The European Commission's Green Paper on Financial Services Policy
The following letter was submitted to the Ministry of Finance on 1 July 2005
Finansdepartementet ber i brev av 9. juni 2005 enkelte departementer, Kredittilsynet og Norges Bank om eventuelle merknader til Europakommisjonens "Green Paper on Financial Services Policy (2005-2010)". Kommisjonen inviterer til synspunkter fra alle interesserte parter. Kommentarene som følger nedenfor (på engelsk etter departementets ønske) er utarbeidet basert på vårt generelle inntrykk av situasjonen uten at Norges Bank har hatt særskilt kontakt med næringen.
Norges Bank has no objection to the general understanding of the situation expressed in the Green Paper, i.e. that at present, the highest priority should be given to the consolidation of the achievements obtained through the FSAP. Our understanding is that both the regulators and the market participants have a full agenda. The regulators have a full work-load in connection with obtaining a common understanding of the rules as well as preparing and adopting the necessary supplementary rules. The market participants must implement new rules into their daily work. For the banking sector, there are several rules that imply heavy workloads; the revised capital adequacy rules, new accounting rules and the development of a common European payment area.
Norges Bank agrees that the open process in connection with regulation is a considerable achievement. As an observer to the CEBS, Norges Bank benefits from more direct contact with other European banking regulators and central banks than before. This is useful to us and we understand that the new committee structure that has been established generally meets the regulatory needs. We shall seek to contribute constructively to attaining the goal of a harmonised regulation that maintains prudential standards while encouraging innovation and competition.
In most instances, a harmonised regulatory standard is desirable. However, there are cases where a common standard may imply the elimination of regulations and market practices that more effectively meet needs than a politically achievable harmonised standard can. A case in point is the Norwegian regulation abolishing banks' float income. It is important that no country should be forced to harmonise to standards that are lower than those already established prior to harmonisation. It may be useful to further clarify this point in the process ahead.
There are some disappointments as regards market developments. One is that the costly system of correspondent banks still exists. There is also a very limited number of cross-border bank mergers and this limits possible economies of scale. Both of these phenomena may reflect work not yet completed. The system of correspondent banks should largely disappear when the single European payments area is established. The lack of cross-border bank mergers may reflect a number of smaller regulatory and taxation obstacles that can be solved through ongoing processes. At present, it will suffice to monitor developments in these areas. If there are no changes in the next few years, it will be necessary to study the obstacles more fully.
One obstacle to the establishment of cross-border institutions may be differences in the rules for deposit guarantees. An increase in the number and size of cross-border institutions will also necessitate further clarification of responsibilities and cooperation procedures regarding supervision and crisis management between authorities in the entire European Economic Area.
The establishment of a single European payments area is a large task with many layers and a large number of stakeholders. Norges Bank has the impression that the banks are working hard to establish this area. Through the regulation on the fee structure for euro payments, market participants know that authorities will use regulatory power if results are not obtained. A bank-driven solution is preferable as it probably will lead to internal price structures that promote sound use of resources. It is important that competition policies are not (mis-)used to prevent cooperation between market participants that is needed to establish a beneficial common payment infrastructure. At this point in time, it is probably wise to give the single European payments area process a bit more time, but the efforts should produce results in the not too distant future.
Norges Bank has no comment concerning the priority given to activities to promote competition in the mortgage as well as the retail and consumer banking market.