In this week’s edition, you will particularly read about how the EU institutions act to fight money laundering, promote sustainable maritime tourism, cap card payment fees, better regulate financial markets and boost growth and jobs creation.
MEPs in favour of a cap on card payment fees
Members of the European Parliament’s Economic and Monetary Affairs Committee voted in favour of a cap on card payment fees. In total, banks earn each year over €10 billion by charging retailers, who ultimately pass on the cost to the customers, for each of their card transactions. Until now, rules on card payment fees are determined by each national competition authority. This allows the often non-transparent fees to differ between Member States.
Now, the MEPs supported the Commission’s proposal to cap the credit card payment fees to 0.3% of the transaction value and the debit card ones to €0.07 or 0.2% of the transaction value (whichever is lower). The caps would apply both to domestic and cross-border transactions.
In addition, retailers would get the right to choose which cards they accept, “unless they are subject to the same interchange fee which, moreover, must comply with the cap set by these rules.” So, customers may have a smaller choice of cards for payment, but the counterpart should be lower prices.
The whole EP needs to adopt the text, but the schedule for a vote is not yet known.
More stringent anti-money laundering (AML) rules
Money laundering is the process in which money coming from an illegal activity is “transformed” into “clean money” through specific processes (e.g., fake loans, contracts or casino winnings, shell companies, etc.). The new rules adopted by the “Economic and Monetary Affairs” and the “Civil Liberties, Justice and Home Affairs” committees aim at improving the transparency and overview of financial transactions.
One of the main reforms which would be introduced is the end of anonymity of owners of companies and trusts. The MEPs amended the Commission’s proposal, suggesting the establishment of public central registers containing minimum information on beneficial owners (i.e., the people ultimately benefiting from the legal arrangement). To ensure the respect of privacy, the registers would be made “publicly available following prior identification of the person wishing to access the information through basic online registration.”
“The draft rules would apply to banks and financial institutions, and also to auditors, lawyers, accountants, notaries, tax advisors, asset managers, trusts and real estate agents.” Casinos and other gambling services would also be included in the scope of application of the AML directive. However, Member States would have a margin of appreciation to decide whether gambling activities which pose a low threat should be included or not.
Professionals covered by the directive have to identify their clients on the basis of reliable sources before establishing business relations. They must also check occasional transactions of a value higher than €15,000 (for payments in cash, the threshold would be €7,500 and for casinos it would be €2,000). The rules would be flexibly applied, taking into account the level of risk: more stringent controls where the risk of money laundering is higher; lowers controls or exclusion of activities with a low risk of money laundering.
Finally, the text highlights the risk posed by politically exposed persons because they are at higher risk of being corrupted. Heads of State, members of governments, legislators, and Supreme Court judges are included in this category.
Another text, the Transfer of Funds regulation, should complement the AML directive. Its purpose is “to improve the traceability of payers and payees and their assets.”
The whole EP is expected to vote on the text in March. If it supports the text, negotiations with the Council and the Commission should start during the second half of this year.
If you want to read more about the European Parliament’s activity each week, click here.
A new European strategy to promote coastal and maritime tourism
The coastal and maritime tourism industry employs around 3.2 million people across the EU and generates €183 billion in gross value (over a third of the maritime economy). In addition, statistics show that tourism is developing in the EU (2.6 billion nights in 2013). The importance and potential of tourism for European coastal areas means this resource shall be adequately and sustainably promoted.
Therefore, on last Thursday, the Commission presented a strategy to promote coastal and maritime tourism. This strategy consists in 14 EU actions to be complemented with national, regional and private actions. In particular, the EU suggests developing skills and innovation, promoting ecotourism, facilitating access to funding opportunities for investment purposes, resorting more often to public-private partnerships, and improving the cooperation “between all coastal tourism stakeholders” across the EU.
These multiple actions aim at addressing some of the main challenges faced by the tourism industry, in particular “gaps in data and knowledge, volatile demand, high seasonality, a lack of adequate skills and innovation, and difficulties accessing financing.” Attracting investment and ensuring a sustainable development of tourism are expected to make the sector more competitive also at global level.
A detailed Q&A is available here.
