I have been asked on a number of occasions how the current plethora of financial services directives from the EU will impact Gibraltar. Indeed over the period 2004 2008 the financial services industry in Gibraltar faces, like its counterparts in other EU jurisdictions, the task of implementing more than 14 major EU legislative measures.

At least eight of these measures have already completed the primary legislative process in the EU. These include directives such as:

· Distance Marketing;

· Insurance Mediation;

Each of these will require financial institutions across Europe to make substantial efforts to prepare for implementation over the next 12 months: they will need to install new IT systems; train staff; change managerial processes; and in many instances bring in external consultants – all the normal steps needed to translate a legislative ambition into a practicality. We will, of course, do all we can in Gibraltar to help the firms we regulate, by giving as much certainty as to both the content and the timing of the FSC’s implementation work.

It is important to point out firstly that we are not the masters of the process. The directives themselves dictate the implementation timetable. Furthermore, some directives require detailed, so called level 2 implementing measures under the Lamfalussy process. These can only be finalised once the primary text has been agreed and therefore eat into the implementation timetable. All the directives will require action by the Government of Gibraltar. The FSC will then have to implement the new rules the legislation imposes.

Our position in Gibraltar is similar to that of the Financial Services Authority (FSA) in the UK, whose Chairman recently spoke on this issue. The FSA in the UK estimate that these adopted measures will cumulatively place a very heavy burden of implementation on companies across Europe in 2004. The impact of the various directives on firms’ resources will obviously differ but the cumulative effect will be to place a demand for implementation resources on authorised firms starting in 2004 which will grow very rapidly. FSA estimates suggest a substantial respite in 2005.

These are the directives whose primary legislative course has been concluded. There are more major initiatives in the pipeline. These include the Transparency Directive, the Investment Services Directive, the Reinsurance Directive, the Risk Based Capital Directive and Insurance Solvency II. Again, the impact of these on demand for implementation resources is not the same.

Financial Services Commission

The FSC in Gibraltar has little opportunity to influence the course of these events.

Nevertheless, as the FSA in the UK has stated, we must ensure that we do not overengineer implementation and careful consideration will be given before adding further regulatory burdens to the already heavy burdens derived from the EU directives.

As we are required by statute to match the UK in terms of our supervisory practices I take heart from the pragmatic stance the UK is taking, in particular their push for proportionality and cost benefit analysis. This requires the regulator, the proposer of legislation and those affected to identify, with increasing clarity as the proposal advances, what steps will be needed to introduce the proposal; the scale and timing of implementation are first defined and then costed.