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International Internet Magazine. Baltic States news & analytics Saturday, 08.08.2020, 12:11

Nasdaq Riga: European capital markets needs simpler regulation

BC, Riga, 07.07.2020.Print version
The regulation of the European Union's (EU) capital markets has to become simpler and more proportional to smaller enterprises, because currently the same requirements are applied to large corporations and small companies whose shares or bonds are listed on stock exchanges, Nasdaq Riga Board Chairperson Daiga Auzina-Melalksne, who participated in drawing up a report on the development of European capital markets, told LETA.

"One thing that our clients say, including those on the stock exchange and those who consider listing, as well as brokers, is that in recent years Europe has experienced a huge wave of regulation. One of the things we tried to underscore in the report is the need for a simple regulation. There are numerous requirements that are incomprehensible to the businesses and investors, which begs the question - why are we obliged to disclose this particular information and why in this particular format, because in the end, nobody benefits from it, there are just very many requirements," Auzina-Melalksne said. 

She indicated that experts have also agreed on the necessity for proportionality in requirements that are set to market players of various sizes. 

"While working on the part of the report in which I too was involved, we came to the conclusion that it is necessary to provide a definition of small and medium-sized enterprises (SME). Each EU member state has a different definition of SMEs. We came to the conclusion that SMEs are enterprises whose market capitalization is up to EUR 1 billion. In the Baltic states, for instance, there are probably no enterprises whose market capitalization is EUR 1 billion. So in the European context, all our enterprises are SMEs. This definition is important, because when deciding on requirements we should realize that what suits in the case of EUR 1 billion capitalization, won't do for enterprises with smaller capitalization," Auzina-Melalksne said.  

The Nasdaq Riga head also noted that small enterprises have to be provided with a growth ecosystem in the European capital markets, because quite often investors only take interest in the securities of large and widely-known companies. 

The authors of the report also indicate that the Covid-19 crisis highlighted the importance of the creation of a European capital markets union. 

"Businesses are in need of finance and currently they are largely reliant on bank loans. The banks have their own risks, so new instruments are needed and shares and bond issues are the option that can be used much more effectively. We are seeing those secondary offers in Europe, and stock markets have also recovered from the first Covid-19 wave, stock market indexes are almost back to where they were before the crisis. That means that investors are ready to invest and businesses must be given this opportunity," Auzina-Melalksne said.

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