to the European Commission’s proposal, the documents will be produced by investment product manufacturers and provided to retail customers when they are considering buying investment products. Find more information here.

L

Lamfalussy process – is a law-making process in the EU that is used to further specify some EU directives concerning financial regulation, for example MiFID. In the process, the European Parliament and the Council of Ministers decide on a framework agreement. Thereafter, more detailed and technical rules are decided by the European Supervisory Authorities in cooperation with the European Commission.

Listed company – Firm whose shares are listed (quoted) on a stock exchange for public trading. Also called quoted company (source).

Living wills – According to Crisis Management proposals, living wills are plans that banks will need to do to prepare themselves for an eventual crash. The living will describes how the bank can be restructured or dismantled in a controlled manner, without threatening financial stability or causing unacceptable costs to tax payers.

M

Market Abuse Directive (MAD) – the EU Directive on Criminal Sanctions for Market Abuse tackles insider dealing and market manipulation practices. It prohibits people who have inside information from trading in related financial instruments. It also prohibits the manipulation of markets, for example by spreading false information or rumours. Find more information here.

Market Abuse Regulation (MAR)– the MAR updates and strengthen the existing framework to ensure market integrity and investor protection provided by the Market Abuse Directive. It reinforces regulators’ investigative and sanctioning powers. On June 2014, it was published in the EU Official Journal. Member States have two years to transpose the new rules which will be applicable starting January 2017. Find more information here.

Mediator – in this context it is mostly used in relation to insurance, see Insurance Mediator. In general, a mediator is someone who acts as a third party between other parties.

MEP – Member of the European Parliament.

MiFID – Is the Markets in Financial Instruments Directive and creates a single market for investment services and activities. MiFID regulates the sales and advice of financial products, and describes how conflict of interest should be handled. The directive ensures a high degree of harmonised protection for investors in financial instruments, such as shares, bonds, derivatives and various structured products. Read more here.

MiFID 2 – On April 2014, the European Commission tabled a proposal to review MiFID. On June 2014, the revised MiFID was published in the EU Official Journal. Member States have two years to transpose the new rules which will be applicable starting January 2017. MiFID 2 strengthens the protection of investors by introducing robust organisational and conduct requirements or by strengthening the role of management bodies. Find more information here.

MiFIR – is short for the Markets in Financial Instruments Regulation, and is paired with MiFID, which aims at creating a single market in EU for investment services. 

Money Market Fund (MMF) – is a mutual fund that invests in short-term debt such as money market instruments issued by banks, governments or corporations. Money market instruments traditionally include treasury bills, commercial paper or certificates of deposit (source). On September 2013, the European Commission proposed a European framework designed for Money Market Funds. Find more information here.

N

O

Omnibus II Directive – is the piece of legislation that implements the changes made on the Solvency II Framework Directive (2009) on the financial position of insurance undertakings. The new Solvency II Directive will be applicable from 1 January 2016. Find more information here.

Organisation for Economic Co-operation and Development (OECD) – OECD is an international economic organisation of 34 countries which promotes policies that will improve the economic and social progress and world trade. Official website.

OTC – refers to ’Over-the-counter’, which is a group of financial instruments, mainly directives that are traded directly between banks and not on any stock market. The OTC trading is considered riskfull, since it lacks transparency.

P

Passive management – Passive management (also called index management) means that the management of the assets is organised to ensure that the return on the actual portfolio reflects the return on the benchmark index (source).

Pension Pillar – One of three pension formats as outlined by the World Bank in 1998 and which has since been adopted by many economically reforming countries in Central and Eastern Europe. The goal of the three-pillar system is to separate the major objectives of pension (retirement) plans into the following pillars: Pillar 1 – A standardized, state-run pension system, which offers basic coverage and is primarily focused on reducing poverty; Pillar 2 – A funded system that recipients and employers pay into; this includes pension funds and defined-contribution accounts/plans; Pillar 3 – Voluntary private funded accounts, including individual savings plans, insurance, etc (source).

Public Consultation – is a regulatory process by which the authority that launches it asks for feedback on a proposal or a topic under discussion. Read our response to consultations over the years here.

PRIPs – Packaged Retail Investment and Insurance Products. PRIPs are the investment products retail investors would typically be offered by their bank when they want to make an investment.

Proxy Advisor – Firm providing services to shareholders, notably voting advice – recommending and sometimes casting proxy statement votes on their behalf.

Q

R

Rapporteur – is a highly important role in the European Parliament. A rapporteur is elected when a Parliament committee gets the task to draft a report on a legislative proposal. The rapporteur writes the report and recommends a line of policy. The rapporteur has large influence. Find more information here.

