I was one of the five MEPs on the Parliament’s negotating team (see photo, right, of trialogue negotiations), my chief responsibility being for the creation of the new European Insurance and Occupational Pensions Authority. It was a hard slog. In the end we had around 25 trialogues, which is the technical term for the negotiations. I believe that must be quite near a record!

The reason why the negotiations were so ardeous was that the legislation is so important and far-reaching. The purpose is to prevent another breakdown of communications between national supervisory authorities, as occurred between the UK, Iceland and the Netherlands over Icesave, or between the Belgian and Dutch authorities over Fortis.

I won’t go into all the details on the powers of the new authorities here,  interested readers can find out more at – http://www.europarl.europa.eu/news/expert/infopress_page/042-80951-245-09-36-907-20100902IPR80950-02-09-2010-2010-false/default_en.htm

Suffice to say that all parties came out of the negotiations fairly happy with the outcome. The powers of the new supervisory authorities are concorrent with the roles bestowed upon them. National governments retain ultimate responsibility, as should be the case given that they are the ones responsible to tax-payers for bail-outs. However, the new bodies have enough teeth to help overcome some of the problems witnessed during the last crisis. I am very pleased with the result.

ISSUED BY PETER SKINNER, LABOUR MEP FOR THE SOUTH EAST REGION

 Peter Skinner MEP , 99 Kent Road, Dartford DA1 2AJ

Tel: 01322 270345 , Mobile: 07976 969912

For immediate release                          Wednesday, 26 March 2010

Alternative funds – European exceptionalism could undermine G20 commitments

Moves to go beyond internationally agreed standards for alternative funds could undermine commitments made at the G20 to co-ordinate the global regulatory response to the financial crisis, warns British Labour MEP Peter Skinner.

It also is likely to result in a backlash from the US, harming the interests of EU investors and industry, he adds.

Skinner, a senior member of the European Parliament’s ECON committee, raised his concerns at a press conference on the Alternative Investment Fund Manager’s Directive (AIFMD) attended by leading MEPs from the major UK parties and European Parliament’s rapporteur for AIFMD Jean Paul Gauzes.

“There is a cold draft of protectionism flowing through the European Council that has seeped into parts of the European Parliament’s draft text on AIFMD,” says Skinner, referring to the current proposals on funds and fund managers in third-countries.

“This will not only ultimately harm the interests of EU citizens, but will seriously damage efforts beyond alternative funds to achieve trans-Atlantic – and therefore global – consensus on re-regulating the financial sector,” say Skinner. “It will also lead to retaliatory action from the US, of which we are already seeing some signs,” he adds.

Skinner is specifically concerned over the possibility that AIFMD will either deny funds and fund managers from third-countries such as the US the possibility of marketing across the EU, or set ‘equivalence’ requirements so high on them doing so as to be almost impossible to meet.

“I believe that current efforts by France in the European Council to deny third-country funds the possibility of passporting across the EU are more about protecting and nurturing the French funds industry than doing what’s best for European investors and business,” says Skinner.

“The current Parliament text is a slight improvement since it foresees the granting of passports to third country fund managers who meet equivalence, however the great concern I have is that equivalence will be interpreted as having to follow the letter of AIFMD, rather than the spirit.”

“The purpose of AIFMD ultimately is monitor and reduce the systemic risk posed by alternative funds, and increase investor protection. International standards, such as those being proposed by IOSCO, achieve these goals. So if a third-country meets IOSCO standards it should be declared as having equivalence with the EU and funds and managers domiciled in that third-country the option to passport across the EU.”

“I am far from being alone among MEPs in holding these views. Over the coming weeks we intend to put pressure on the rapporteur to take a more open and reasonable approach on the issue of third countries, for the benefit of all European citizens,” says Skinner.

ENDS

My report was presented alongside similar reports to create authorities for the banking and securities and markets sectors, produced by rapporteurs from the European People’s Party and the Greens. In parallel the rapporteur from the European liberal group presented her draft report on the creation of a European Systemic Risk Board to monitor the potential for macro-economic risks in the European economy.

The four new bodies that will be created will be essential to help monitor the development of potential risks in the European financial system, and take action to prevent them from becoming full-blown crises. In the event that a crisis occurs, the new authorities – it is hoped – will allow for better communication and coordination of responses between national authorities.

While there was some divergence in the exact role and powers to be granted to the new authorities between the rapporteurs, the overall direction of what we want to see achieved is the same: a consolidated approach to the supervision of systemically important financial institutions within the European Union, and the adoption of a single rulebook for financial institutions in all EU Member States. This will allow for greater integration of financial services in the EU, and a more coherent regulatory approach.

Our draft reports will now be considered by other MEPs in the ECON Committee, who will be able to table their own amendments. We hope to have the reports agreed with the rest of Parliament and the Council of Ministers over the summer, so that the new authorities can be up and running by the start of 2011.

My amendments focused on four main areas: 1) ensuring that investment trusts, which have operated for over 100 years and do not present systemic risk, are not needlessly regulated out of existence by the new law; 2) that European fund managers are not prevented from providing services outside of the EU; 3) that there are extra protections for investors by clarifying the split between depositories and fund managers; and 4) developing the concept of proportionality so that smaller funds are not overly burdened by red-tape and restrictions.

The ECON committee will begin the debate over which amendments will be included in the final parliamentary report with the rapporteur Jean-Paul Gauzès (pictured above) on 23rd February. With so many amendments to discuss, it could be a long process.