5 key features of CMU
Capital Markets Union (CMU) is a relatively new initiative from the European legislature that is becoming increasingly topical. We have summarised below its five key features.
What is the CMU?
The CMU is the European Commission’s ‘landmark project’ which aims to create a single market for capital, unlock funding for Europe’s businesses and boost growth in the EU’s 28 Member States. It aims to achieve this by making the investment chain as efficient as possible through improving the access to finance across the EU, increasing and diversifying the sources of funding available and ensuring the effective allocation of capital through markets. Its objectives also include:
- helping SMEs raise finance as easily as large companies
- creating a single market for capital by removing barriers to cross-border investments, and
- diversifying the funding of the economy and reducing the cost of raising capital.
Who does it affect?
It affects businesses across the EU, including regulated entities such as fund managers, fund service providers and investment funds.
What does it involve?
The CMU is part of the Commission’s “Investment Plan for Europe” which it launched in November 2014. Its measures include:
- the implementation of European Long-term Investment Funds (ELTIF) regulation,
- 'high-quality' securitisation,
- standardised credit information on SMEs,
- private placement and
- the review of the Prospectus Directive.
What was the 'Green Paper' on the CMU?
Earlier this year, the European Commission issued a Green Paper on CMU to foster debate across the EU on possible measures needed to create a true single market for capital and to seek feedback from the European Parliament and the Council, other EU institutions, national parliaments, businesses, the financial sector and all those interested. The deadline closed on 13 May 2015.
The Green Paper suggested the following principles should underpin a CMU:
- how to reduce the costs of setting up and marketing investment funds across the EU;
- how to further develop venture capital and private equity;
- whether targeted measures in the areas of company, insolvency and securities laws as well as taxation could materially contribute to CMU; and
- the treatment of covered bonds, with a specific consultation in 2015 on a possible EU framework.
Is there a timeline for implementation?
The CMU is a long-term project expected to last many years. However, the Commission is hoping to make early progress in some areas in the coming months.
The Commission will use the feedback from the Green Paper to identify the actions that are necessary to achieve its objectives, and will adopt an Action Plan in the summer of 2015 setting out its roadmap and timeline for putting in place the building blocks of a CMU by 2019.