Hard headed Pro-Europeanism - City Minister on Europe

City Minister Ed Balls wrote to European Commissioner for the Internal Market and Services Charlie McCreevy yesterday (Tuesday 15 May 2007), setting out his concerns over the potential failure of some member states to implement Markets in Financial Instruments Directive (MiFID) by the November 2007 deadline.

The letter welcomes Commissioner McCreevy's efforts to get member states to implement MiFID on time, and urges him to maintain the pressure on member states to ensure the implementation deadline is successfully reached. The competitiveness and reputation of Europe's markets and financial services industry will be undermined if implementation is not achieved on time says the Minister.

The text of the letter follows:

"At the last ECOFIN, you and I discussed progress on MiFID, and its importance in establishing a regulatory environment that equips European-based firms to compete and succeed against a background of increasing global consolidation.

I am writing to reinforce this message and to express my support for your efforts, and those of Commission staff, in making MiFID a reality.

First, let me welcome the progress on a number of key interpretative issues under MiFID where the Commission has sought to take a pragmatic approach, guided by the impact on the functioning of Europe's markets. The Commission's support in resolving the best execution debate was particularly helpful. The wrong outcome here would have had very damaging consequences for the bond and derivatives markets.

I believe it is vital that we resolve the key remaining interpretative issue - that of home/host supervisory arrangements for branches - motivated by the same spirit. It is key that this issue is resolved in a manner that ensures effective supervision of Europe's markets, recognising the legitimate interests of home and host authorities where appropriate, and avoiding any fragmentation of the regime in place in national markets.

Let me turn though to the greatest challenge facing us collectively: the successful and timely implementation of MiFID. Delivering an integrated market based on the harmonisation that MiFID delivers is essential for the competitiveness of Europe's markets and financial industry. You and I have spoken on this publicly many times. It is vital that Member States transpose and implement MiFID by the agreed November deadline.

From my contacts with the UK-based industry, I know that firms and authorities have put significant effort into ensuring timely preparation, as have those in a number of other EU countries. It would damage the reputation of MiFID if those firms that have stretched themselves, often at considerable cost, to be ready on time, are unable to extract the benefits. And firms located in countries that have not yet transposed are unable to make practical preparations, and face a potential competitive disadvantage if they are not ready by November.

I therefore welcome your recent moves to put pressure on authorities and firms to implement on time and urge you to maintain this pressure against those Member States that are undermining the EU's competitiveness by dragging their heels over implementation. Around the world public authorities are watching MiFID with great interest, with many looking to Europe for inspiration in reforming the regulation of their own marketplace. It would be a great shame if we missed this opportunity for collective European leadership."

Notes for editors

1. MiFID is the replacement to the Investment Services Directive. It is one of the key directives of the FSAP and does three main things:

establishes organisational requirements and rules governing behaviour towards investors for firms ("investment firms") who wish to be authorised to undertake activities linked to the buying and selling of financial instruments such as shares, bonds and derivatives;
sets a regulatory framework for stock and derivative exchanges and other markets where the organised trading of financial instruments takes place;
facilitates the carrying on of business by investment firms and stock and derivative exchanges and other organised financial markets across national borders in Europe.

2. The UK and Romania transposed MiFID on time (by end January 2007). Ireland has since transposed MiFID. No other Member State has yet notified the Commission of full transposition (Lithuania has notified transposition of only the Level 1 Directive).

3. MiFID is intended to offer improvements over the ISD in various areas, for example:

an improved passporting regime for branches and cross-border business;
effective competition between execution venues - in particular the removal of the concentration rule and the introduction of explicit recognition of Multilateral Trading Facilities;
liberalisation of the means of trade and transaction reporting;
principles-based implementing measures.

4. Media enquiries should be addressed to the Treasury Press Office on 020 7270 5238.

5. Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558, or by e-mail to public.enquiries@hm-treasury.gov.uk

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