John F. Mogg


In March 2000, European leaders met in Lisbon, Portugal, to consider the state of the European economy. While there had been economic growth in Europe in the 1990s, it had been consistently lower than that of the European Union's (“EU” or “Union”) main competitors, with unemployment levels remaining stubbornly high. Determined to blaze a new course in Europe, Heads of State and Government announced that “the Union has [today] set itself a new strategic goal for the next decade: to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable growth with more and better jobs and greater social cohesion.” These conclusions on economic reform contained a range of policies to stimulate key sectors of the European economy. Delivering this major goal would mean that the EU needed to equip itself with efficient, transparent, and above all, integrated European financial markets. To achieve this, European leaders called for the implementation of the European Commission's 1999 Financial Services Action Plan by 2005. This target was as ambitious as it was essential, recognizing the fundamental strategic importance of integrated European financial markets for the whole European economy. The economic benefits of improving companies' access to investment capital and encouraging investors in such an integrated market were seen as central to its achievement. Attention has focused on the importance of achieving higher levels of harmonization of regulations in securities markets. Although turnover on European stock exchanges reached record levels at the end of the 1990s, capital markets remained regulated by essentially outmoded EU legislation, some of which dates back two decades. This is one of the main reasons why levels of capitalization of European stock exchanges have remained considerably below those of the U.S. markets. And despite the 1992 deadline for completion of the EU's internal market and the fact that many Member States had modernized their market regulations in the 1990s, little had changed at the European level to create a true level playing field. Against this background, and in order to achieve the ambitious goal set at the Lisbon summit, in July 2000, the Council of Economic and Finance Ministers established a high level group of independent figures, the Committee of Wise Men, chaired by Baron Alexandre Lamfalussy, to develop fresh thinking on the reform of the regulatory process for securities. The European Institutions in the course of 2001 endorsed their proposals, and their application is now being extended from securities to all financial services sectors in the Union.