The European Commission is being urged to support a new system of pan-European retail financial products and services that would avoid harmonising the rules covering consumer finance in the European Union's 25 member states.

Eurofi, a Paris-based think tank backed by some of Europe's leading financial groups, is advocating a "26th regime" that would allow the creation of European financial products to compete alongside nationally approved financial offerings.

Eurofi, which includes Axa, Aviva, BNP-Paribas, Citicorp, Crédit Agricole, Deutsche Bank, Goldman Sachs and JP Morgan Chase among its supporters, has singled out retirement savings as a promising area in which the 26th regime could operate. Bankers also believe it could be used for long-term savings products.

According to Jacques de Larosière, the former Banque de France governor who is co-chairman of Eurofi, the 26th regime "constitutes a new regulatory approach".

It would require the definition of "simple but adequate rules" for creating the European financial products. Mr de Larosière said the regime would be offered "on an optional basis to market participants".

He claimed that it would encourage new pan-European products and services while bypassing the politically difficult process of harmonising 25 sets of national laws.

These would continue to apply to domestic financial products and services on sale in each of the EU member states.

Unveiling the concept to senior bankers and policymakers at a Eurofi conference in Luxembourg last week, Mr de Larosière said that the 26th regime should now be taken up by an expert group under the auspices of the commission.

Representing consumers of financial services, the banking and finance sectors and political groups, this "consultative and monitoring group on consumer financial services" should be chaired by a "wise man", with the aim of reporting at the end of this year.

Although the 26th regime has been billed by Eurofi as legally feasible and a way out of the log-jam caused by the difficulty of harmonising and integrating retail financial services in the EU, there would be difficult problems to overcome.

For example, a pan-European pension product would need equivalent tax treatment of retirement savings in the EU member states to be a success.

Nonetheless, Michel Pébereau, chairman of the European Banking Federation, said the proposal was "worth further exploring".

Adding comments to his prepared speech, Internal Market Commissioner Charlie McCreevy told the conference that he was "interested in exploring the 26th regime as a supplemental approach" to his efforts for integrating the EU's retail financial market.

It could "get round" some of the problems surrounding harmonisation, he said.

"It is clear that, with an integrated market, cross-border provision of retail services should become less and less the exception," Mr McCreevy said.

"We are experiencing more consumer mobility and we now have the common currency. With technological developments, such as the internet, consumer behaviour has changed."

While promising to be selective in his approach to retail financial integration, the commissioner said that "we should not shy away from new initiatives in the retail area that will make a real difference".

He added: "In principle, everyone should be able to buy financial products from wherever they want in Europe, while knowing that they are properly protected."

However, many conditions will have to be fulfilled before Europe's financial markets are fully integrated. One such condition is the creation of a single European payments area (SEPA), where, according to Mr McCreevy, the banking industry is moving forward too slowly.

The commissioner said the goal of Europe-wide payments infrastructure, standards and products by 2010 is likely to be missed. - (Financial Times Service)