European Commission Communication on Progress on Building the Capital Markets Union
03/15/2019The European Commission has published its latest progress report on building of the Capital Markets Union. The CMU is an EU initiative which aims to deepen and further integrate the capital markets of Member States, further safeguard financial stability, strengthen the international role of the euro and diversify sources of finances for small and medium enterprises. The CMU aims to allow consumers to buy cheaper and better investment products, and enable financial services providers to scale up by offering services in other Member States.
The progress report notes that the CMU is an important Single Market project that will give increased access to capital for both companies and citizens, especially in smaller countries. A well-developed CMU increases the EU’s attractiveness to foreign investment and complements the EU’s agenda of free and fair trade. Broadly, the Commission has delivered measures that it had committed to take forwards at the beginning of the mandate and put in place certain "building blocks" of the CMU. However, the report notes that it may take time for the impact of the Commission’s actions to be realized.
The Commission has proposed six legislative measures introducing new EU-wide rules for products, labels and passports, five of which have been adopted or in respect of which a political agreement has been reached, but urgent progress is required on the last:
- regulations on European venture capital and social entrepreneurship funds, making it easier for investors to invest in innovative SMEs by opening up regulation to fund managers of all sizes and expanding the available range of companies;
- regulations harmonizing the securitization legal framework and creating "Simple, Transparent and Standardised" securitizations to help build confidence in the securitization market, prevent mistakes from the past reoccurring and free up the balance sheet of banks;
- regulations on a Pan-European Pension Product, introducing an EU-wide voluntary pension product;
- a political agreement on common rules on covered bonds, which are based on high national standards and best practice to develop covered bonds as a stable and cost-effective source of funding;
- a package of rules on facilitating cross-border distribution of collective investment funds, improving the transparency of national requirements and cutting red tape to make the distribution of funds quicker and easier; and
- proposals for a regulation on crowdfunding, which is still being negotiated but would allow platforms to apply for an EU license under a single set of rules.
The Commission has proposed five legislative measures providing more simple, clear and proportionate rules for entrepreneurs, businesses and financial institutions:
- the Prospectus Regulation, adopted in June 2017, which cuts red tape by making a prospectus simpler to produce and clearer to understand;
- more proportionate and risk-sensitive rules for investment firms were agreed upon in February 2019, which introduce simpler and less burdensome prudential rules for non-systemic investment firms;
- a political agreement on the Directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures was reached in December 2018;
- new rules that will facilitate financing through capital markets for small businesses were agreed by co-legislators in March 2019 by cutting red tape for small and medium-sized companies trying to access SME Growth markets, a new category of trading venue dedicated to small issuers; and
- a proposed regulation on the law applicable to the third-party effects of assignments of claims, which will increase legal certainty and facilitate cross-border investment by determining which national law applies to the effects on third parties where a claim is assigned cross-border.
The Commission has proposed two legislative measures to ensure a more integrated and efficient supervision of capital markets, of which one has been politically agreed upon:
- revamped rules for more robust supervision of central counterparties, agreed upon in March 2019, to ensure that the EU supervisory framework is sufficiently robust to anticipate and mitigate risk from EU central counterparties and from systemic non-EU central counterparties that provide services to EU clients; and
- reform of the European supervisory authorities to make European financial supervision stronger and more integrated, and a proposal to strengthen the supervisory framework for anti-money laundering and terrorist financing.
The Commission is also aiming to develop local capital markets, which primarily benefit medium-sized companies that are not large enough to tap capital markets across borders. The report notes that this requires significant action at the level of Member States, as well as cross-border and regional initiatives.
View the Communication.
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