What’s next after CMU and Covid-19?

Article

What’s next after CMU and Covid-19?

CMU 2.0

Discussing the Capital Market Union 2.0 (CMU) first requires a return to the original and still current version of the Capital Market Union. CMU was a plan led by the European Commission under Commission President Junker to better integrate capital markets across EU Member States. It was also cast as a counterweight to the post-financial crisis regulations and aimed at making business life a bit simpler without being deregulated. A core assumption of the original CMU was that, in order to have the EU economy thrive, it needed some flexibility to expand. In that respect, the CMU was inspired by the example of the US, where after 2007-09 the economy jumped back to quasi-normal much more quickly than in the EU. The underlying reason was a better equilibrium between bank- and market-based financing, with close to a 50-50 balance between these in the US compared to an 80 – 20 split in the EU.

Executive summary

The CMU delivered several new regulations: securitization, review of the prospectus directive, the ELTIF (European long term investment funds) and an embryo of covered bond regulation, as well as a review of EU supervisory authorities’ powers and, specifically of interest for Luxembourg, a double regulation on crossborder fund distribution that will be live August 2021. This progress notwithstanding, the CMU was still dogged by concerns about Brexit. Hence, since autumn 2019, the new EU Commission, and some Member States have wanted to up the ante and accelerate the development of a CMU 2.0 with three objectives in mind: promoting ESG and sustainable strategies across new financial regulations, digitalizing the EU and improving the access to finance balance between market and bank based.

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Performance magazine issue 33, September 2020

Performance is a triannual digest, dedicated to investment management professionals, which brings you the latest articles, news and market developments from Deloitte’s professionals and clients.

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