Sharon Bowles MEP

Speech to the Unicredit Annual Reception

I would like to start by thanking you for inviting me to address you this evening. Unicredit is one of the world's largest financial institutions, so almost everything that my committee does will touch you in one way or another. I know that there will be some much more melodious tones than mine in the concert in a few moments so I shall not keep you too long.

I have no intention of updating you on everything that the committee has coming up, because it would be a pretty long speech just to read out a list the directives and regulations in the pipeline.

However, apart from volume, a few other things characterise our work right now. First, we are following a global agenda set by G20, and although a lot of what we are doing was already going to come up in reviews of the original Financial Services Action Plan, never before has their been such a concerted effort at international level. And I do want to reiterate that efforts are being made by myself and the committee, as well as the other institutions, to align the outcomes of legislation, in particular in the EU and US, although of course the individual legislative steps necessarily follow those of the corresponding legislature.

A second characteristic now, especially in Europe, is that safety ranks higher than it did before, ahead of efficiency. Efficiency is no longer a sufficient reason for doing or not doing something, the safety argument must always be made.

The third characteristic is that everyone is interested in the crisis and the steps taken in consequence. The crisis drives the rhetoric of many politicians because they are answering to their constituents, who also see the crisis through their own national lens. This can make it more complicated for those of us embedded in the detail, and perhaps the AIFM Directive (Hedge Funds and Private Equity) illustrates this well. Those countries that had no regulation of hedge fund managers or protection for retail investors find the media and public more interested in prohibitions. Asset stripping is a more sensitive issue in countries that fear covert operations but cling to the transparency directive 3% shareholder disclosure threshold rather than going lower and do not have disclosure limits for contracts of difference - which of course is a way in which positions for takeovers can be built up.

Having mentioned the AIFM directive, I am pleased that we have now reached a conclusion in the trialogue today. It has been a long and bumpy ride, but we have changed an unpromising start into a workable directive. In particular we have avoided creating a fortress Europe that would shut out third countries, and have also avoided 'prison Europe' in which investors would be denied freedom to invest in third countries. At the same time we have created checks that should allay concerns of the type that I alluded to just now. In the end it has taken give and take on all sides, a determined Parliament, a dynamic Belgian Presidency and a considerate Commission. We can call the end result European, with plenty of reviews to check how it plays out in practice.

Although it might feel like it right now to some of us, the AIFM Directive is not the only piece of financial legislation to have been taking up our time recently. It was only just over a month ago (although it seems like much longer) that the Parliament voted on the financial supervision package, which set up the three EU authorities for banking, markets, and insurance and occupational pensions, and the European Systemic Risk Board.

The Parliament also made a big difference to the final outcome of that package. We made the authorities stronger, of that there is no doubt, but we also put a high priority on ensuring joined-up supervision between the authorities. We understand that financial markets and institutions are complicated, not only in terms of operating across borders, but also because of the different sectors which interact with each other. Not everything can always be pigeonholed as 'banking', 'securities', or 'insurance and pensions'. Rules in markets will have a direct effect on the prudential side, on capital in banks and other institutions, not least through the operation of other regulations.

In the context of the European Systemic Risk Board we ensured that wider views than those of central bankers would have a voice.

Now we are engaged in the job of 'populating' the authorities with responsibilities given to them in sectoral legislation. The markets authority, ESMA, is being a role in the direct supervision of credit rating agencies, and ESMA also has a role in the AIFMD. I'm particularly concerned to see that, when it comes to the regulation of derivatives markets all the authorities have appropriate roles because of the industry wide cost and impact.

Supervision is not the only high profile package that the committee is responsible for. Today we had the first exchange of views on the Commission's proposals on Economic Governance, which promises to be highly politically charged package. We are under pressure from the other institutions to work quickly - which I have to tell you we always do anyway - but this is an issue that citizens will want follow - it intimately involves their quality of life. So while we discuss such sensitive issues as "to sanction or not to sanction" it must be possible to follow the debate and understand the agreements finally reached.

So all round we have massive reforms underway and it is imperative that they are done well. We must keep an eye to the future and on the collective economic impact of our work. All the additional safety that we are building in does not come for free - and the cost is all the higher in comparative terms at a time when we are struggling for growth. We must not be tempted by short term localised protectionism, even within the EU never mind beyond. That is not the way to meet the challenge of current US markets and future Asian markets that dwarf our fragmented structure. If ever there were a time for the EU to harness the strength of a single market, and a single financial market, it is now. Our future depends on it.

So again, thank you very much for inviting me, and I think now it is time to face the music.