Capital Markets Union
On the occasion of the mid-term review of the Capital Markets Union (“CMU”) which is due in June 2017 the European Commission has launched a consultation (contributions to be handed in by mid-March). In this consultation the public can strike a balance on the status of the CMU initiative and provide further input. The results will also become part of the mid-term review.
The idea of the CMU stems from the notion that, despite its considerable size, Europe’s capital markets are comparatively (e.g. in contrast to those in the US) underdeveloped and fragmented. Furthermore the European Commission concluded from the financial markets crisis that the European economies should be strengthened against economic crises and shocks. This idea was laid down in a CMU action plan in late 2015.
The overall goal of the CMU is to foster a well-focused capital flow in Europe and harmonise the rules concerned. Thus it aims to trigger investments and boost collective economic growth across Europe. Furthermore the interconnectedness of investment projects and financings are meant to being enhanced considerably in the European Union. Through better integrated capital markets it is envisaged to strengthen the ability of the European states to cope with economic shocks (like the one of 2007/2008) and its consequences in joint efforts, hence making the financial system more stable.
The action plan includes various measures to support small and medium sized enterprises. Through alternative lending products (e.g. crowd investment, peer-to-peer loans et al.) start-ups shall be provided with more diverse forms of financing and sponsoring. Companies, searching for capital, shall gain enhanced access to public capital markets.
Apart from tapping new sources of financing outside the banking sector, also new means for banks to extend their capacities to provide financing are part of the capital markets union.
Another aim of the CMU is to encourage institutional investors outside the banking sector to make sustainable long-term investments in infrastructure projects. Last but not least the confidence of retail investors in direct investments shall be restored, amongst other things, through better information and counseling.
The securitisation industry, for example, is well acquainted with the initiative of Simple, Transparent and Standardised (“STS”) securitisations. This standard was integrated into the CMU action plan and is now approaching finalisation and translation into law.
To many it may come as a surprise that it is near mid-term in the CMU project – apart from the mere time factor. Have we really made significant progress in enhancing and integrating the capital markets in Europe? Are the measures taken convincing? Are there sufficient answers to Brexit?
Please find below the link to the consultation (contributions to be handed in by mid-March).