DELEGATION OF THE EUROPEAN COMMISSION PRESS BRIEFING WITH
CHARLIE MCCREEVY EU COMMISSIONER FOR INTERNAL MARKET AND SERVICES

THURSDAY, APRIL 21, 2005
EU COMMISSION DELEGATION
WASHINGTON, DC

ANTHONY GOOCH: (In progress) – new commissioner – not so new now – but commissioner for Internal Market and Services. Those of you who saw The Wall Street Journal early this week will have seen that he set up some interesting positions in advance of his visit, but that fortunately – well, you’ll be disappointed to see that he bears no resemblance whatsoever to the Simpson Family. (Scattered laughter.)

This is not the first time that he is doing EU business in Washington. This time last year during the Irish presidency, when he was Irish finance minister, he signed the EU-U.S. Container Security Agreement with former Homeland Security Secretary Tom Ridge, and was obviously here attending and representing the EU at the spring meetings of the World Bank and the IMF.

We are very fortunate that he is able to join us today after having had such a heavy week, starting in New York where he met with Paul Volcker and Treasury Secretary John Snow and also addressed a major conference on the euro. And here in Washington in the past few days his program has included meetings with the Federal Reserve, Alan Greenspan, Vice Chairman Roger Ferguson, and also business representatives at an organized – a roundtable organized by the European-American Business Council.

With that, Commissioner, I would invite you to give all of the details on how things have gone.

CHARLIE MCCREEVY: Okay, thank you very, very, much. This is my first visit to the United States as the EU commissioner. As has been said, I have had a wide range of meeting in New York and Washington – representatives of the U.S. government, the U.S. Congress, U.S. regulators in the United States and the EU business community. And the details are in the press release.

The purpose of my visit is to promote the regulatory dialogue between the European Union and the United States on financial services and the competency (?) issues. The EU and the U.S. have strong mutual interest in promoting better regulation between ourselves. We are each other’s most important trading partner. A large number of United States companies operate in Europe and vice versa. When we draw up legislation, we need to take the impact on each other into account. In this context I was particularly pleased with the positive response I received from SEC Chairman Donaldson on the issue on determining equivalence between international reporting standards and the U.S. gap.

We announced yesterday a roadmap which set out with the steps to be followed by the SEC so that the need for companies using IFRS standards that are reconciled to the U.S. gap might be eliminated, possibly as soon as 2007 but no later than 2009. As a former practicing accountant, I know only too well the costs faced by companies who have to file separate accounts in the EU and the United States. Since the marketplace is global, we ideally need regulation and standards that are global as well. And so, yes, there is agreement with the SEC as an important step in this direction.

This agreement is not a sign of the health of the EU-U.S. financial markets’ regulatory dialogue, which has already proven its worth in resolving earlier tensions over Sarbanes-Oxley and the EU Financial Conglomerates Directive. I also discussed the issue of the rules on the deregistration of foreign companies with Chairman Donaldson. I emphasized that change in this area would make the United States market much more attractive to European companies considering possible IPOs in the United States. I received very clear indications of the priority and considered the approach with which this issue is now being treated. And I’m confident that we can expect prompt success of resolution in the interest of both sides.

We also discussed the treatment of international standard-setting bodies. We’re fundamentally agreed of the importance of the independence of such bodies and of the high quality of professionals needed to run them. We expect to work together closely on this issue. I also met with U.S. insurance commissioners Diane Koken, Al Iuppa and Howard Mills to discuss how to make progress on the issue of the collateralization requirements set by the United States state insurance regulators for European re-insurers. I expressed our concerns on this issue and recommended that we use the opportunity currently offered by negotiations in Europe on the reinsurance directive – the forthcoming proposal on Solvency 2 to address each other’s concerns. I am happy to say that they shared my view of the benefits to both economies for the resolution of this issue and they need to work with us and with the European insurance regulators to make progress.

As well as Treasury Security John Snow and PCAOB Chairman Bill McDonald, I want to pay tribute to the leadership shown by FCC Chairman William Donaldson, all of whom I had fruitful meetings with this week. The strong message received from my contacts in New York and here and Washington is the willingness to engage constructively to tackle regulatory obstacles to business. I committed to doing this in the European Union and I am delighted my counterparts in the United States share this view. I expect to be visiting Washington many times in the years ahead. I look forward to deepening this cooperation.

Thank you very much.

MR. GOOCH: We now have a certain amount of time for questions and answers. Although Commissioner McCreevy may know some of you from previous visits, if you would be kind enough to remind him of your name and your affiliation before you ask your question I think that will be useful. Thank you.

Q: I’m Kevin – (inaudible) – from Reuters. The FASB and the IASB have been working with the EU on reducing accounting disparities between GAP (ph) and various European systems. How does this agreement, this roadmap that you – figure into that process?

