Financial Services: European Officials Spark Fresh Debate On Tax Harmonisation

Imperfect solution, say French.Attending the two-day forum, entitled Eurofi 2000, Europe's central bankers expressed doubts over the information-exchange plan to be used as an alternative to beleaguered plans to create a 20% withholding tax for savers who keep money in banks in other EU countries outside their own. France's Finance Minister, Laurent Fabius, has already described the compromise package, confirmed in an eleventh-hour decision at the Feira Summit in June, as an "imperfect solution", but the choice had been between it - or the old one on the table from long before. The European Central Bank President Wim Duisenberg made little secret of the fact that he supported the ill-conceived plan of savings tax harmonisation though, which he believed would sooner or later be forced on the European authorities by the markets themselves. However, all were agreed that despite the reality of fragmented tax regimes and de-centralised banking and securities regulation, any plans that were to be implemented should not come with the result of creating a central EU Regulator for Europe's stock markets.Centralisation not needed?On 15 September, the group of central bankers, supported by France's Finance Minister, Laurent Fabius, said that a single pan-European bourse was not needed right now. The comments come just days after a second group of experts, headed by French banking specialist and former EMI President Alexandre Lamfalussy, called for the Commission to substantially speed up its own Financial Services Action Plan - which has a 2005 deadline for implementation. Industry experts have voiced concern that Mr Lamfalussy's fellow "Wise Men" - six in total - will push for the creation of a central EU Regulator to govern Europe's bourses (see European Report No 2526). However, speaking at the Eurofi 2000 conference on European banking and finance in Paris, both European Central Bank President Wim Duisenberg and Jean-Francois Theodore, Chairman of Paris stock-exchange operator ParisBourse, said they had doubts over the idea of creating one single European exchange in the short term. "Centralisation in only one market place is not necessarily needed", declared Wim Duisenberg, adding that he believes in a network of markets more than in a single market. Mr Theodore said he believed in "unity via competition" and that a single market would offer additional liquidity, and cut costs. Citing the American example, Mr Duisenberg said: "There is consolidation going on but it will take many more years until we achieve a situation comparable to the US". Delegates at the conference were generally suspicious of the idea of centralised authorities for the banking and financial sector. "I am very much against a unique centre of banking authority", said Banque de France Governor Jean-Claude Trichet. Michel Prada, Chairman of French stock market watchdog Commission des Operations de Bourse, said the speed of procedures would not be enhanced by the creation of an additional bureaucratic level.Europe's regulators - toothless tigers?Britain's financial services watchdog joined in the general chorus of disdain over the poor structure of Europe's securities and banking regulators, saying that Europe needed a stronger network to make them more effective and to speed up the legislative process in Europe. "We need to strengthen the network of European regulators to make them more effective and, indeed, to give it more teeth. These two points are, in practice, closely linked", Howard Davies, Chairman of the Financial Services Authority, said at the Eurofi 2000 conference. Mr Davies said key short-term priorities were to accelerate the legal framework in Europe and to strengthen the network of European regulators. He told delegates that the single market in financial services was not delivering its full potential benefits for capital raisers or for consumers of financial services. "Markets remain fragmented, and there are still many internal barriers, both informal and formal", he said. On Europe's law-making process, Mr Davies also had a bee in his bonnet: "It is absurd that, even with a fair wind, a new Directive scarcely ever takes less than three years between inception and delivery. This lengthy gestation period is not matched anywhere else in the animal kingdom", he fumed.

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