Speech by Ed Balls to The Hong Kong General Chamber of Commerce and The British Chamber of Commerce, Hong Kong

Today Ed Balls gave a speech to the Hong Kong General Chamber of Commerce and the British Chamber of Commerce in Hong Kong in which he highlighted the shared financial traditions between Hong Kong and the UK and called for a strengthened partnership between the two leading global financial centres to grow and prosper together in the years to come.

The speech also included two key announcements on the London Stock Exchange and the implementation of European Directives in Britain.

Ed Balls announced that the Government is to legislate to enhance the Financial Services Authority’s (FSA) powers in relation to recognised bodies. The FSA will be given the power to veto rule changes proposed by recognised bodies that would be disproportionate.

He also announced that the Government would be implementing the Transparency Directive and that this would be done in a way that would lead to “smooth implementation and avoid unnecessary gold plating” of European legislation.

Notes for editors

1. There are now 160 Hong Kong companies investing in the UK. Hutchison Whampoa alone has assets worth £14.7 billion in the UK, employing more than 27,000 people. Major Chinese companies such as SINOPEC and Air China are listed both in London and Hong Kong stock exchanges, the latter raising £558 million in 2004. 2 Hong Kong companies are also listed on AIM, with a combined market capitalisation of £57 million.

2. See separate press notice 62/06 for details on the London Stock Exchange announcement.

3. The Transparency Directive establishes and updates rules on periodic financial reports and their publication, and disclosure of major shareholdings for issuers whose securities are admitted to trading on a regulated market in the EU. Its aim is to improve information flows to investors and the markets. The effects of Transparency Directive are to require all issuers of securities on a regulated market to:

publish more detailed annual financial reports within four months after the end of the financial year;
publish more detailed half-yearly financial reports; and
publish quarterly management statements.

4. Implementation of the Directive in the UK is being done by including provisions in the Companies Bill that enable the FSA to make detailed transparency rules.

5. The announcement in today’s speech means that companies will only need to apply these new financial reporting requirements to financial years beginning on or after the 20 January 2007. The Commission has encouraged other Member States to apply the Directive’s financial reporting requirements from an earlier date, and a number are reported to be planning to do so. Some of the earlier dates being discussed could have brought forward UK application by almost one year. Earlier application of the Directive’s financial reporting requirements would have imposed additional costs and burdens on companies traded on the LSE main market.

6. The Government believes that companies should have the maximum time after implementation in national law to adapt their systems to enable them to report under the new regime. Given the lead times involved, for practical purposes this means that new obligations should bite from the beginning of a financial reporting period, not part way through.

7. This approach is consistent with the approach that has been taken by the DTI with regard to EC directives touching on the content of annual accounts and reports (e.g. the Takeover Directive).

8. Companies will only have to follow the financial reporting requirements of the directive where their financial year begins on or after 20 January 2007, allowing a significant number of companies additional time to prepare for the new financial reporting obligations under the directive.

9. Copies of Ed Balls speech and a statement he has issued are available from the Treasury’s website at www.hm-treasury.gov.uk

10. Media enquiries should be addressed to the Treasury Press Office on 020 7270 5238.

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