MR. MCCREEVY: Well, what those two bodies are doing are trying to arrive at internationally accepted accounting standards. The IASB has been the body which Europe is working with. The FASB is the U.S. organization and their work will continue. But what I agreed with Chairman Donaldson is that the requirement in this side to recast accounts that are now from the EU are going to be in the – (inaudible) – IFRS, and that we set out a roadmap on this side with a time scale as to when this equivalence or convergence can be achieved.

In Europe, on the 1st of January of this year, all EU-listed companies have to produce their accounts onto the standards of the IFRS. And in another few months, I and the commission will be in a position to – we must make a decision on the accounts of U.S. companies that are listed in the EU as to their equivalence to IFRS. We hope to do that – that will be done this year.

So in our discussions on this side of the Atlantic, we are anxious to develop a timeframe under which this can be done here. And in the statement from yesterday, that set out what that roadmap is going to be. So these things will work in tandem.

Q: How do you think the outcome of your decision about whether GAP companies have to reconcile their efforts with figures based on the achievement – the roadmap that you achieved here?

MR. MCCREEVY: Well, I –

Q: Are the two related?

MR. MCCREEVY: Well, in the sense that we – the objective of having globalized international accounting standards is the objective still we’re fighting for and continuing, so as that work progresses it will lead to that, hopefully, end outcome at some period of time. But the immediacy is to be with this problem – EU companies that are listed here in the United States and the timetable is set forth in the statements of myself and Commissioner Donaldson yesterday.

Q: Chris – (inaudible) – from Tax Analyst. Did Chairman Donaldson give you an idea of a timeline on the deregistration initiative?

MR. MCCREEVY: Well, we have had some progress with the SEC on the deregistration some months ago. Chairman Donaldson did, when he came to Europe about a couple of months ago, say that they were willing to progress this particular issue. In our discussions yesterday, hopefully in a short period of time the SEC will bring forward a proposal in this particular regard. I would expect it to be later this year but not much later this year.

Q: (Inaudible.) How big a problem is this problem here? (Inaudible.) How many countries are there willing?

MR. MCCREEVY: Well, this is the deregistration question?

Q: Yes.

MR. MCCREEVY: Yes. Well, I understand that there are approximately, I think, 300 or so EU companies listed in the United States, and the deregistration rules here in the United States make it very difficult to deregister. There is a rule here – the rule – the rule is the rule about the 300 shareholders, and it is very difficult to prove one way or the other. So therefore I think it is in the interest of – it is certainly in the interest of EU companies that if they want to avail of the deregistration, then they should be able to so do.

Now, I am not certain as to how many EU companies would want to do this if the rule is somewhat mitigated or changed a lot, but at least the option will be there. Also there is also the question that those that might be willing to come and list in the United States are possibly deterred from so doing because they say if we get in and get listed and then change our minds, how do we retreat from it, and you don’t actually know the number of those that you’re putting off. So hopefully later this year we’ll have the matter resolved satisfactorily.

Q: Can you give us – sorry, Cheryl – (inaudible) – Inside US Trade. Can you give us a sense of where the services – the Internal Services Directive is right now, and also how it would affect the services offer at the WTO Doha talks?

MR. MCCREEVY: The question relates to our services directive that we have currently before the European Parliament and the Council of Ministers. The – (unintelligible) – directive was published in January 2004 and people here who have followed the debate in Europe will be aware it has run into pretty heavy political weather – (chuckles) – in the past 16 months or so, particularly over the past six, and has featured in the deliberations of some member states quite forcefully in recent times.

In the procedure that we adopted in the European Union, once we published that particular document, it then is a matter for the European Parliament and the Council of Ministers to progress it. It is currently before the European Parliament and they then are considering it. That rapporteur has recently given a report on two parts of this. That will have to be discussed in a particular committee of the European Parliament. And probably then in September or October there will be what is called a forced reading at the parliament with amendments.

So we have – I think then, and so does President Borroso, that we are willing to consider amendments in some areas, but we have to leave this now, rightly, in the hands of the European Parliament and we just think that we are willing to work with them. What we hope to achieve at the end process is to have a worthwhile Services Directive. What I mean worthwhile is that something that will unleash the economic potential in the services area in Europe. As you possibly are aware, 70 percent of the EU’s GDP comes from services. So if you want to do something to increase the growth rates of the EU, it is in the services area that we must concentrate upon. And that was the raison d’etat behind putting forward the Services Directive proposal.

But having said that, we are in the political process; there are always compromises that have to be reached, but hopefully we’ll be able to reach a broad consensus around a number of areas that will bring the majority with us in the European Parliament and in the Council of Ministers. But at the moment that is where it is; it is in their hands.

Q: And how does affect the services offers and the WTO – (inaudible)?

