EU takes first steps towards capital markets union

Among the key focuses of the proposal announced today is a move to develop the European securities market. They also say there is too much emphasis in the plan on promoting riskier investments such as venture capital.

The Bank of England responded positively in a statement, saying that, “We consider this Action Plan to be a further important step in moving closer to a single, integrated capital market in the European Union, although we are yet to review the Commission’s detailed proposals”. The Commission is proposing the creation of a new classification for infrastructure as an asset class via an amendment to the Solvency II Delegated Act.

The Capital Markets Union will be “a central part of the Commission’s overall effort to encourage jobs and growth”, said the EU financial services chief Jonathan Hill, presenting the plan in Brussels at midday Wednesday.

While the European Union economy is roughly the same size as that of the USA, U.S. capital markets dwarf those in Europe.

A few elements of the plan, such as new collateral requirements for insurers to invest in infrastructure, could be in place as soon as the end of this year if there are no objections from national leaders or the European Parliament.

Connecting financing to the real economy: the CMU is a classic single market project for the benefit of all 28 Member States. However, this must be tackled with member states’ commitment and fiscal incentives must support innovation and apply to both investment and capital gains.

The scheme will make it easier for companies to access funding, reducing dependency on banks and making it easier for borrowers to shop around across Europe.

Deepening financial integration and increasing competition: the CMU should lead to more cross-border risk-sharing and more liquid markets which will deepen financial integration, lower costs and increase European competitiveness.

Banks are still under a state of fix, as they try to meet new capital ratio standards.

Thirty-four funds have registered for the label dubbed EuVECA. The consultation runs until 6 January 2016. “However, we should make it clear that the goal is not only to boost market activities but also to diversify sources of financing, in order to boost investment and growth”.

“If you create a harmonized market someone will start using it, and the others will get jealous and start to follow, and it will change the culture”, said the Finn.

The Commission is today launching a “call for evidence” to gather feedback and gauge the cumulative impact and interaction of current financial rules. The consultationwhich runs until 6th January 2016, will also seek views on the use of covered bond structures on the back of SME loans. Through the consultation, the Commission is seeking to identify possible inconsistencies, incoherence and gaps in financial rules, as well as unnecessary regulatory burdens and factors negatively affecting long-term investment and growth.