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Thursday, 28.03.2024, 14:06
European Capital Market Union: new perspectives
The CMU’s initial idea is to strengthen the flow of private
capital to growing businesses, to infrastructure investment, to sustainable energy
transition and other vital projects to increase jobs and growth. Removing
obstacles to the free flow of capital across borders will strengthen Economic
and Monetary Union by supporting economic convergence and helping to cushion
economic shocks in the euro area and beyond, making the European economy more
resilient.
In September 2015, the Commission adopted an Action Plan on
Building a Capital Markets Union (CMU), which set out a programme of actions to
establish the European-wide integrated capital market by 2019.
CMU will make a stronger capital markets, which is better
connected to productive investment, while creating better investment
opportunities for pension funds, institutional and retail investors saving for
the long-term and retirement.
In January 2017,
the Commission launched a consultation on the CMU mid-term review, creating an
opportunity for stakeholders to provide targeted input to complement and
advance actions put forward in the CMU Action Plan.
The Action Plan is built on four key principles:
- connecting financing to the real economy by developing
non-bank funding sources;
- creating more opportunities for investors;
- fostering a stronger and more resilient financial system;
and
- deepening financial integration and increasing
competition.
CMU as part of the EU’s Investment Plan
The CMU is a key pillar of the Commission's Investment Plan
for Europe, which through a mix of regulatory and non-regulatory reforms would seek
to better connect peoples’ savings to investment structures. The CMU aims at strengthening
EU’s financial system by providing alternative sources of financing and more
opportunities for consumers and institutional investors. The Commission thinks
that the CMU means accessing more funding opportunities, such as venture
capital and crowd funding for small and big companies and start-ups.
CMU plan puts a strong focus on sustainable and green
financing; in this way the EU financial sector would help sustainability-conscious
investors to choose suitable projects and companies.
Concerning the mid-term report, the Commission
Vice-President Valdis Dombrovskis, responsible for Financial Stability,
Financial Services and Capital Markets Union underlined that “CMU remains at the heart of EU’s efforts to
boost European investment and create jobs and growth”. He argued that with the
departure of the largest EU financial centre in the UK, the Commission is
forced to step-up efforts to strengthen and integrate the EU-27 capital
markets.
The Commission Vice-President Jyrki Katainen,
responsible for Jobs, Growth and Investment, mentioned that Commission had given already decisive
impetus to the CMU. For example, Commission has delivered two-thirds of the initial
CMU’s commitments. Besides, it is expanding its efforts in order to meet new
challenges, e.g. funding sustainable investment and harnessing the potential of
FinTech; these new measures, he added would renew and reinforce the
Commission's commitment to a progressive CMU.
Two years’ progress
The Mid-Term Review underlined good progress made in
implementing the 2015 Action Plan, with around two-thirds of the 33 actions
delivered in twenty months. Recently, the EU co-legislators (Parliament and the
Council) agreed in principle on two major proposals:
- securitisation package (to free-up capacity on banks'
balance sheets and generate additional funding for households and fast growing
companies) and proposal on venture capital funds (to facilitate investment in
innovative SMEs.
In 2016 the Commission agreed on new Prospectus regime that
would allow easier access to public markets, especially for SMEs.
The Mid-Term Review also sets the timeline for the new
actions; they will include a pan-European personal pension “product” to help
people finance their retirement. Furthermore, the Commission will continue its
work on enhancing the supervisory framework for integrated capital markets,
increasing the proportionality of the rules for listed SMEs and investment
firms, harnessing the potential of FinTech and promoting sustainable
investment.
The Commission is also unveiling measures to encourage
long-term investment through a review of prudential calibration for investments
in infrastructure corporate entities. Commission proposes reducing the amount
of capital that insurance companies need to hold when they invest in
infrastructure companies. These targeted changes to the Solvency II Delegated
Regulation will further support investment in infrastructure.
The Mid-term proposal in detail
The CMU Mid-term review sets out nine new priority actions:
- strengthen
the powers of European Securities and Markets Authority to promote the
effectiveness of consistent supervision across the EU and beyond;
- deliver
a more proportionate regulatory environment for SME listing on public
markets;
- review
the prudential treatment of investment firms;
- assess
the case for an EU licensing and pass-porting framework for FinTech
activities;
- present
measures to support secondary markets for non-performing loans (NPLs) and
explore legislative initiatives to strengthen the ability of secured
creditors to recover value from secured loans to corporate entities and entrepreneurs;
- ensure
follow-up to the recommendations of the EU Expert Group on Sustainable
Finance;
- facilitate
the cross-border distribution and supervision of UCITS and alternative
investment funds (AIFs);
- provide
guidance on existing EU rules for the treatment of cross-border EU
investments and an adequate framework for the amicable resolution of
investment disputes;
- propose
a comprehensive EU strategy to explore measures to support local and
regional capital market development.
In addition, the Commission will put forward 3 legislative
proposals:
- On
a pan-European personal pension “product” to help people finance their
retirement;
- On the
EU-framework on covered bonds to help banks finance their lending
activity; and
- On increased
legal certainty on securities ownership in the cross-border context.
More information on the following websites:
- MEMO;
- Factsheet;
- Communication
on Capital Markets Union- Accelerating Reform;
- Action Plan
on Building a Capital Markets Union;
- EPSC
Strategic Note on Financing Sustainability; and
- Study
on tax incentives by DG TAXUD, in: https://ec.europa.eu/taxation_customs/sites/taxation/files/final_report_2017_taxud_venture-capital_business-angels.pdf
References: European
Commission, press release IP-17-1529 “Completing Capital Market Union: building
on the first round of achievements”, Brussels, 8.06.2017. In:
http://europa.eu/rapid/press-release_IP-17-1529_en.htm?locale=en
and copy in Latvian:
http://europa.eu/rapid/press-release_IP-17-1529_lv.htm