MR. MCCREEVY: Well, it wouldn’t be interlinked. The services directive is to open up the market throughout the 25 member states of the European Union; that is what the Services Directive is about. The proposal is being put forward that the Doha round has to do with services internationally. But what we should do in Europe is open up the markets in Europe in order to unleash the economic potential that’s undoubtedly there. But may I just repeat, there are some genuine concerns expressed by parliamentarians and some member states as to what the possible outcomes might be with some of the proposals in the initially drafted directive. And we hopefully will be able to take those on board and reach a compromise, or compromises.

Q: Gary Urte (ph) with BNA – to sort of a follow up to Cheryl’s question. I don’t know is this is what she was getting at but would adoption of the Services Directive enable the EU to go further in the Doha Round in terms of offers to the – (inaudible)?

MR. MCCREEVY: I wouldn’t say there is any interlinkage at all in that regard. It’s to try to open up the – what the Services Directive is proposing to do is to open up the services cross-border within Europe. See, in Europe there are – probably in the United States there are some – (unintelligible) – as well, but it is difficult to provide cross-border service in Europe because different member states have different rules and administer the rules and all kinds of regulation procedures, and so therefore it is stifling the potential that is there. So to open up our own markets is the purpose of the Services Directive and it should not be interlinked with the Doha Round.

Q: Hi. Stephanie Kirchgaessner, the Financial Times. In the statement yesterday from Chairman Donaldson, he discussed that achieving the goal of this roadmap would require a detailed analysis of the faithfulness and consistency of the application, interpretation of IFRS across companies and jurisdictions. Can you just give us a little bit more detail about what company is doing this analysis and what –

MR. MCCREEVY: Well, Chairman Donaldson of the FCC would naturally be concerned, from the perspective of the United States, that there is uniformity of the application of the IFRS standards across the 25 member states. That would be very legitimate concern for the United States and the regulatory authority to have.

Now, your question really applies, how are we going to ensure this occurs the 25 member states of Europe? And we have a body in place on the CESR, spelled C-E-S-R, not the man who was on the Earth 2000 years or so. It stands for – it’s the regulators – the regulatory body based in Paris. We have asked that CESR to – they’re the people – they are our expert technicians. I hope I am not insulting them by saying that; those are all very high-powered people. They will be the group that will be monitoring all of this and they will be putting procedures in place as to how this will be monitored across the member states of the 25.

So that is what we will be doing internally in Europe. There will be a subgroup of the CESR body who will be setting things in place to ensure that it occurs throughout Europe, because we would want to know ourselves – irrespective of what was requested here in the United States, we would want to know ourselves in Europe, in the commission, that the IFRS standards that we have made compulsory from the 1st of January this year, that they are being applied with all of the list of companies throughout the EU. So we have to make sure that we have procedures in place for our information, that this is to be done consistently, and the body which will use will be CESR. And that is going to be our procedures.

Q: So does that mean a detailed audit of a handful of companies?

MR. MCCREEVY: No, I think what CESR will bringing forward, their own proposal in this regard and working out their own methodologies as to how this will be done, in order to satisfy also in the commission that it is being applied consistently among the 25 member states.

Q: Sorry, just one last question. Is this the first sort of step in the roadmap then?

(Cross talk.)

MR. MCRREVY: No, well, Mr. Donaldson just made that point from his statement. That is his statement. I’m just explaining what we were doing, what we are going to do on our side. It’s not what – the United States SEC will be in the privileged position that they will get, in the second half of 2006, the accounts of the EU companies listed in the United States here. That will have a calendar year 2005. I understand the regulation – (inaudible) – six months at the end of your accounting period. So they will be able to see for those ones the number of companies that are listed here – the EU companies listed here in the United States. They will be able to see it firsthand that that is occurring.

But for us in Europe there will be thousands of thousands of – it’s the companies across all of the 25 member states. We’ll want to be seeing ourselves that this is being applied efficiently well for those companies that don’t have anything to do with the United States or anywhere else, see if they’ve been applied effectively – (unintelligible) – the methodology that we will be using.

Q: Kevin Carmichael from Bloomberg. What more can be done to ease the burdens of Sarbanes-Oxley on European companies?

MR. MCCREEVY: Well, the SEC have announced a kind of a time period in which the EU companies listed here have to comply with it. I think Sarbanes-Oxley has – as a former accountant a long time ago when I was at – (unintelligible) – but I think the Sarbanes-Oxley Act grew out of the scandals of which we know about, with scandals on both sides of the Atlantic Ocean, so I think it was necessary for the legislature to make some proposals, and the Sarbanes-Oxley proposals are what apply on this side of the Atlantic.