Recommendation – is a type of EU rule decided on directly by the European Commission. It has a weaker status than both a directive and a regulation.

Regulation – Regulations are the most direct form of EU law – as soon as they are adopted, they have binding legal force in every Member State. In comparison with directives, member states cannot decide for themselves how to implement regulations. Regulation is however also used as an umbrella term for all legislation, which makes it a bit confusing.

Remuneration – is a term that covers the different kinds of pay that employees can receive. Remuneration includes wages, bonuses and other compensations, for example for inconvenient working hours.

Responsible lending – see CARRP.

S

Saving Tax Directive (STD) – The Savings Directive ensures that paying agents either report interest income received by taxpayers resident in other EU Member States or levy a withholding tax on the interest income received. The Commission proposal seeks to improve the Directive, so as to better ensure the taxation of interest payments which are channeled through intermediate tax-exempted structures. It also proposes to extend the scope of the Directive to income equivalent to interest obtained through investments in some innovative financial products as well as in certain life insurances products. Moreover, simplification of the technical operation of the Directive should lead to a more user friendly system and more efficient implementation. Read more here

SE Company – is a company that follows European Company Regulation for all of its operations in the EU countries and does not have to adapt to national company laws. Normally, international companies have to follow different rules in different countries. By becoming an SE company, this can be avoided. When an SE company is created, the company has to negotiate with a body representing all employees concerned to discuss the future involvement of the employees. SE stands for “Societas Europaea”. Find more information here.

SEPA – the Single Euro Payments Area is an EU initiative for the simplification and harmonization of bank transfers. As of March 2012, SEPA consists of the 27 EU Member States plus the four members of the EFTA (Iceland, Liechtenstein, Norway and Switzerland) and Monaco.

Shadow banking – there is no fool-proof definition of shadow banking, but the term is usually used to describe the parts of the financial systems that are not regular banks – and therefore do not have to follow banking regulation. Examples are Money Market Funds, Investment Funds, Special Purpose Vehicles and Special Investment Vehicles. Also banks can do shadow-banking activities for example when they do securitisation.

Single Supervisory Mechanism (SSM) – is the tentative term for the mechanism through which, per the European Commission’s proposal, the European Central Bank shall assume ‘ultimate responsibility’ for specific supervisory tasks related to the financial stability of all Euro area banks. Find more information here.

Solvency – The ability of a company to meet its long-term financial obligations (source).

Solvency II Directive – is an EU piece of legislation regulation the taking-up and pursuit of the business of insurance and reinsurance aimed at guaranteeing that insurance companies are financially sound, and that they can survive difficult periods. The goal is to protect both policyholders (consumers, businesses) and the stability of the financial system. It is a recast of several directives and will be applicable from 1 January 2016. Find more information here.

T

TFEU – Treaty on the Functioning of the European Union. The old Rome Treaty, now with a new name. Includes rules on what the EU can and cannot decide upon. For example, Article 153 states that EU does not have a mandate to regulate pay and the right to strike.

Tobin Tax – is a small tax on financial transactions, proposed by the American economist James Tobin. Nowadays, the term Financial Transaction Tax (FTT) is more often used.

“Too big to fail” – The idea that a business has become so large and ingrained in the economy that a government will provide assistance to prevent its failure. “Too big to fail” describes the belief that if an enormous company fails, it will have a disastrous ripple effect throughout the economy (source).

Trade Repositories (TR) – Trade Repositories centrally collect and maintain the records of derivatives. They play a central role in enhancing the transparency of derivative markets and reducing risks to financial stability. Trade Repositories are entities regulated by EMIR that centrally collects and maintains the records of all derivatives trade related data. Find more information here.

U

UCITS – stands for Undertakings for Collective Investment in Transferable Securities. UCITS funds are investment funds that can be traded on an EU-wide basis, according to the UCITS Directive from 1985. Since the financial crisis, the Commission has tabled several amendments to the UCITS directive. They aim at increasing the long-term stability of the investment fund market, regulating the behavior of fund managers and increasing market transparency. Find more information here.

UNI – UNI Global Union is an international umbrella organisation for trade unions who represent 20 million service sector workers around the world. UNI has 900 member unions in 150 countries. UNI represents workers in for example Finance, Commerce, Finance, Media, Entertainment & Arts, Post & Logistics, and Tourism. Official website.

V

W

Whistleblower – is a person who exposes misconduct, alleged dishonest or illegal activity occurring in an organization (source).

White Paper -is a document containing proposals for EU action in a specific area, written by the European Commission. It presents a detailed policy for discussion and for decision. In some cases it follows a Green Paper.

Working Time Directive (WTD) – is an EU Directive that contains rules on working hours, breaks and holidays for employees in all the EU Member
States.

X

Y

Z