A report highlights the need for European industrial renaissance
The Commission published on last Monday a report showing that, overall, most industrial sectors in the EU had not yet fully recovered from the financial and economic crisis. However, there are important disparities between sectors and Member States. So, many central European Member States recovered quicker and have already exceeded their pre-crisis output. Regarding the sector differences, high tech, pharmaceuticals and staple goods have resisted much better than, e.g., construction, manufacturing and mining.
Summarised, the findings of the report are as follows:
- Productivity gains are not evenly spread across sectors (they are stronger in high tech industries).
- Employment grows in services while it declines in manufacturing. This comes from a growing demand for services, which are more labour intensive (and have lower productivity growth) than manufacturing.
- Linking manufacturing and services results in mutual benefits. The report shows manufacturing firms “are increasingly using services as part of their business processes” (e.g., for the sale of products, accounting, etc.). This has “a stimulus effect on innovation and qualitative upgrading for service activities.”
- Global value chains are increasingly important. EU firms need to strengthen their participation in cross-border networks to “increase their competitiveness and ensure access to global markets in more favourable competitive conditions.”
- There is a lack of foreign investment in manufacturing. So, slightly older statistics showed that the EU Foreign Direct Investments (FDI) inflows in 2010 were a third of their level in 2007, mainly because intra-EU FDIs had sharply dropped. Foreign FDIs currently focus too much on finance and real estate.
The full report is available here.
If you want to know more about the Commission’s action, click here.
Council / European Council
The Council confirms the agreement with the EP about the regulation of markets in financial instruments (MiFID)
The Permanent Representatives Committee expressed, in the name of the Council, its support to the compromise reached with the EP about the reforms to the MiFID rules. So, a new regulation will be adopted to improve transparency (proportionally to the risk) and competition of trading activities: there will be less exemptions from disclosure requirements; all financial instruments shall access to trading venues and central counterparties; and derivatives will have to be traded on organised venues (rather than in shadowy transactions). As to the reformed directive, it will change rules on “requirements for providers of investment services and on investor protection.” Furthermore, its scope will be extended to also cover organised trading facilities (OTF) where many standardised derivative contracts are being traded. So, the three types of regulated trading venues will be regulated markets, multilateral trading facilities (MTF) and OTF. In addition, high-frequency trading will be limited. Regulation of commodity trading will become more stringent to prevent market abuse.
In short, the reform of the MiFID rules aims at better protecting investors, increasing competition (to improve the quality of services offered by banks, investments firms and trading facilities) and at tackling the lack of transparency of some parts of the financial system.
The Council conclusions on the 2014 European Semester
The European Semester is an innovation introduced at the end of 2010: each year, during the first semester, the Commission analyses the economic, fiscal and structural reforms of each Member State and makes recommendations which are then endorsed by the Council. After that (mostly during the second half of the year), the Commission monitors the national implementation of the suggested measures.
The Council welcomed the “encouraging signs of economic recovery” (which nevertheless “remains fragile”) and the “significant progress” made by the EU and the Member States. It also underlined “the need to preserve the competitiveness of the EU economies vis-à-vis the rest of the world.” The 5 priorities agreed on for 2014 are the same as in 2013: “pursuing a growth-friendly fiscal consolidation”; “ensuring the long-term sustainability of public finances”; “restoring lending to the economy”; “promoting sustainable and inclusive growth and jobs and competitiveness”; and “tackling the social consequences of the crisis”.
The Council noted that EU and Eurozone aggregate debt levels should decrease from 2015 onwards. This will enable Member States to reduce the aggregate planned fiscal effort in 2014 in order to promote the so-called “growth-friendly consolidation”. Furthermore, the Council insisted that “more attention should be paid to the quality and composition of fiscal adjustment as well as to the influence of fiscal policy on growth.” Moreover, the Council reiterated its commitment to establishing a “fully-fledged Banking Union” which, together with the upcoming stress tests, should guarantee the financial stability and the solidity of the banking system, therefore incentivising banks to lend more to businesses, especially SMEs. The Council also recalled the existence of “specific (legislative and structural funds) measures” to support SMEs wanting to access to finance. To promote growth and job creations, the Council insisted on the importance of structural reforms and on a more coordinated approach to reforms. Other measures to unlock economic potential are stimulating research and innovation, completing the Single Market (in particular by better opening the services’ and network industries’ markets), simplifying the business environment by removing unnecessary regulation (REFIT initiative) and making labour markets “more inclusive, flexible and dynamic.”