ABN AMRO Bank*
The introduction of the single currency in the EU will dramatically alter the environment within which financial business is transacted. This new era promises greater efficiencies, lower costs and greater choice for the users of financial services. Furthermore, the rapidly increased use of on-line technologies such as the Internet (enabling better and more advanced methods of electronic banking and other electronic commerce) should compound the effects of the single currency for European citizens and businesses.
These developments are welcomed by the banking industry, and by the users of financial services. However, the regulatory and legal framework governing these activities in the EU seems to have reached an impasse in its ability to allow the delivery of the potential benefits of the single currency by the banking community. It seems that, in some areas, aspirations have overtaken the practical ability to deliver. In other words, whilst the European single currency has at last arrived, a real Single Market has not yet been created in which to deliver its full benefits.
To deliver the benefits of the single currency to European
businesses and citizens, priorities must be set. ABN AMRO has, for the
purposes of this paper, chosen to highlight those issues or disparities
we feel need the most urgent attention. Many of these issues are already
recognised as difficult subjects to approach at EU level. ABN AMRO suggests
a practical approach, in keeping with its actions and customer relations.
The Bank is committed to the European Union, serving its European customers
from offices in every EU country, and in sixty other countries world- wide.
EU Regulatory Environment
for Credit Institutions
The regulatory framework for credit institutions has been shaped by those Articles in the EU Treaty, which allow for the free movement of goods, services, and capital. In this regard, the home state control principles of the Second Banking Directive and the Investment Services Directive have assisted in the creation of a Single Market for financial services. However, much of the regulatory framework for credit institutions was created before the Single Market was an established principle. More importantly, it was established before the prospect of economic and monetary union became real and hence, before companies operating in Europe looked to the actual and final creation of the Single Market.
The first and most basic aspect of Single Market creation is to ensure that Member States properly impose existing EU measures. For financial services companies operating in Europe, unclear or inconsistent imposition of EU measures can lead to fundamental legal uncertainty about otherwise simple business arrangements. The following complex issues which are particularly important to the financial services sector, can be highlighted:
between Customers and Banks
The process by which a relationship between a potential customer and a bank is established varies from country to country. The legal and regulatory environment governing this process is based heavily on national rules, and much of the process is not under EU competence. Having said this, however, the Community has, from time to time, approached issues relating to the establishment of relationships (contract law) through conventions. For the time at which those conventions were drawn up, they have been successful.
Furthermore, the procedures established for the setting up of a relationship presupposes, or demands, face-to-face contact in many instances. This suggests, merely, that recognition of new ways of doing business - especially via the Internet or other electronic or on-line means - must be recognised both in EU law and at national level in order to facilitate that process.
The most important aspects to consider are:
Cash Management and the euro
The real benefits of the single currency to European businesses and citizens are likely to be more demonstrable, in the first instance, to the corporate customers of banks. This is because the regulatory and logistical costs of transacting business will still be relatively high compared to the domestic market situations.
More efficient use of assets for European companies is needed in cash management. Currently, cash management structures are only normally set up for large corporations because of the costs involved in their establishment. However, as improvements in cross-border financial transactions are made for lower value transfers, as well as improvements in the legal and regulatory framework, these efficiencies will be available to smaller companies and private individuals.
Cross-border cash pooling, for example, would enable a customer to receive interest payments on the combined balance of their current accounts in different EU countries. In other words, if a company were to have a deficit in one country, but a credit in another country, it ought to be possible, notionally, to merge these balances (i.e. without making any transfers) and pay interest on the total net balance.
However, in order to set up these rather sophisticated structures, and to make it commercially plausible for corporate groups as well as private individuals or smaller companies to gain from the technical ability which banks now have, the following issues must be addressed:
The disparities between Member State laws relating to financial services is understandable, given the long divergent histories and traditions of the EU Member States. But the fact remains that the euro has been created in order to make the EU into one of the most efficient and competitive business environments in the world. Perhaps more importantly, it was created in order to complete the EU’s Single Market and deliver its benefits to EU citizens and businesses.
We have highlighted a number of the sources of inefficiency
in Europe’s financial services market, and a number of areas of the Single
Market which have not been addressed as effectively as they could have
been. Other areas such as investment services and securities regulations
have not been addressed, but are nonetheless equally important. Aside from
the long traditions of the legal and fiscal systems of the EU Member States,
and the difficulties in creating accords in some of these areas, we hope
the European Commission and the EU Member State governments give these
issues high priority. The euro should be delivered as it has been promised.
And we will assist in any way possible in order to achieve that.