The European Union has introduced a large number of rules in recent years in response to the financial crisis. Last September, the European Commission launched a public consultation, – or call for evidence – on those EU rules for financial services, to examine whether they are working as intended. The aim was to get feedback and empirical evidence on the benefits, unintended effects, consistency and coherences of EU financial services rules and their impact on the ability of the economy to finance itself and grow. Here, Juri Mara, financial economist at the European Commission, gives a snapshot of the main themes emerging from the initial analysis. 

Empirical evidence and concrete examples

The consultation was launched on 30 September 2015 and ran until the end of January 2016. In total the Commission received 288 responses from 20 Member States as well as from outside the EU.  The responses came both from the financial sector and from the wider economy. Twenty-nine public authorities sent their feedback, as did think tanks, academics, consumer organisations and trade unions.

'We were interested to understand not just the effect of individual pieces of legislation, but also the interconnections between all the different pieces of the regulatory jigsaw,' said Jonathan Hill, Commissioner for Financial Services, Financial Stability and Capital Markets Union.

Emerging themes

Initial analysis of the responses points to three main areas that need particular attention. First, a number of respondents argued that certain parts of EU legislation are not sufficiently proportionate and called for rules that take greater account of companies' size, business models and risk profiles.

Also, while a number of respondents emphasised the positive impact of EU rules on investor confidence and financial stability, others claimed that prudential rules – especially the Capital Requirements Regulation and Directive (CRR and CRD IV) - are reducing the amount of funding available for investment in the wider economy. The challenge is to make sure that the legislation in place continues to achieve its prudential requirements and at the same time support growth in Europe.

There were also a number of complaints about the burden imposed by the complexity of the rules and the quantity and duplication of reporting requirements. Businesses complained that they are reporting and disclosing the same information in different ways to comply with different pieces of legislation and that the volume of information they are being asked to provide is not always proportionate to risk.

What next?

The Commission published all the non-confidential responses in February and a summary feedback statement in May. Moreover a public hearing held on 17 May gave stakeholders the opportunity to further elaborate on their submissions and discuss the initial results of the consultation. The analysis will be completed this summer and a report will be prepared on how to follow up and feed the evidence received into the reviews of individual pieces of legislation.

'What makes this review urgent?  The lack of growth across Europe,' said Commissioner Hill, stressing that it is important 'to work for a regulatory framework that delivers financial stability but which also recognises that without risk, we will not have growth'.

Read more on the call for evidence