Strengthening financial stability

Published 10-11-2010
Excessive risk taking in the financial sector, especially in banks and financial companies, has contributed to bringing down these financial companies and created systemic problems at a national and global level. These problems have spread to the rest of the economy with high costs for society.

Although not the main reason for the global financial crisis of 2007 and 2008, there is widespread consensus that inappropriate remuneration practices in the financial sector contributed to fostering excessive risk taking, thereby contributing to considerable losses for major financial companies.

Remuneration practice has, in large parts of the financial sector, been inconsistent with efficient and sound risk management. Last year, the European Commission adopted a recommendation to ensure better handling of this practice. At its meeting on 10 November 2010, the EEA Joint Committee decided to incorporate the recommendation into the EEA Agreement.

Several EU directives in the financial services sector were also taken into the Agreement at the meeting. One of these deals with undertakings for collective investment in transferable securities (UCITS). The aim is to modernise the regulatory framework applicable to these financial products in order to offer investors a greater choice of product at lower cost through better integration of the Internal Market, as well as providing investors with suitable protection through high-quality information and more efficient supervision.

An amendment of the EU Directive on Electronic Money, which among other things seeks to make it easier to benefit from electronic payment methods, was also extended to the EEA EFTA States by a decision of the EEA Joint Committee.

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