I think as experience comes in all of this area, I think regulators on both sides of the Atlantic will learn from it and make some maybe adjustments of – (unintelligible) – but in the United States that is strictly a matter for the United States legislature; it is not a matter for an EU commissioner. So it’s for the SEC to make their own decisions here, the same as we do in Europe and are within the – (unintelligible) – of our jurisdiction.

Q: I’m Chuck Nattinger (ph) with Tax Analyst. When you speak about open financial markets, can you explain how significant tax obstacles are and do you have any oversight over tax issues within the European Union?

MR. MCCREEVY: Well, in the 25-member EU Commission, tax is now a matter for my colleague Mr. Kovacs, so I don’t have responsibility in that particular area. But even in the European Union there are legal and taxation obstacles in many areas but taxation remains the reserve of member states, and only decisions can be made by the European Union on taxation if they’re done by unanimity of the whole 25. That is the position in the existing treaties and it is – (unintelligible) – in the proposed new constitution as well.

Q: If I can just follow up on that. This week there was a meeting of a body that was specifically studying the tax obstacles to cross-border clearing and settlement of securities transactions among the 25 member states. So at least in the area of securities they are looking at tax obstacles to open the financial market. Is that a model for the financial markets more broadly or is that only concerning securities?

MR. MCCREEVY: Well, it’s one of the issues that we raised on the question of clearing and settlement, and that group is looking at those particular obstacles and will be outlining how they see it. But I would like to extrapolate from that a broader interpretation regarding taxation across the European Union because I know from my experience as a finance minister of Ireland how delicate questions relating to taxation when they come up in the context among member states.

Q: One of the difficulties that came out of Sarbanes-Oxley was the extent of the PCAOB’s reach over European accounting regulators; not only that but Chairman McDonough. Are you satisfied with the progress toward the PCAOB’s achieving these bilateral agreements with different national accounting regulators about how much authority PCAOB has in each EU nation?

MR. MCCREEVY: Well, the PCAOB is what regulates the business here in Europe that we have to proceed in our own methodology, but I’m very satisfied as to the level of cooperation between ourselves and Chairman McDonough. He takes a very broad view of these areas but he strictly looks after his patch, which is the United States.

I believe in the years to come we hopefully – it will be beyond my time as commissioner, I’m sure, but that we will be able to – as I was speaking earlier, we internationally accept the standards all around and we’ll all be happy, as I said in the article which my colleague referred to that was – (unintelligible) – that we’ll be able to be happy with each other’s regulatory systems and accounting systems, auditing systems, or whatever, and that we’d have mutual trust, but that takes a period of time. You have to set the processes of trade before that can occur. And that is a goal that I think is worth keeping in our minds at all times.

Q: Did you get the impression from McDonough that even one of these promised agreements has been completed? I mean, has the PCAOB and the U.K., for instance, finished their discussions on how the PCAOB is going to interact with the –

MR. MCCREEVY: Well, what we’ve been trying to do – we all have discussed for the past number of months, among ourselves in Europe, as to what the governance arrangements will be for some of these international bodies, and we have to bear in mind that what some member states and what some parliamentarians in Europe want is this transparency and how these things are going to apply. So we’re working on it.

Q: Siobahn Hughes at Dow Jones Newswires. I wonder if you could characterize the meetings you’ve had with some of the lawmakers in both the Senate and the House side. And just out of curiosity, I’m wondering how come you chose to meet with Deborah Price instead of Mike Oxley, who would have been the logical choice on the House side.

MR. MCCREEVY: I think there was a reason that we couldn’t meet Mr. Oxley, and Chris (?) can explain that. That’s why we met with –

MR. : We tried – we moved hell and high water and somehow we just couldn’t get the chairman’s schedules to fit. As you’ve been aware, he’s been holding a fairly intensive schedule of hearings with Secretary Snow, with Chairman Donaldson and with Chairman McDonough, and there was just simply no way. But both Commissioner McCreevy and Chairman Oxley dearly wanted to make it work and sometimes these things, you just can’t get them to – can’t get these things to work.

MS. : (Off mike.) (Laughter.)

MR. : And they’ll see each other regularly.

MR. : And he spoke at the conference of the commission in New York.

MR. MCCREEVY: Yes.

MR. GOOCH: He’s getting it from all sides. (Laughter.)

Did you want to comment on the broader question of the legislators that you have met?

MR. MCCREEVY: Well, I’ve been on Capitol Hill once – actually only once previously as an Irish minister – I think as an Irish minister on trade I was there a long time ago, and I’ve been a politician myself for over 27 years. I find interaction with politicians an interesting part of my job. (Laughter.) It’s what I’ve done for all of my – nearly all of my working life. I don’t find it ever a strain. Okay.

MR. GOOCH: Well, thank you, Commissioner, for making the time. Thank you for coming along today.

MR. MCCREEVY: Thank you very much.

MR. GOOCH: Hope to see you soon.

MR. MCCREEVY: Thank you.