FINANCIAL SERVICES: EUROPEAN MORTGAGE BANKS REFLECT ON CURRENT LEGISLATIVE MOVES.

The European Mortgage Federation is monitoring closely the ensemble of legislative developments that currently herald changes in the regulatory environment for financial services. In particular, it is watching moves on capital adequacy, e-commerce, and the Brussels Convention. The predominant role of the Basle Committee in capital adequacy discussions causes some concern among the banks. And overall, they are arguing for the distinct legislative initiatives affecting the sector to be seen as a whole rather than just as separate elements.

On capital adequacy, mortgage banks are particularly concerned to argue for the most favourable treatment possible of commercial mortgage lending in the changes that will be needed to EU rules to bring European practice into line with the revised Basle Agreement. Recent discussions in the European Parliament and with the Commission have focused on the 50% weighting for commercial mortgage lending. As the European Mortgage Federation points out, "Supervisors world-wide tend to adopt a cautious approach with respect to commercial real estate and are always keen to gather and obtain the latest data on this topic so as to be able to identify the true risk". MEP Christopher Huhne (ELDR/UK) is drafting an own-initiative report on this issue for the Parliament's Committee on Economic and Monetary Affairs, and the two main political groups, the Christian Democrats and the Socialists, are also expected to send Internal Market Commissioner Frits Bolkestein a letter to stress the EP's main concerns.

One of the challenges seen by the mortgage banks is how the European Parliament is to play a more active role in a process that, per se, does not imply direct participation of EU institutions, even though the European Commission does have observer status in Basle. The banks feel that since the forthcoming EU legislation will have to be consistent with the principles agreed in Basle, the risk is that the EU will not be left much room for modelling its...