Corporate & Securities Law

By Jim Hamilton

New EU Commissioner for Internal Market Pledges to Complete Financial Reform Legislation

At a time when European financial regulation is at the threshold of significant legislative overhaul, the new Commissioner for the Internal Market, Michel Barnier, pledged to complete the reform efforts begun by previous Commissioner Charlie McCreevy, under whose remit the most sweeping changes in financial regulation were proposed, including the regulation of hedge funds, derivatives, credit rating agencies, and systemic risk. Mr. Barnier was formerly a member of the European Parliament, and, before that, a member of the Prodi Commission, serving as Commissioner for Regional Policy.

At his confirmation hearings before the European Parliament, Mr. Barnier said that he would propose a coherent legislative framework to the Commission for the regulation of OTC derivatives, as well as for post-trade activities and infrastructure, including a legislative proposal on indirectly held securities. The second Barrosa Commission is committed to passing derivatives reform legislation in 2010.

Another high priority for the new Commissioner is the adoption by all of the EU?s partners, including the United States, of high-quality global accounting standards. He also plans to revise the Capital Requirements Directive in order to incorporate the G-20 agenda and the work of the Basel Committee. Noting that much work remains to be done in the area of the infrastructure of financial markets, Mr. Barnier will re-examine the MiFID Directive.

The Commissioner-Designate also intends to submit a proposal creating a legal framework for crisis management and resolution, including a resolution fund, that would reinforce and harmonize the regulation of financial groups in terms
of equity and liquidity and the financial stability of each Member State and of the Union as a whole. Recently, in an effort to end too big to fail, the US House passed legislation creating a resolution authority and a resolution fund paid for by assessments on systemically risky financial firms.

The new Commissioner will also issue a report on corporate governance, containing proposals for remedying the weaknesses revealed by the crisis, particularly involving the eradication of abusive executive remuneration practices and policies. Also, a report on the application of the Transparency Directive will be published shortly, possibly followed by proposed amendments.

With the G-20 emphasizing the need for a global regulatory response to the financial crisis, Mr. Barnier is aware of the challenges of globalization and the need to craft a harmonized cross-border response. In earlier remarks, he has noted that not long ago financial exchanges were nation-centric and, in all countries, capital exchanges were forbidden or restricted and the approval of the Ministry of Finance was needed before any capital could leave or enter a country. Noting that change now happens very quickly and abruptly, he recognizes the need for new paradigms and thus a need for a new governance.

Full post as published by Jim Hamilton's World of Securities Regulation on January 12, 2010 (boomark / email).